Markets where Possible Government where Necessary - Case Study Example

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The following case study "Markets where Possible Government where Necessary" deals with the concept that is encapsulated in the of-used statement in economics. It is stated that here we will try to identify the key concepts that relate to the proper functioning of the markets. …
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Markets where Possible Government where Necessary
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Download file to see previous pages Infrastructure is a very vital cog of any country, and hence takes a supremely significant position in the government's perception. Now, Rostow, who was a specialist in this field has made a note and brought to light the fact that the inability of the governments to create infrastructure was one of the major roadblocks that were faced during the process of modernization in Europe during the 19th century. In his argument, he says that the "creation of preconditions for take-off was largely a matter of building social overhead capital". This comes in line with the generally accepted argument that the cost of infrastructure or the social overhead capital compliments the industrial production process as this facilitates the transfer of goods, which leads to the creation of mobilization of markets on a national and international level. Haber, another esteemed expert in this field, has further developed the importance of infrastructural support in his arguments based on the case study of Mexico. Here, he offers the opinion that Mexico was unable to solve the problem of surplus capacity which it was facing in the 1980s by exporting goods to different countries around the world. All of this, he attributes to the lack of infrastructural support that was present in the country at that point in time. He cites Avisador Commercial de Havana which attributes this problem related to the exorbitant costs of transportation:
"How, then, can merchandise be shipped to the coast at an advantageous price How can they [Mexican manufacturers] compete in foreign markets within their own borders they have incredibly high freight rates" [1] [5]
In recent times, economic analysts have argued that the major difference between the growth differentials of different countries is infrastructure as highlighted by the case of India and China. Due to the importance infrastructure plays in the workings of a country and its non-excludable and unrivaled nature has further substantiated the claim for the need for governmental intervention to facilitate and hasten industrial growth in the country. On face value, one can see that this notion is somewhat not contestable in nature in that not many can refute the claim that has been put forward; however, some economists have also offered the notion of a private sector backed infrastructural growth. This notion certainly has immense promise in theory as this would basically remove the role of the government from this entire workup and would subsequently move the entire mechanisms onto a free market which would be highly appreciated in light of the concept at hand. However, that certainly does not appear to be a distinct possibility at the current point in time which is why infrastructural support has been ascribed to governments to this day and age. The rationale behind this is suggestions like the one offered are more likely to fail in the developing countries as a private sector-led infrastructural growth needs immensely advanced institutional or technological support in order to create and sustain excludable and rivaling properties. Due to this, infrastructure would remain severely under-protected as well as remain under produced which would be due to a large number of externalities that cannot be catered to by the entrepreneurs who are undertaking the workings of such an enterprise. ...Download file to see next pagesRead More
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