Economics Management - Assignment Example

Economics Management College ECONOMICS MANAGEMENT The role that the government plays in the economy of a country is a subject that has attracted a lot of attention in the works of many scholars. Notably, there is a direct relationship between the policies that the government puts in place and the ability of a country to gain the potential to grow economically. Since the government profits from the economic growth of a country, it has an obligation to make laws that will stimulate economic development within the country. However, there is a limit to which the government can regulate the business market. Therefore, it becomes crucial for the government to design desirablelaws that will promote rather than inhibit business. As management theories point out, the government should institute policies that stabilize the economy, inhibit unhealthy competition and protect the right of its citizens. This way the government will profit from increased tax revenue, infrastructural development and the rise in the public economic level. However, if the government implements short-term measures, there is going to be short-term growth which may be unbeneficial to the country.On this ground, to some extent, that economic growth is always beneficial to a country. Government regulations play a critical role in the business environment as the dictate the freedom that organizations have while conducting business.Fishback (2008)defines government policies as the set of rules and laws that the government puts and have a direct or indirect impact on the way people conduct business within a country. The government puts laws in place to inhibit or to encourage certain business strategies within the business market. However, it is wise to note that government policies is a double edge sword and may have either negative or positive impact on the economic development in a country. While some regulations may benefit a country, others may work against its development strategy. For instance, in the US, the government launched a deregulation procedure in the early 1990s as a strategy to open up business development.This was after the government realised that strict regulation of the business market culminated to unprofitability in the business sector. Therefore, the government should be analytical while implementing laws to ensure that they create a healthy business environment. In a dynamic business market, it has become challenge for the government to choose the best approach to regulate business. To promote economic development within a country, the government should design laws to regulate competition within the market.Laws should ensure that the every investor has a fair chance to start business and compete with its rivals. This helps to prevent monopolistic competition that may impact negatively on the economy of a country. Monopolistic competition results to unfair competition, which benefits only a few investors. Unhealthy competition within the business market has a wide range of disadvantages to the economy of a country. To begin with, it prevents the entry of many investors within the market, hence reducing the government revenue. Secondly, it reduces the consumer bargaining power, leading to high prices of products (Minniti, 2008). High prices products results to the exploitation of the public resulting to increase in the poverty levels within a country. From this point of view, the government policies should serve to discourage unhealthy completion within a country. Secondly, the government should put in place policies that encourage international investors while still protecting the local investors. Evidently, local companies are vulnerable toexploitation or unhealthy competition from external investors. However, international investors are crucial to a country as they bring about new services to the people and contribute the tax income of the government. Taxation policies are important for regulating international investors. For instance, countries such as the US have high tax rates for foreign investors as one way of ensuring that international investors do not exploit local companies. In addition, it is crucial to regulate the international investors’ relationship with the public. For instance, such investors should be compelled to employ the local people, use environmental friendlyapproaches and contribute to the social development. Such laws ensure that both the local government and the public profit from international investors (Minniti, 2008). From this angle, the government policies will contribute to the growth of the economy. The notion that economic growth is always beneficial to a country has become a controversial debate that has captured the attention of many scholars. Harrison (2008) defines economic growth as the percentage increase in the national input within a year. This is among some of the scholars that presented both sides of economic growth within a country. On one side of the coin, economic growth may be beneficial to development of country. Economic growth is directly linked to the improvement of the social welfare of the public. As a country gross domestic product increases, the people income level is bound to rise and life becomes more affordable. Therefore, the living standards within a country will rise while the poverty level will decrease. As the life of the people improve, they can afford better healthcare, education and other basic needs. While the level of literacy and life expectancy grows, there is going to be further growth as the public becomes more productive in the economic realms. Secondly, economic growth reduces country’s dependence on other countries, allowing them to exit exploitative relationships. The economic growth of countries such as US has led to the improvement in the quality of life and economic independence in the country. On the other hand, Harrison (2008) points out that in some occasions economic growth does not lead to the benefit of a country. In some instance, economic growth may be beneficial to the government only in the short-term but a burden in the long-term. The long-term benefit of an economic growth depends on the sustainability of growth. For instance, in the China, the government enacted measures to encourage business growth within the country as part of its strategy to improve the country’s growth. Consequently, the country enjoyed a rapid economic growth for 25 years characterised by a rise in the social class, improvement in living standards and high income tax. However, in 1997, the country experienced a high inflation rate of about 6.9%, leading to decrease growth. This is linked to the inability of the government to support policies that stimulate sustainable growth within its country. From a global perspective, the great depression that hit across the world was a result of World Banks initiative to promote growth by stimulating public borrowing. As more people borrowed, the investment opportunities decreased leading to high rates of debts and inflation in the global economy. From this point of view, unless country invoke sustainable development, economic growth may not be necessarily beneficial to a country. From a critical analysis, the national government bears the role of measuring the sustainability of its development strategies to ensure that they are beneficial to the country both in the short and long-term. The sustainability of the economic growth depends on the ability of the government to get rid of the costs linked to unsustainable growth (Minniti, 2008). For instance, economic growth results to income inequality amongst different classes in the society. This is because short-term growth benefits the rich who have a higher potential to invest and oppresses the poor who form part of the consumer population. Secondly, there are times that economic growth is associated with environmental deterioration. For instance, as third world countries strive to industrialize, they deforest their countries. While the country benefits from increased tax, employment and business opportunities, the cost of living is likely to rise due to loss of fertile land that they had previously used to cultivate food products. To some extent, the government is responsible for controlling the sustainability of growth within a country. To do this, the government should focus on developing policies that reinforce long-term growth. In this light, they should institute policies that reduce environmental costs and support equal growth within the country. In conclusion, I disagree with the idea that economic growth is always beneficial to a country. From the analysis of a number of countries, it is clear that there are times when economic growth results external costs to the government. For instance, countries such as China have experienced short-term growth followed by a period of increased inflation rate. This is clear indication that increase in the gross domestic product in a country does not always translate to the development of a country. In other occasions, economic growth results to economic inequality within a country. The benefits that a country accrues from the economic growth of country is dependent on the government’s ability to focus on regulatory policies that are sustainable and can pave way for long-term growth within its territory. Sustainable growth will benefit the country by increasing the government tax income, bridging wealth gap and raising the standards of living with the country. Therefore, there is need for the government to focus on long-term strategies that are likely to contribute to the development of its country.This way it is possible that economic growth will benefit a country. Bibliography Top of Form Fishback, P. V. M. 2007,Government and the American economy: A new history. Chicago: University of Chicago Press. Bottom of Form Harrison, S., 2008, Is Economic Growth Always Beneficial? Available at:< http://blogs.yis.ac.jp/macaulayp/files/2013/11/Article-Is-Economic-Growth-Always-Beneficial-22oswcz.pdf> Minniti, M. 2008, The role of government policy on entrepreneurial activity: productive, unproductive, or destructive?.Entrepreneurship Theory and Practice, 32(5), 779-790. Read More