essay on government intervention

Government Intervention in Markets

Governments intervene in markets to try and overcome market failure. The government may also seek to improve the distribution of resources (greater equality). The aims of government intervention in markets include

• Stabilise prices
• Provide producers/farmers with a minimum income
• To avoid excessive prices for goods with important social welfare
• Discourage demerit goods/encourage merit good

Forms of government intervention in markets

• Minimum prices

Maximum prices

• Minimum wages
• Nudges/Behavioural unit

Minimum Prices

This involves the government setting a lower limit for prices, e.g. the price of potatoes could not fall below 13p.

The minimum price could be set for a few reasons:

• Increase farmers incomes
• Increase wages
• Make demerit goods more expensive. For example, a minimum price for alcohol has been proposed.

Diagram Minimum Price

A minimum price will lead to a surplus (Q3 – Q1). Therefore the government will need to buy the surplus and store it. Alternatively, it may impose quotas on farmers to decrease the quantity of the good put onto the market.

Problems of minimum prices

• It could be costly for the government to buy the surplus
• A minimum price guarantee acts as an incentive for farmers to try and increase supply. As an unintended consequence, the minimum price encourages more supply than expected and the cost for the government rises. This happened with the EEC Common Agricultural Policy.
• To ensure minimum prices, the government may have to put tariffs on cheap imports – which damages the welfare of farmers in other countries.

Maximum Price

This involves putting a limit on any increase in price e.g. the price of housing rents cannot be higher than £300 per month.

Maximum prices may be appropriate in markets where

• Suppliers have monopoly power and are able to generate substantial economic rent by charging high prices
• The good is socially important – e.g. good quality housing is important to labour productivity and a nations’ health.
• Demand is price inelastic because the good is necessary for maintaining minimum standards of living.

Diagram Maximum Prices

The Maximum price will be set below the equilibrium. This makes sure the price is less than the market clearing price.

• However, the problem of a maximum price is that there will be a shortage. At Max Price, Demand is greater than supply. (Qe-Q1) This leads to queues and consumers unable to buy.
• This will encourage the operation of black markets.
• Therefore the government will have to ration the goods or increase supply

If supply and demand are very inelastic, then a maximum price may have little adverse impact on creating shortages. For example, if supply housing for rent is very profitable, then a maximum price will not stop landlords putting the house on the market.

• Buffer Stocks

Agriculture suffers from various problems. These include:

• Fluctuating Prices
• Uncertainty leads to lack of income
• Low-Income elasticity of demand
• Positive Externalities of Farming

Therefore the government may feel there is a case to intervene and stabilise prices. A buffer stock involve a combination of minimum and maximum prices. The idea is to keep prices within a target price band.

This is a different kind of government intervention. It is a government policy to influence demand indirectly. For example, putting cigarettes behind closed covers – makes it harder or less enticing for people to buy.

The government may also place flashing speed limit signs to give a smiley face to drivers under the speed limit, but an unhappy face to drivers exceeding the speed limit.

See: nudges

Tax is a method to discourage consumption of certain goods. For example, taxes on demerit goods – goods with negative externalities. Taxes both discourage consumption and raise revenue for the government.

In the above example, the tax moves output to Q2

Problems of tax

• Demand may be inelastic
• Hard for the government to know external cost and how much to tax
• May encourage tax evasion – e.g. rubbish tax can encourage fly-tipping

The government may subsidise goods with positive externalities (for example, public transport or education).

In the above example, a subsidy shifts output to 120 (where SMB = SMC) so it is more socially efficient.

Problems of subsidies

• Cost to government
• Subsidies may encourage firms to be inefficient because they can rely on government aid.
• Government intervention in the labour market

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What Impact Does Economics Have on Government Policy?

Yarilet Perez is an experienced multimedia journalist and fact-checker with a Master of Science in Journalism. She has worked in multiple cities covering breaking news, politics, education, and more. Her expertise is in personal finance and investing, and real estate.

Economic conditions often inform the policy changes that governments elect to enact. Specifically in the United States, government policy has always had a large amount of influence on economic growth, the creation of new business entities, and the success of financial markets.

In the broadest sense, a country's economic activity reflects what people, businesses, and governments want to buy and what they want to sell. Because the U.S. has a capitalist economy that relies on the principles of a free market, theoretically, it is primarily the decisions of consumers and producers that mold the economy.

Key Takeaways

• Economic conditions often inform the policy changes that governments elect to enact.
• In the U.S., government policy has always had a large amount of influence on economic growth and the creation of new business entities.
• For those in political power, having a track record of economic growth is often an important consideration (especially if they are in a position of seeking re-election).
• To ensure strong economic growth, there are two main ways that the federal government may respond to economic activity: fiscal policy and monetary policy.
• In the U.S., the Federal Reserve System directs the country's monetary policy.

The government may decide to regulate some aspects of economic activity in order to engineer economic growth or prevent negative economic conditions in the future. In general, a government's active role in responding to and influencing the economic circumstances of a country is for the purpose of preserving and furthering the economic interests of the general public.

For those in political power, having a track record of economic growth is often an important consideration (especially if they are in a position of seeking re-election). In the U.S., many studies have shown that the economy is a major factor that affects how people vote (specifically in the U.S. presidential election). Strong economic growth typically translates to high job creation, stronger wage growth, better financial market performance, and higher corporate profits.

How Do Governments Respond to Economic Activity?

To ensure strong economic growth, there are two main ways that the federal government may respond to economic activity: fiscal policy and monetary policy .

Monetary Policy

One of the most common ways that a government may attempt to influence a country's economic activities is by adjusting the cost of borrowing money. This is most often done by lowering or raising the federal funds rate , a target interest rate that impacts short-term rates on debt such as consumer loans and credit cards. The Federal Reserve increases the federal funds rate to constrict economic growth and decreases the federal funds rate to encourage economic growth.

Another form of monetary policy is the act of the Federal Reserve buying and selling government securities. When the Fed buys a security from a bank, it increases the money supply by injecting funds into that bank. Alternatively, it can sell securities to remove cash and decrease the money supply.

Monetary Policy Example

In response to the COVID-19 pandemic, the Federal Reserve quickly reduced the federal funds rate to 0%. By setting prevailing interest rates very low, the Federal Reserve attempted to support economic activity, maximize employment, and meet price stability goals.

Fiscal Policy

The government may also enact policies that adjust spending, change tax rates, or introduce tax incentives. In regard to government budgets, the government identifies whether or not it wants to spend more money than it anticipates collecting. This process of evaluating public spending aims to promote economic prosperity or cool an overheated economy.

Instead of focusing on how the government spends money, common fiscal policy revolves around how the government collects money. Offering tax incentives, additional tax credits, or lowering tax rates decreases the economic burden on citizens and promotes economic growth. Striking down favorable tax laws or increasing taxes slows economic activity.

Fiscal Policy Example

In response to the COVID-19 pandemic, the Federal government awarded economic impact payments (i.e. stimulus checks) to qualifying Americans. The government directly sent eligible individuals money to promote economic activity and encourage household spending.

Fiscal and monetary policies are both intended to either slow down or ramp up the speed of the economy's rate of growth. This, in turn, can impact the level of prices and the employment rate in the country. However, there are subtle differences between these two types of government action.

Differences Between Government Policies

Change in the money supply or how easy credit is to obtain

Adjustment in federal funds interest rates or money supply

Set by Central Bank

Heavily independent of the political process

Impacts debt industries like housing market

Change in how the existing monetary supply is utilized

Adjustments in government spending and tax rates

Set by Federal Government

Heavily integrated with political process

Impacts government budgets/net deficits

In the U.S., the Federal Reserve System directs the country's monetary policy. The Federal Reserve System—also called "the Fed"—is the central bank of the United States. Established in 1913 by Congress, the Fed controls the money supply and actively uses policy to respond to and influence economic conditions.

The Fed adjusts the interest rate that banks charge to borrow from one another. (This cost is then passed onto consumers.) The Fed may lower the interest rate to keep borrowing cheap, ensure that credit is widely available, and boost consumer (and business) confidence. Conversely, the Fed may decide to raise interest rates in a strong economy, or in response to inflation concerns—the increase in prices that occurs when people have more to spend than what's available to buy.

In the two ways governments can intervene in the economy, you'll note that monetary policy is set by the Federal Reserve, an independent entity technically not part of the Federal government. On the other hand, fiscal policy requires political intervention and majority approval (for items not issued by executive order by the President).

Achieving Financial Stability in the U.S. Economy

Prior to the creation of the Fed in 1913, the U.S. had experienced several severe economic disruptions as a result of massive bank failures and business bankruptcies. As an institution, the Fed was tasked with ensuring financial stability in the U.S. economy.

After the Great Depression , the greatest threat to the stability of the U.S. economy was recessionary periods: periods of slow economic growth and high unemployment rates. In combination, these two factors created a sustained period of decline in the gross domestic product (GDP). In response to this, the government increased its own spending, cut taxes (in order to encourage consumers to spend more), and increased the money supply (which also encouraged more spending).

Beginning in the 1970s, a different economic reality emerged. This expansionary economy with substantial money supply growth led to a sustained period of a high level of inflation. In response to these economic factors, the U.S. government started focusing less on combating recession and more on controlling inflation. Thus, the government enacted policies that limited government spending, reduced tax cuts, and limited growth in the money supply.

At this time, the government also shifted away from its reliance on fiscal policy—the manipulation of government revenues to influence the economy. The fiscal policy did not prove effective at addressing high levels of inflation, high levels of unemployment , and vast government deficits. Instead, the government turned to monetary policy—controlling the nation's money supply through such devices as interest rates—in order to regulate the overall pace of economic activity.

Since the 1970s, the two main goals of the Fed have been to achieve maximum employment in the U.S. and to maintain a stable inflation rate. This dual mandate is difficult to achieve; by combating one of the goals, it becomes more difficult to fight the other.

While outside events may influence economic activity, governments use economic means to enact changes as they see fit. This may include changes to tax policy, adjustments to the federal funds rate, fluctuations in the money supply, or alternations to government spending.

Should the Government Intervene in the Economy?

Whether or not the government should intervene in the economy is a deeply-rooted philosophical question. Some believe it is the government's responsibility to protect its citizens from economic hardship. Others believe the natural course of free markets and free trade will self-regulate as it is supposed to.

Why Might the Government Intervene in the Economy?

The government has an inherent interest in protecting the well-being of its citizens. Due to prevailing conditions in the world, the government might see fit to enact certain legislation to preserve the quality of life for its citizens. The government might also enact legislation to promote economic well-being and equity across different socioeconomic classes.

What Are Some Ways the Government Intervenes in the Economy?

The government has two primary ways of interacting with the economy. Through monetary policy, the government controls prevailing interest rates and makes obtaining debt easier or harder. Through fiscal policy, the government controls spending levels and how to allocate resources.

Keynesian economic theory holds that governments should hold their citizens out of a recession. Governments do this by enacting monetary and fiscal policies. By having a central bank (i.e. the Federal Reserve), the United States has the ability to manipulate economic policy in an attempt to intervene when appropriate.

U.S. Department of State. " U.S. 2022 Midterm Elections: Role of the Economy in Elections ."

Sage Publications. " Economic Perceptions and Voting Behavior in US Presidential Elections ."

Federal Reserve Board. " Monetary Policy Principles and Practice ."

Federal Reserve Board. " Federal Reserve issues FOMC statement, March 15, 2020 ."

Internal Revenue Service. " Economic Impact Payments: What You Need to Know ."

Federal Reserve Board. " What Is the Purpose of the Federal Reserve System? "

Federal Reserve History. " The Great Inflation ."

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Better Knowledge. Your Insight Is Sharper

Government Intervention: Examples, Reasons, and Impacts

April 10, 2022

What’s it : Government intervention refers to the government’s deliberate actions to influence resource allocation and market mechanisms. It can take many forms, from regulations, taxes, subsidies, to monetary and fiscal policy. In some cases, the government also sets maximum and minimum price limits on the market.

Government intervention and the economic system

Broadly speaking, the significance of the intervention depends on the economic system adopted by a country.

Under a  command   economy system , government intervention is highly significant. The government determines what is best for the economy and society. It allocates resources and determines the production and distribution of goods.

The private sector’s role is minimal or even zero. Under a command economy system, the market mechanism does not work.

In contrast, a  free-market economy  operates in reverse compared to a command economy. The free market system emphasizes the minimization of intervention. The private sector plays a significant in the allocation of economic resources.

The market operates freely through a supply and demand mechanism. This mechanism directs the allocation of resources more efficiently than the command economy system. Under this system, the government’s role is usually limited to enforcing rules to recognize and protect private property ownership.

Furthermore, under a  mixed economy system , interventions are more diverse than in a market economy, but not as extreme as a command economy. The government has a role, and so does the private sector.

The significance of the roles of the government and the private sector also varies between countries. Some countries, such as China and Cuba, are more inclined towards a command economy. The government plays a significant role. Meanwhile, in countries such as the United States and the United Kingdom, the private sector plays a more dominant role in managing economic resources.

Reasons for government intervention in the economy

The government intervenes in the economy with several objectives, such as:

Redistributing income and wealth.  For example, the government launched various welfare programs such as unemployment insurance, health, and free education. It sustains the quality of life of those who are economically disadvantaged. Taxation is also another avenue for redistribution of income.

Providing public goods . Examples of public goods are public parks, infrastructure, and national defense. The private sector often does not want to provide it because it is unprofitable. Hence, the government took a role.

Promoting fair competition . Through antimonopoly regulations, the government prevents unfair competition practices such as collusion and predatory pricing.

Securing and spurring the domestic economy.  For example, the government set trade barriers to protect domestic industries from competing imported products. So, they continue to grow and create more jobs.

Protecting people . For example, the government launched a consumer protection policy, quality requirements, occupational safety, and the environment.

Changing consumer behavior . Intervention is one way to reduce the impact of negative externalities. For example, the government could increase taxes on products such as alcoholic beverages and tobacco.

Preserving the environment . Without government regulations and policies, companies are more likely to ignore external costs to the environment. They overexploit natural resources or allow waste to flow into the environment without further treatment. Such practices certainly jeopardize the long-term sustainability of the economy.

Achieving macroeconomic goals.  The four macroeconomic goals are sustainable economic growth, full employment, low inflation, and balance of payments equilibrium.

Ways of government intervention 

Government intervention takes many forms, from the micro to the macro level. In this article, I try to group them into the following categories:

Economic policy

Regulations, price controls.

The economic policy falls into two main categories:

Supply-side policy

• Demand-side policy

The government designs supply-side policies to influence aggregate supply in the economy. Typically, these policies focus on increasing production efficiency, either in product markets or factor markets (e.g., labor market).

In the product market, the government promotes competition by launching antimonopoly, deregulation , and privatization policies. Competition forces producers to be more efficient and innovative to stay in the market and make a profit.

Furthermore, in the labor market, the government is trying to improve labor mobility and quality. That is through various programs such as education, training, and reduction of union power.

Demand-side policies

Demand-side policies consist of fiscal policy and monetary policy. The government is responsible for the fiscal policy through changes in its spending and taxes. Meanwhile, monetary policy is under the responsibility of the central bank or monetary authority. It seeks to influence the money supply in the economy. Both affect the economy through their effect on aggregate demand.

To stimulate economic growth, the government and the central bank adopted expansionary policies. That is usually during a weak economy, such as an economic recession. The options are to:

• Increase government spending
• Lower taxes
• Cut policy rates
• Open market operations through central bank purchases of government securities
• Lower the reserve requirement ratio

Meanwhile, to avoid high inflationary pressure, both implement a contractionary policy. High inflation endangers economic stability and can lead to hyperinflation. Among the options for implementing a contractionary policy are:

• Reducing government spending
• Lifting taxes
• Raising the policy rate
• Open market operations by selling government securities
• Raising the reserve requirement ratio

The government ensures that economic activities run healthily. Several regulations aim to encourage business activity. While others, to control business activities and avoid unwanted results or negative externalities.

There are many variations of government regulations, and each affects economic activity in different ways. The following are several categories of government regulations:

Employment . The government issues rules, regulations, and laws regarding wages, fair recruitment, and workforce health and safety.

Environment . For example, the government launches various regulations regarding the environmental impact of company operations on the surrounding environment, such as environmental safety standards and waste management.

Consumer protection . The focus is to protect consumers from unfair practices related to price rules, health and safety standards, and product descriptions.

Competition . It is in the government’s interest to promote fair competition. These types of rules and regulations include antitrust and merger and takeover regulations. This category includes deregulation, namely eliminating regulations or restrictions such as limits on foreign investors’ share ownership.

Information and reporting . An example of these rules and regulations are accounting standards and the security of consumers’ personal information.

Taxes are the main source of government revenue. The government uses it to finance several programs and to pay off debts. In addition to government operations, the government uses taxes to increase economic capital by providing public goods such as roads, bridges, trains, public parks, and national defense. This economic capital is vital for increasing the production capacity of the economy in the long run.

The government collects taxes from taxpayers, which come from the household and business sectors. The government can impose it directly on taxpayers, such as through income tax and profit tax. Or, it is indirectly as in sales tax and value-added tax.

Tax is a means of redistribution of income. Also, taxes affect the financial behavior of businesses and households. For example, an increase in taxes reduces household disposable income . Therefore, households tend to spend less on goods and services.

Under a price control policy, the government sets price limits for certain goods and services. The two forms of price control are:

Price ceiling

Price floor.

Price ceilings limit the maximum prices for goods and services. Suppliers cannot charge a price higher than that price. The purpose of a price ceiling is to protect consumers by ensuring it is affordable to as many consumers as possible. An example is the rental price of residential property.

To be effective, the government sets a price ceiling below the free-market equilibrium price.

Setting a price ceiling has the following implications:

Bringing up the shortage . Due to lower prices, more consumers are asking for it. Conversely, lower prices make fewer producers willing to supply. Therefore, the market will experience excess demand (shortage), where the quantity demanded exceeds the quantity supplied.

Less efficient and decreasing economic surplus.  Economic surplus is the sum of consumer surplus and producer surplus. Due to lower prices, the producer surplus will decrease. They get less profit. Meanwhile, even though consumers get lower prices, however, they face a shortage. Supply decreases because producers supply fewer goods.

Rationing . Because of the shortage, consumers have a more challenging time finding goods. Suppose it goes on for a long time. In that case, the government may need to ration goods to ensure their availability for as many consumers as possible.

Raising a black market.  The black market thrives on shortages. The producer may sell at a higher than the ceiling on the black market. Likewise, some consumers who already own goods will sell back to other consumers at a higher price to profit.

It is the minimum price that can be charged for a good or service. Its purpose is to protect suppliers of goods or services.

The most quoted example of a price floor is the minimum wage. In this case, individuals act as suppliers of labor services, while companies are buyers. With the minimum wage, workers make enough money from their jobs to meet their basic needs.

To be effective, the government sets the price floor above the equilibrium price. Because prices are higher, more and more suppliers are willing to supply goods and services. On the other hand, the quantity demanded is less because the price becomes more expensive for consumers. As a result, the market will experience an excess supply, where the quantity supplied exceeds the quantity demanded.

The government also provides subsidies to households or companies. Examples include fuel oil, public health care, education, research and development, fertilizers, and raw materials subsidies. Soft loans also fall into this category.

The provision of subsidies reduces the burden on households. They spend less money on these goods and services, enabling a better standard of living.

For companies, subsidies reduce production costs. It stimulates them to produce more. Also, they can sell at a lower price, making the product more competitive in the market.

Disagreements among economists

Some economists view government intervention as necessary. However, they are still arguing about how much the government should intervene and how they should intervene. In macroeconomics, both gave rise to schools of thought: Keynesian economics and Neoclassical economics.

Keynesian views that the government should intervene. When there is a disequilibrium, the economy will not move towards the new equilibrium by itself.

Take the case when the economy is depressed. Among the solutions to getting out of the economic depression is stimulating government spending, which is a part of aggregate demand.

As we know, aggregate demand consists of household consumption, business investment , government spending, and net exports. Net exports are beyond the control of the domestic economy because they depend on global economic conditions. Thus, the main options for stimulating aggregate demand are through consumption, investment, and government spending.

But, during the economic depression, business profits worsen as demand falls. Likewise, household income drops due to high levels of unemployment. Therefore, it is almost impossible to increase consumption and investment during the depression.

Thus, a more sensible option would be to increase government spending. The budget depends more on discretionary government policies than on economic conditions.

In contrast, Neoclassical economists view government intervention should be minimal. The market mechanism will work and direct the economy towards equilibrium. According to Neoclassical economists, supply and demand are the main factors that determine goods, output, and income in an economy. So, government intervention will only make the economy no better.

Negative effects of government intervention 

Although the aim is positive to build the economy and society’s prosperity, interventions often result in unintended consequences. The following are the opposing sides of government intervention in the economy:

Government failure . It happens when the intervention doesn’t produce better results. The market becomes inefficient in allocating resources. The government may also consider short-term effects rather than the long-term. For example, trade barriers protect domestic industries. But, it also disincentives producers to be more innovative and more efficient. Likewise, in the case of production subsidies.

Increased costs . For example, companies have to spend more money to meet product safety and health standards. They also bear the cost of further processing the production waste.

Fewer options . In an extreme case is the command economy. The government decides what to produce and how to distribute it.

Discrimination policy.  Intervention may be beneficial for some, but detrimental for others. Take competition policy, for example. The government may favor state-owned companies over private companies. Likewise, in a bailout, the government used tax revenues to save the big banks instead of all the banks.

Government Intervention and Public Health Essay

Introduction, current interventions, proposed intervention.

The government, under the constitution, has the power to intervene in public health policies. I believe such intervention is necessary for the health and overall well-being of the country. Public health interventions from the government ensure that the spread of illnesses is controlled and treatment is regulated.

The mandates for COVID-19 vaccination were implemented to curb the virus’s spread and return things to normalcy. The Supreme Court upholds that cities and states have the right to ask for vaccine mandates in various instances. Nevertheless, twenty states in the U.S. have restricted local and state authorities from mandating COVID-19 vaccines (Bardosh et al., 2022). Under the Federalist system of the United States, states and the national govt share regulatory jurisdiction over public health issues, with states typically exercising the majority of this authority under their regular police power.

Those for the COVID-19 mandate argue that vaccines are both practical and safe, according to overwhelming data. More importantly, there is good evidence that vaccine requirements function in the scope of this argument. Those against vaccinations contend that a person has the right to control the sanctity of their flesh (Bardosh et al., 2022). Orthodox medicine ethics suggest that compelled therapy is only permissible when the individual benefits outweigh the recognized risks.

COVID-19 presently has no proven treatment or plans geared to treat the disease (Korang et al., 2020). To keep the COVID-19 pandemic under control, institutions use vaccination, isolation, quarantine, and disease control measures to prevent disease spread and supportive care such as oxygen and ventilators for afflicted patients.

Social distancing, donning N95 or surgical masks, and washing hands are all effective public health treatments for lowering the chance of infection. It is better to opt for these options rather than subject people to COVID-19 vaccine mandates.

COVID-19 vaccinations have been pushed as a significant way to prevent the virus from spreading. Mandates have been established in various states and cities to ensure that individuals get vaccinated. Many states differ on the COVID-19 vaccination mandate. However, the federal government is evident in the mandate for people working in healthcare facilities. Instead of subjecting people to mandatory vaccinations, it would be appropriate to respect their autonomy and only deny services in case one is positive.

Bardosh, K., Figueiredo, A. de, Gur-Arie, R., Jamrozik, E., Doidge, J., Lemmens, T., Keshavjee, S., Graham, J. E., & Baral, S. (2022). The unintended consequences of COVID-19 vaccine policy: Why mandates, passports, and restrictions may cause more harm than good . BMJ Global Health , 7 (5). Web.

Korang, S. K., Juul, S., Nielsen, E. E., Feinberg, J., Siddiqui, F., Ong, G., Klingenberg, S., Veroniki, A. A., Bu, F., Thabane, L., Thomsen, A. R., Jakobsen, J. C., & Gluud, C. (2020). Vaccines to prevent COVID-19: A protocol for a systematic living review with network meta-analysis including individual patient data . Systematic Reviews , 9 , 262. Web.

Largent, E. A., Persad, G., Sangenito, S., Glickman, A., Boyle, C., & Emanuel, E. J. (2020). U.S. public attitudes toward COVID-19 vaccine mandates . JAMA Network Open , 3 (12). Web.

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Government intervention in private enterprise often harmful

It leads to decisions that are bad for the company and the country.

Greg Ip, Economics commentator for the Wall Street Journal, has made an interesting and relevant observation about the American economy. According to Ip, our economy is, sliding into a “China Style” capitalism. By this he means that decisions about what and how to produce, the key functions of any economic system, are increasingly made by government officials directly or indirectly.

Ip gives several recent examples of government intervening in the private economy to ensure that businesses serve the national interest as defined by the then current administration. Efforts on the part of Washington to stop the sale of U.S. Steel to Nippon Steel because of union fears that Nippon Steel will look unfavorably upon the company’s alliance with labor unions, is one of many cases in points.

On the surface such government led intervention might seem justified so to “create or save American jobs.” But denying managers and shareholders control of their businesses is antithetical to our private enterprise system and often leads to inefficiencies which are harmful to a company’s success and that of the economy. Government interference also leads to decisions that are bad for the company and the country. Many recent historical examples serve as evidence for this conclusion. The quotas set on the importation of Japanese autos in the 1970s and 1980s led to higher auto prices and the diminishment in the quality of American cars from which it took years to recover. In 2023 Porterra Inc., an electric bus company that received millions in federal grants, declared bankruptcy. It serves as a recent example of the failures of government engaging in corporate economic intervention.

The Paycheck Protection Program (PPP) awarded $525 billion in loans to 5.2 million companies and was often rife with political inspired favors. The Small Business Administration has released data only on the largest of those loans, but among them 285 businesses have filed for bankruptcy protection.

Washington is hardly the only level of government that is engaging in state capitalism. When any level of government gets involved in making business decisions, problems often follow. In 2013 Hertz Corporation accepted $68 million in tax credits from Lee County and the state of Florida to relocate in Estero. It promised many high paying jobs, and significant participation by Hertz volunteers and grants to local nonprofits. In August of 2020, the company filed for bankruptcy. Eventually 14,000 permanent Hertz employees were fired. Hertz’s volunteer efforts never materialized nor did its local corporate philanthropy or leadership. Following a series of fired CEOs, Hertz made another poor decision. Partially to curry favor with the administration it announced the plan to purchase 100,000 electric vehicles for its rental fleet. The demand for rental EVs never materialized and Hertz is now selling its electric fleet at steep discounts.

At the national level, the Biden administration is hardly alone in using public “state capitalism,” to circumvent private enterprise decision-making. President Trump’s administration browbeat companies into keeping factories in the U.S. As a candidate he recently torpedoed a bipartisan plan for border security because, if it had passed, how could he rail against the current Biden immigration policy during the campaign? Trump’s own circumstances are even impacting upon the current debate over TikTok. The former president now suggests that Facebook, a U.S. company which incidentally suspended his account after January 6, 2021, represents a greater threat to America as the Chinese owned TikTock.

Political inspired government interference on both sides of the aisle serves to undermine businesses and leads to conflicting government policies. It suggests to other countries that our economic policies are opportunistic, rather than guided by thoughtfully developed policies. This is exactly what the U.S. accuses China of doing, and it creates policy ironies that are impossible to answer. For instance, if President Biden gets his way, an American company will purchase U.S. Steel and the outcome will conflict with the administration’s position opposing market concentration.

Government’s involvement in the private sector often leads to disasters at the local and national level. Government officials should keep that fact in mind and try to refrain from using public clout and money to interfere with private sector decision-making.

Michael A. MacDowell is President Emeritus of Misericordia University and a director of the Calvin K. Kazanjian Economics Foundation. He lives in Estero.

State of Governance: Debating the Balance Between Government Intervention and Personal Liberty

E xamining historical perspectives on government involvement is crucial to understanding and ending the current debate. Throughout different eras, societies have grappled with the ever-shifting balance between individual liberties and collective well-being. The role of government has been shaped by events such as wars, economic crises, and social movements, molding perceptions of state responsibility and citizens' rights.

Economic Considerations: Balancing Regulation and Innovation

One facet of the discussion revolves around the impact of government on economic dynamics. Advocates for increased government involvement argue that regulations are necessary to curb corporate excesses and protect consumers and the environment. In contrast, proponents of limited government stress the importance of fostering a business-friendly environment to encourage innovation, job creation, and economic growth. Striking the right balance requires navigating the intricate relationship between regulation and innovation .

Social Justice and Equity: The Quest for Inclusivity

Social justice and how government interventions can address systemic disparities are central to the debate. Supporters of an active government role believe that targeted policies are essential to dismantle barriers to equality. Initiatives such as affirmative action, anti-discrimination laws, and social welfare programs are seen as tools to foster inclusivity. However, critics argue that these measures can sometimes result in unintended consequences, raising questions about the effectiveness of such interventions.

Global Perspectives: Contrasting Models of Governance

A global perspective adds another layer to the debate as different countries adopt diverse approaches to government involvement. Examining contrasting models, such as the Scandinavian social welfare systems versus laissez-faire economies, provides valuable insights into the outcomes of varied governance philosophies. This international context underscores the need for nuanced discussions considering cultural nuances and diverse societal structures.

Technological Advances and Privacy Concerns

In the contemporary era, technological advancements introduce new dimensions to the debate. Governments grapple with striking a balance between utilizing technology for the collective good—such as healthcare data for public health research—and safeguarding individual privacy. The ongoing challenges of regulating emerging technologies underscore the need for adaptive governance frameworks that can respond to the rapid pace of technological change.

Climate Change and Environmental Policies

Environmental concerns amplify the complexity of government involvement. Striking a balance between protecting the planet and maintaining economic vitality is a formidable challenge. Policies addressing climate change and ecological sustainability necessitate coordinated efforts, raising questions about the extent of government regulations and their impact on industries.

Democratic Governance: Engaging Citizens in Decision-Making

An essential aspect of the debate revolves around democratic governance. The level of government involvement should align with the values and preferences of the citizens. Engaging the public in decision-making ensures that policies reflect the diverse perspectives within a society. Striking a balance involves fostering a participatory democracy where citizens have a meaningful role in shaping the direction of government actions.

Adapting to Societal Evolution: A Dynamic Approach

Ultimately, the question of government involvement in people's lives is not a static inquiry but a dynamic one that evolves alongside societal changes. As new challenges emerge and values shift, policymakers must adapt their approaches to governance. An open, informed, and inclusive discourse is paramount to finding sustainable solutions that resonate with diverse societies' ever-changing needs and aspirations. The path forward lies in fostering a continuous dialogue, considering the multifaceted nature of governance and its profound impact on individuals and communities.

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