A Study of the Role of the State in the United States Economy and the Need for Government
Can man commit acts of righteousness without guidance? Under corporate personhood of the United States justice system, a corporation is seen as an entity, a person. So, can a corporation commit acts of commutative injustice without mediation? A higher authority must be needed to ensure the world we live can provide security, structure, and freedom for our citizens. And the role of government in can contribute just that. The impacts of the government regulations has been largely debated on both ends. Many people have a negative view of it and think we should get rid of it altogether. However, some others say that we need government regulation to promote fairness in competition and that the government owes it to their people. I believe without the state’s role in the economy the economy wouldn’t be as stable and prosperous.
In the United States, there are different ways in which the government gets involved with the economy. First, the government provides a legal and social framework in markets where participants buy and sell the goods and services produced by the economy’s scarce resources. The government also strives to maintain competition in markets for goods and services by trying to ensure no one seller dominates the market in an unfair manner. As stated in Leviathan, A corporation acting by the “fundamental nature of man” will commit acts of commutative injustice to gain superiority in the market.
The role of the government in the state is to regulate the major corporations from committing such acts and to protect the smaller firms from their monopolistic/oligopolistic superiors. In the midst of this government intervention, the government also get something in return which is taxation. The government’s taxation system has the ability to control the percentage of taxes and redistribution of income and wealth. Taxation levels can be altered as a means for stabilization and growth. By adjusting spending and tax rates (fiscal policy) or managing the money supply and controlling the use of credit (monetary policy), it can speed up or slow down the economy’s rate of growth. And in the process of that, it will affect the level of prices and employment. Periods of slow economic growth and high unemployment were viewed as the greatest of economic threats. This period of time were reflected following the Great Depression. The government came into play when they cut down taxes so consumers would have more to spend to strengthen the economy again.
During a time of desperation such as the Great Depression of the 1930s, The New Deal was created to provide relief for the unemployed, recovery of the economy, and reform of the economic and banking systems. Many of these programs initiated in the Roosevelt administration continue to have instrumental roles in the nation’s commerce even today, such as the FDIC, TVA, SEC and the Social Security system which provides income for retirees. What would’ve happened if the government did not exist? How do the lower class citizens survive? Many people and corporations still question the reasoning behind the government and its interventions.
In The Vampire Economy: Doing business Under Fascism, it was mentioned that some American corporations feels “……. harassed by what they regard as unreasonable government interference, finding a large part of their profits siphoned off by taxes……..in the totalitarian States.” Is this fair? Is it right to take someone else’s success and redistribute it among others? How do we determine success for a company? How do we determine success for a country? Over the years, analysts and reporters love to talk about Gross Domestic Product, hence the GDP and it has become the yardstick by which we measure a country’s success. But there’s a big problem with that, GDP only accounts for a country’s economic performance, not the happiness or wellbeing of its general citizens.
Government intervention should take bigger steps to improve welfare, health care education and communication. As mentioned by Pope Francis in Apostolic Extortion Evangelii Gaudium, it is news when the stock market drops two points, but its not a news worthy item when an elderly homeless person dies of exposure. There is a huge case of inequality in the society. Everything comes down to the laws of competition and the survival of the fittest, the powerful feed upon the powerless. Are the success of a market economy based solely on the rate of GDP? “Almost without being aware of it, we end up being incapable of feeling compassion at the outcry of the poor, weeping for other people’s pain, and feeling a need to help them as though all this were someone else’s responsibility not our own”(Pope Francis). The rich should help, respect and promote the poor. With the government’s inclusion in the activity of the market economy, there is generous solidarity expected and to return the economics and finances to an ethical approach which favors human beings. It is vital that government leaders and financial leaders take heed and broaden their horizons, working to ensure that all citizens have dignified work, education and healthcare. And this can only be done with the taxation of a government’s citizens.
The government can also set up laws to prohibit acts that are considered unlawful. The Federal Trade Commission was set up to investigate violations, enforce antitrust laws, and determine what actions constitute “unfair method of competition”. The purpose of anti trust laws was to limit the power of larger firms and protect smaller independent firms, regardless of the effects on efficiency. Again, the governments interference limits the rise of monopoly and cause a industrial dominance. As stated in the Economist, the Dodd-Frank Act was created with the intention to reduce banks’ ability to take excessive risks by restricting proprietary trading and investments in hedge funds and private equity.
It is hard to predict the economy, Economists can only evaluate and predict based off current methods and make logical choices without knowing the exact numbers of the flow of money going in and out a market at a given time. There are some loopholes and many unanswered questions that the economy has. When the Dodd-Frank attempts to answer these questions, they faced many complications hence led to the withdrawal of the Dodd-Frank Act.
Opposed to the Dodd-Frank act, regulatory reform were held in the Office of Information and Regulatory Affairs. Sunstein was hired to suggests new pension plans and libertarian policies. As the head of the office, he works to remove the old type of bureaucrats, yet, the Obama administration has added more rules instead. The scope of regulations is expanding. One study for the Business Administration stated that regulation costs $1.75 trillion a year in 2008 (The Economist). Many ideas are being suggested in regards to deleting the regulations. Mitt Romney supports the idea to remove one regulation for each new one. Another idea is to create an independent scorer for regulatory costs and benefits. Creating a board of outside grandees to help break political deadlocks can be a solution to the problem.
When the government is involved in the market economy, it generally controls the behavior of buyers and sellers through a process of indirect command”. This “visible hand” of the government does not change the basic system of rewards and punishments, instead, it alters the size of the reward structure of a laissez-faire market so resources are allocated more in accordance with government policy than with the actions of individual buyers and sellers.
Policies and the “visible hand” of the government such as price controls, regulations, taxes, and subsidies are in need not only in communist countries where the government is in control, but also the economy in general. Because China has developed its market remarkably and has succeeded in achieving state capitalism and wealth interactions, the visible hand continues to grow. However, the debate of how much the state should be involved in the market without the invasion of liberty still exists.
State capitalism can claim the world’s most successful big economy for its camp according to the Invisible Hand, China’s GDP has grown at an average rate of 9.5% a year and its international trade by 18% in volume terms in just 30 years. Over the past ten years its GDP has more than trebled to $11 trillion (The Visible Hand). China has taken over from Japan as the world’s second biggest economy, and from America as the world’s biggest market for many consumer goods. The Chinese state is the biggest shareholder in the country’s 150 biggest companies and guides and goads thousands more. It shapes the overall market by managing its currency, directing money to favored industries and working closely with Chinese companies abroad. This goes to show countries like China that is governed with communist power can also achieve high levels of success because of government intervention.
Although government laws and regulations can reduce a firm’s profits. But we must not forget the government itself is a major customer and so businesses can also profit by being suppliers to the government’s demand of goods and services. Todays managers must be equally versed in matters of government and private industry. Nevertheless, whether man is evil or pure, a State will be there to guide, to limit and to provide a foundation for corporate operations. The role of the state is vital for the economy to flourish. All of these rules and attempts to find the perfect formula for our economy is what makes up the economy. The economy is a giant complicated struggle between morality and costs.