Is There a Necessity for Government Intervention in the Economy?
Is There a Necessity for Government Intervention in the Economy?
The necessity for government intervention in the economy is a rather controversial issue. Ron Paul on Forbes.com claims that the current attempts to repair the economy, such as the bailout and stimulus programs, are simply the creation of a bubble doomed to eventual collapse. One of the earliest examples of protective intervention is the Sherman Antitrust Act of 1890. Government intervention is particularly crucial in times of hardship, as is well known to be true based on the Great Depression. Thoroughly excluding the government from economic concerns is essentially equivalent to economic anarchy .
The necessity for government intervention in the economy is a rather controversial issue. Those in support of government intervention generally believe that the economy is not completely capable of overcoming hardships and struggles on its own. Those in opposition to government intervention often tend to feel that the methods used by the government are largely ineffective and sometimes do more harm than good. As is often the case, particularly in government matters, neither side is completely wrong.
We Reap What We Sow
Ron Paul on Forbes.com claims that the current attempts to repair the economy, such as the bailout and stimulus programs, are simply the creation of a bubble doomed to eventual collapse, as was observed following Alan Greenspan’s low interest rates approach. He asserts that economic growth cannot result from government intervention due to the ultimate cost to taxpayers (Paul, 2009). Thomas E. Woods, Jr. wrote for The Daily Reckoning and stated, “F.A. Hayek won the Nobel Prize for his work showing how the central bank's intervention into the economy gives rise to the boom-bust cycle, making us feel prosperous until we suffer the inevitable crash. Most Americans know nothing about Hayek's theory (known as the Austrian theory of the business cycle), and are therefore easy prey for the quacks who blame the market for problems caused by the manipulation of money and credit. The artificial booms the Fed provokes, wrote economist Henry Hazlitt decades ago, must end “’in a crisis and a slump, and...worse than the slump itself may be the public delusion that the slump has been caused, not by the previous inflation, but by the inherent defects of 'capitalism (5th paragraph, 2009).’” The perception is that the solution results in extended/increased problems .
The Hand That Feeds
Although often viewed as overprotective and sometimes patronizing, government intervention originated to protect the people, especially the “little guy” from increasingly powerful corporations and various unethical practices. One of the earliest examples of protective intervention is the Sherman Antitrust Act of 1890, which was designed to break up monopolies in order to prevent the crippling effect they have on free enterprise and competition (About.com, n.d.). The greatest changes in the economic powers of the government occurred after the depression. “Many Americans concluded that unfettered capitalism had failed. So they looked to government to ease hardships and reduce what appeared to be self-destructive competition. Roosevelt and the Congress enacted a host of new laws that gave government the power to intervene in the economy (About.com, 2nd paragraph, n.d.).” From these new laws were born many of the rights society clings to today, such as the formation of unions, wage and hour restrictions, and retirement benefits (About.com, n.d .).
Those seemingly omniscient writers of the United States Constitution apparently foresaw arguments regarding the ability of the government to become involved in economic affairs. Article 1, Section 8 of the U.S. Constitution states, “The Congress shall have Power To lay and collect Taxes, Duties, Imposts, and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States (LG, 2010).” Some additional supporting clauses include, “To regulate Commerce with foreign Nations, and among the several States…” and “To establish an uniform Rule of Naturalization, and uniform Laws on the subject of Bankruptcies throughout the United States...(U.S. Constitution Online, n.d.).”
Have Your Cake and Eat It Too
The basic perception of the public, regardless of whether or not they desire government intervention, is that the public has certain rights and it is the responsibility of the government to ensure those rights are upheld. The government is commonly requested to intervene in matters ranging from education, to pollution, to health insurance, and so on. When the government issues a tax cut, nobody complains. Yet lower taxes means less government purchasing power, potentially disabling some of the functions necessary to the government. Therefore, once the economy has regained a level state, the taxes rise again to replenish depleted funds, then the complaints start. Government intervention is particularly crucial in times of hardship, as is well known to be true based on the Great Depression. Stimulus programs, open market operations, and lower interest rates are only some of the methods utilized by the government to overcome financial crises (amber.c, 2009).
The origins of our country are well-known to have been founded on freedom from oppression, which is perhaps why so many individuals protest government intervention. Regardless, it is historically clear that we are not safe when left to our own devices. Thoroughly excluding the government from economic concerns is essentially equivalent to economic anarchy. All things in life should be monitored to ensure they do not become excessive, and government actions are no exception. However, a sensible level of intercession is needed and should not be shunned. Independence can too easily become arrogance, resulting in ultimate failure. The key to financial success is knowing when to request succor and being dignified enough to accept it .
About.com. (n.d.). Growth of government intervention in the economy. Retrieved from http://economics.about.com/od/governmenttheeconomy/a/intervention.htm
amber.c. (2009). What are the pros and cons of government intervention on the economy?. Retrieved from http://answers.yahoo.com/question/index?qid=20090930140916AApoStI
LG. (2010). What does the constitution say about government intervention in the economy?. Retrieved from http://answers.yahoo.com/question/index?qid=20100208133908AA8kC8t
U.S. Constitution Online. (n.d.). U.s. constitution - article 1 section 8. Retrieved from http://www.usconstitution.net/xconst_A1Sec8.html
Paul, Ron. (2009, October 29). Be prepared for the worst. Retrieved from http://www.forbes.com/forbes/2009/1116/opinions-great-depression-economy...
Woods, Jr., Thomas, E. (2009, May 6). Government intervention for economy makes things worse. Retrieved from http://www.dailyreckoning.com.au/government-intervention-for-economy-mak...