ROLE OF THE GOVERNMENT ON THE ECONOMY

Role of the Government on the Economy

            There are many debates that arise in the contemporary society regarding the extent to which the government should take control of the economy. This has been largely the stoc of thread of many societies given the fact that economy plays a vital role in ensuring that national interests are met. Even though the debate has been ranging across generations, it is still evoked frequently on the extent to which the government is supposed to interfere with the economy of the society. This mostly happens in situations where there is financial crisis.

            The views on the role of the government in the economy range from capitalism, a belief that the economy should be controlled by the individuals, to communism, which holds that a social organization such as the government or the state should be held responsible in controlling the economy. Even when people hold moderate views halfway between capitalism and communism, their views vary greatly. Since most societies emphasize most on profit and high productivity, then most economic systems of the countries have adopted capitalism instead of communism.

            Government plays a vital role  on the economy of any society. The purpose is to maximize on the well-being of the society. All the measures that the government takes is to ensure that the economy of a country grows at a steady rate, stabilize the price level and ensure that there is increased levels of employment within the nation or country. However, there have been heated debates on whether the government should take active roles in devising policies that directly interfere with the economy of the nation or they should let it grow naturally.

            Firstly, in the 1930’s, there was the great depression. There was a remarkable decrease in the stock prices in America which later spread to the rest of the world (McElvaine, 1993). The period saw a tremendous decrease on the demand and global trade in general. There were also high unemployment rates. Because of this, various governments took various measures in an attempt to improve their economies and increase employment rates. They did this partly through stimulating the demands by spending more than they actually earned.

            Keynesian macroeconomic theory has greatly helped in understanding the role of government in the economy of any country. Its impact on the interventionists policies cannot be taken for granted. From the point of view of the Keynesian economics, when there are inefficient economic outcomes emanating from the private sector, then public sectors need to take measures to counter the effects. The fiscal policies, adjusting taxes, government policies as well as monetary policies need to be checked by the government. By cross checking the amount of funds supplied with that it receives, the government assists to stabilize the economic growth rate of any country. In the process, the price level and the employment rates are affected (Congdon, 2007).
            A case in point is the current growth of economy in China. The economy in China has grown at a very fast rate. The state needs to step in and take measures to prevent economic crisis. Otherwise, it would be in the danger of decelerating at a very fast rate without warning. The economy might increase until it leads to a sudden downward crisis. At the end of the day, the economy would crash and have no ability to regain again.

            From another insightful perspective, the government plays a great role in ensuring that businesses and companies are confined to specific rules. For instance, there are certain societies whose market rules prohibit monopolistic tendencies. These among other rules will eventually play a vital role in stabilizing the market world through minimizing conflicts. Through ensuring that the market rules are followed in the market, conflicts are minimized in the society.

            Briefly, the government plays vital roles on the economy of any society. Firstly, it ensures that there is a balance between the amount spent and that earned thus making sure that there is economic growth in the nation. Secondly, it makes sure that the rules of the market are followed thus minimizing conflicts that would hitherto affect market activities. These among others are the vital roles that a government cannot escape if the economy of any nation is to be improved.

References

 Congdon.T. (2007). Northern Rock Is Making Money For Taxpayers. Rout ledge. New          York.

McElvaine. R. S. (1993). The Great Depression: America 1929-1941 . Three rivers press.        New York.