Government versus the Private Sector - Essay Example

The debate for publically owned economic setup versus privately owned environment has been prevailing for centuries.

However, the corporate analysis of the private sector argues that the private companies know their niche and can work in creative ways to enhance profitability and generate economic growth. According to them the government should concentrate on the matters at the national level and emancipate the private sector to function effectively in the market. The extent to which the government should be involved in the private sector can be validated through the following examples.

Let's take the example of manufacturing vehicles say for example cars. The company General Motors which is the leading carmaker in the world was forced to declare bankruptcy in 2009. After filing for bankruptcy the company reemerged in the market with most of the control taken over by the government. The Obama government took charge but ignored many aspects with their straightforward approach. There was no discussion of the research and development expenditure on the changing future demands of for example electric cars, light rails, or products for a more energy-efficient future. The employees were also not given the desired emancipation and rights to work in the company and the entire environment turned into a regimented setup.

Other examples can be the takeover by the government of Citigroup and other such organizations at times when these firms were in financial distress. ‘When the government took an ownership stake in Citigroup, AIG, Fannie Mae, and Freddie Mac in the midst of the financial crisis, it also took a severely limited view of its role—imposing few obligations in exchange for the bailouts.’ (Weissman) These examples all point towards the fact that the government involvement is too hierarchical and direct and this mars the creativity of the firms. However, one cannot underestimate the help offered by the government in order to stabilize the organizations in financial jeopardy. But if they were held for longer periods of time as public organizations then this would harm their future productivity and innovation. As the changing demographic and societal norms all call for better and more efficient products, the firms need to work on their innovative techniques to build a better chance of profitability for their books. This will result in a more long-term perspective of better economic growth for the US as a whole.

Thus government intervention is appreciated to a certain extent and longer involvement and encroachment by government in the private sector can be detrimental to the health of the private sector and the economy as a whole.