Issues Concerning Market Economies - Coursework Example

Intеrnаtiоnаl business Name Institution Tutor Date Introduction The market economy may be performing so efficiently that questions may be asked as to why the government interferes with its functioning. This issue may be raised by private markets which may wish to operate freely without the interference of the government as long as there are strict policies in place. Many economists and observers believe that the government has a pivotal role to play in the market economy. What is common in many countries, the government does not actually take the place of the market economy but instead the governments intend to improve how the market economy functions. The most important aspect in any intervention or regulation by the government in the market forces is that any such interference must ensure that there is a balance between the cost of regulation and the benefit brought out by the same intervention (Block, 2008). This paper will focus on the various roles that the government should play in the market economy and demonstrate why is hard to have a truly “free-market” economy. Body Market economies may abuse the economy, exploit or steal from it if it is not well protected. The government is entitled to keep the record of deals involving lands and houses by enforcing contracts taking place between buyers and seller in almost each commodity. The government does this by putting in place a functional legal framework that safeguards the rights of the consumers as well as the producers (Bremmer, 2010). The truth of the matter is that when the legal rights of both the consumers and the producers are not clearly protected and recognized, there can be little trade in regards to owning and trading economic resources. When buying goods, the buyers need to be sure that the goods they are buying from the sellers are really owned by the seller implying that the seller deserves the right to sell the goods. When contented, the buyer will need to be guaranteed that there will be a formal agreement when they parties agree to exchange something. This situation is also typical between workers and employers where the workers negotiate individually or within a union on the wages and the conditions of work with the employers. Failure to routinely and effectively comply with the agreement, the market becomes expensive and ineffective to operate especially when the criminal justice system is impartial or unfair. Therefore, it is the responsibility of the government to ensure a fair play between the trading parties by ensuring that there is a functional and credible criminal justice system (Sirico, 2012). The government has to ensure that private property and the economic benefit derived from such property is well protected. Investors need such assurances in order to have confidence when doing business in any market economy. Failure to have such assurance may not attract or encourage investors to spare their time and money in an economy where there gains may be taken up by the government or some individuals (Sirico, 2012). The government should also have control over pollution and external costs especially in the manufacturing sector. A lot of waste is generated from the manufacturing sector of the economy where the by products end up in the environment and most the nearby water bodies and the air. Such natural bodies like the rivers are not owned by individuals and the government should be the custodian of such resources which are vital for various uses by the people (Kates, 2011). The government should have laws in place indicating the penalties associated with pollution of natural features and the environment at large. Before issuing any operation license, it is the role of the government to inspect the proposed business in order to assess the impacts of the business to the environment. The government should specifically check the pollution control equipments and systems to ensure that they comply with the minimum set standards. For huge investments, some governments recommend and environmental impact assessment report from an expert before giving a nod for the project to start. Failure to have such checks by the government, companies can have low cost of production implying that they can sell their products at reduced prices. This can maximize their output in order to satisfy the rising demand for their products over their competitors (Wild & Wild, 2012). By imposing a penalty on pollution, the government seeks to protect the people who do not directly benefit from the acts of the industries. Such effects whose impacts are felt by a third party are referred to as externalities. The pollution factor from the industrial activities is thus felt by the people who live in the polluted environment and the tax payers who cover the bill for the clean up process. Many natural resources like the air, oceans, river and public utilities like roadside and open fields become a victim of pollution because there are no individuals to take care of them (Kates, 2011). The government should come in and regulate the imbalance by charging the producers and consumers of the product who are the main beneficiaries. When deciding on the cost to impose on pollution, the government should establish a balance such that the cost of pollution and what the pollution is costing the society so as the producers are not discouraged to continue working (Finnerty, 2012). Governments play a critical role in establishing a suitable economic condition for market economy in order to ensure that private businesses operate most effectively. The governments are able to do this by implementing monetary and fiscal government policies. The government ensures that the market has a stable currency so as to ensure that inflation is controlled. Many states have suffered from the problems of inflation and rising unemployment (Hamada, 2009). As a lesson, governments employ such measures referred to monetary and fiscal policies to help control the possible problems of currency instability. During the times of high unemployment, governments use tax programs as catalysts to stimulate the national economy in order to reduce the inflation and unemployment rates (Sirico, 2012). Business cannot be effective when there is lack of adequate security. Security and defense services are only provided by the government and no individual or private business can be in a position to provide such services. The government is the sole provider of defense and public good. Defense is referred as a public good since it is provided to all the members of the public and it guarantees security in the market economy (Finnerty, 2012). Defense services are provided as free services to the public just like other public goods like television signals. It difficult to sell defense services to those people who are willing to pay for them and then fail to provide the same service to the people unwilling to pay. Everybody would wish to have defense services but people would not be willing to pay for them, a problem referred to as “free rider”. It is for this reason that only the government can provided such services and maintain its cost through taxes collected from the public (Wild & Wild, 2012). The market economy does not favour everyone to have income since not all people have resources of skills to earn a living. Most people benefit from inheritance, socio-political connections of their families and friends while others are successful in business. There is a big class of people which is not lucky to benefit from the available means of wealth creation. The government has a role to play in income and social welfare distribution. The government is able to meet income and social welfare goal by implementing tax policies and ensuring the after-tax distribution of the available income is fairly executed (Nohr, 2012). The overall goal of the government is to ensure that there is equity in the market economy by avoiding an imbalance that would lead to the collapse of the market economy. The government goes further to provide a “safety net” to the disadvantaged members of the society by supporting the unemployed, providing healthcare for the poor and pension for the retired (Wild & Wild, 2012). Conclusion In conclusion, based on the findings of this essay about the role of the government, it is worth to note and understand that there can never be “a truly free market”. A truly free market is one that the government does not involve itself in the regulation other than providing a common currency. A free market can only create opportunities for the few greedy people to exploit the poor and the resources of a country. This implies that the income will only be concentrated in a small group of the opportunists. There are several commonwealth countries like England and Australia which operate a free market. However, the market is not completely free since the government exercises some regulations to get rid of the excesses (Sirico, 2012). Each country exercises some form of regulation only that the level of government regulation vary form one nation to the other. From a philosophical perspective, there should be no intervention when two parties engage in a business in a fair process. People should be allowed to trade freely but there is no truly free market instead most countries have a “mixed market”. References Block, W. (2008). Labor Economics from a Free Market Perspective: Employing the Unemployable. London: World Scientific. Bremmer, I. (2010). The end of the free market: who wins the war between states and corporations? European view, 9, 249-252. Finnerty, J. (2012). Insiders and market efficiency. The Journal of Finance, 31 (4): 1141–1148. Hamada, R. (2009). Portfolio analysis, market equilibrium and corporation finance. The Journal of Finance, 24, (1): 13–31, Kates, S. (2011). Free Market Economics: An Introduction for the General Reader. New York: Edward Elgar Publishing. Nohr, R. (2012). Free Market Economy and Dino Crisis: The Production and Circulation of Knowledge in Strategy Games. Computer Games and New Media Cultures, pp 125-142. Sirico, R. (2012). Defending the Free Market: The Moral Case for a Free Economy. New York: Regnery Publishing. Wild, J., & Wild, K. (2012). International business: The challenges of globalization. (6th ed.). New Jersey: Pearson. Read More