Government Intervention in Stabilizing the Market - Essay Sample

The recent economic disaster in the global arena, as well as the interventionist attempts by several regimes to steady their economies, have caused a lot of debate about the merits of the free-market organization and the knowledge of state involvement (Gallup & Newport, 2009). Drafting on the concepts of laissez-faire and market failure, the Keynesian and Marxian theories of regulation, I argue that mutual co-existence of the market and the government is valuable to a nation. Governments need to put in place a proactive regulatory framework to guard against regulatory capture, investment and forbearance to check financial market surplus.

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Instead of seeing unbalanced government budgets as mistaken, Keynes recommend the countercyclical fiscal policies that act against the course of the business sequence. For example, Keynesian economic experts would advocate compensatory spending on labor-intensive infrastructure developments to induce employment and stabilize incomes during economic recessions (Ryu, 2014). According to the public interest theory, regularization got instituted for the guard and benefit of the community as a whole or some big subclass of the general (Mitnick, 1980). Without suitable fiscal policy and governing framework, a countrys financial system grows susceptible to crisis and risks the constancy of the whole economy.

The organization of regulatory check strongly impacts financial institutions conduct and operation, and consequently the source of financing for the economy, the motivation to save and amass demand. Extreme asset growth throughout economic flourish and market liberalization involves the establishment of suitable economic and controlling policies to guard against market fiasco, to avert political and institutional intrusion in the regulatory supervision of monetary institutions, and to avoid regulatory forbearance, arbitrage, and capture (Ryu, 2014)

The government has a significant role to play in regulating the economy through the formulation of fiscal policies which can be used to guide and regulate the economy. Financial institutions also should be regulated by the government through the central bank by managing the amount of money supply in the economy which can cause the weakening of a currency if not well monitored. At different times the government should intervene in terms of the amount of interests that financial institutions charge on credits to ensure that the economy has enough circulating capital which can promote job creation and entrepreneurship in an economy. The government however, should ensure that regulatory measures are not in excess which can lead to the stagnation of the economy and also can scare away potential investors (Ryu, 2014).

In conclusion, governments in capitalistic nations rely on commercial activities for investment, employment, high living standards and government income. Such reliance calls for governing and an industrial atmosphere that promotes higher aggregate demand and high financial development, as well as raised revenues to fund government financial priorities (Gallup & Newport, 2009). The implication is that both government and the market should co-exist in a way that compliments the contribution of each other on the road to a sustainable and lively economy. Government control of the market will be valuable with a monitoring framework that stresses compliance, competence, risk management and universal coordination through the suitable use of technology to lessen the chances of collapse.

Refences

Gallup, A. & Newport, F. (2009). The Gallup poll (1st ed.). Lanham, Md.: Rowman & Littlefield Publishers.

Mitnick, B. M. (1980). The political economy of regulation: Creating, designing and removing Regulatory reforms. New York: Columbia University Press.

Ryu, J. E. (2014). The public budgeting and finance primer: Key concepts in fiscal choices.