The eternal debate
The eternal debate of whether or not the government must intervene in the market system in order to ensure that the market is in good shape still goes unanswered. There are many situations in various countries where countries put a firm hand in regulating their market, and there are those who entirely leave the market system alone. This is a decision that causes rifts within a government system. The question still remains. Should the market be regulated or be left alone?
Nevertheless, with or without government intervention, it is the need for all societies within countries to ensure that markets operate fairly and safely in order to encourage the widest possible confidence in them, thereby promoting high levels of savings and investment. This is the integrity of the market – ensuring that the market system is in full shape to be able to function well within a society. Without a doubt, the government has the greatest power to guarantee the orderly functioning of a society.
This is the main function of a government – to ensure the stability, and the maintenance of a peaceful and functioning society. More than that, the government has the capabilities to fully enforce their policies and decisions that can greatly affect the people in almost all aspects, including the economy. Thus, the dilemma of whether or not the government must intervene in the market economy is of a very crucial decision. There are scholars and theorists who argue that the government must intervene in the market system.
In their view, the government must utilize its power most especially to ascertain the growth of emerging businesses that will consequently contribute growth to the whole economy. The government must intervene in instances where fledgling businesses are still growing by protecting them from the harsh consequences that would be created by the more established corporations. Such support would be in the form of loans, tax breaks, and other such incentives that would further stimulate the growth of an emerging business.
This is certainly most helpful in guaranteeing the integrity of the economic market system. Such scholars and theorists who support such ideology is John Maynard Keynes (1883 – 1946). He firmly supported the form of an economy referred to as “Managed Capitalism”. Such form of an economy stipulates the rejection of laissez faire policies, or the form of an economy where the market system must be “left alone. ” John Maynard Keynes, in his book the General Theory of Employment, Interest, and Money [(1936) 1965], rejected the idea that the natural economic order be based on a self-regulating market.
He argued that laissez faire policies that draw a bold line between the government and the economy had merely resulted to further instability and unemployment most clearly evident in the United States’ great depression of the 1930’s. Keynes argued that the government must even more lend a hand in the market economy in such instances of great economic slumps by “reflating the economy” through increased public spending or cutting down taxes. Such a solution would consequently lead to economic growth that would act as a stimulus to the market economy.
This is known as the “Multiplier Effect. ” Government intervention can also come in the form of laws addressing consumer rights. For example, consumers can return products they purchased that are defective, and when they are not satisfied with the services that they paid for. This form of consumer rights exists in almost all countries wherein their government creates laws that back up the rights of their consumers. Specifically, the United States of America provides for the Bill of Consumer Rights which is the law that stipulates the redress for the consumer’s grievances.
During the Presidency of John F. Kennedy, he gave the American consumers 4 basic rights which are: 1) the Right to Safety: to be protected against the marketing of goods which are hazardous to health or life. 2) The Right to Choose: to be assured, wherever possible, access to a variety of products and services at competitive prices: and in those industries where competition is not workable and Government regulation is substituted, an assurance of satisfactory quality and service at fair prices.
3) The Right to Information: to be protected against fraudulent, deceitful or grossly misleading information, advertising, labeling, or other practices; and lastly, 4) The Right to be heard: to be assured that consumer interests will receive full and sympathetic consideration in the formulation of Government policy, and fair and expeditious treatment in its administrative tribunals (http://www. cuts-international. org/Consumer-Rights. htm). Other interventions from the government may also be in the form of price regulations that would allow for the integrity of Price formation within the economic laws of supply and demand.
Government interventions also come in the form of manipulative behavior prevention from monopolizing companies. The most concrete example is the case against Microsoft Corporation’s monopolizing tendencies where the US government, represented by the US Department of Justice, filed a set of compounded civil proceedings on May 18, 1998 against the corporate giant. The United States government (the plaintiff) alleged that Microsoft Corporation (the defendant) abused its monopoly power in handling the sales of operating systems and web browsers.
(http://www. thisnation. com/question/027. html) On the other hand, there are also theorists and economists who support the view that the government must not intervene in the economic market. Such is known as “Unmanaged Capitalism” where the government, no matter how powerful and influential it is in the society, and most especially to the economy, must “leave the economic system alone. ” Such an economy requires the independence of the market system in order to let the market function according to the natural economic laws of supply and demand.
Such a form of market is also better known as “Laissez faire” economics, or the self-regulating market. (Andrew Heywood. Politics. Third Edition. Palgrave Foundations. ) In such system, the economic market must regulate on its own even on instances when the economic system is at bane – when financial crisis occurs. Those who support Laissez Faire economics believe that the market need not anymore be intervened by the government Some of the harsh consequences of the free market system are the effects of the financial crises. History has showed us many times about the instability of the market system.
The gravest of which occurred during the 1930’s now known as the “great depression”. When such instances happen in a Laissez Faire system, the free market system must still be “left alone” and to recover on its own. However, at present times, the financial crisis of the decade has forced the capitalist system to rely on the government for bailouts. This is clearly evident on the numerous banks and institutions worldwide that has survived the crippling effects of the financial turbulence through the funds doled out by their governments.
If the governments of countries has just “left them alone”, then the financial crisis would be much worse. There are also who dispute that government intervention would lead to restriction of freedom for businesses that ought to be “left alone”, and to just follow the natural laws of the economic market. There may be instances that arise when too much government interference would lead to the imposition of stringent laws that would impede the growth of rising businesses. (Embry and Hepburn (2005) Accusations of constant governmental actions.
) This would deem unfair for budding businesses, and would go against the principle of the integrity of the market. Too much government intervention in a country’s market system can send a strong signal for foreign direct investors (FDI’s) that profiting in that country is impossible. Government policies such as tariffs and other trade barriers would prove to be a major hurdle for businesses to invest in certain countries. This is a government action that can consequently hinder economic growth for a country. This can be a major loss for any country seeking foreign direct investments.
The decision to whether or not let the market alone is at the government’s hands. The government must always act accordingly and decisively in matters requiring economic intervention. Nevertheless, the topmost priority of the society in such instances is to ensure the integrity of the market – to guarantee that the market system is in full shape to be able to function well within a society, and to ensure that the market is operating fairly and safely in order to encourage the widest possible confidence in them, thereby promoting high levels of savings and investment.
With that said, the government must weigh all their decisions impartially to ensure that market integrity is met with or even without their intervention. References: 1. Andrew Heywood. Politics. Third Edition. Palgrave Foundations. 2. John Maynard Keynes the General Theory of Employment, Interest, and Money [(1936) 1965] 3. Embry and Hepburn (2005) Accusations of constant governmental actions. 4. Growth of Government Intervention in the Economy from http://economics. about. com/od/governmenttheeconomy/a/intervention. htm 5.
Laissez-faire Versus Government Intervention from http://economics. about. com/od/governmenttheeconomy/a/laissez_faire. htm 6. When Government Intervention Becomes Excessive: The Rights of the State Versus the Rights of the Parents by Dawn Michelle Irons, BSW April 1996 from http://familyrightsassociation. com/bin/excessive_government_intervention. htm 7. Consumer Rights and Its expansion from http://www. cuts-international. org/Consumer-Rights. htm 8. Is Microsoft a monopoly? If so, why does it matter? From (http://www. thisnation. com/question/027. html)Sample Essay of RushEssay.com