Government involvement in the economy: where the line between delicate care and tight control should be drawn

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Table of Contents

Introduction
Government Control vs. Freedom of Entrepreneurship: The Golden Mean
Working on the Probable Solutions: Reaching a Compromise
Conclusion
Works Cited

Introduction

Although government often influences the economy of the state greatly, the link between the two is rather loose. In fact, once a state allows private entrepreneurship, economy is no longer in the hands of those beholding power – on the contrary, these are business people who shape the realm of the state’s economy, thus, contributing to its development and enhancing the cooperation with foreign countries.

Naturally, letting the state economy be guided by private industries must seem extremely risky to the government, which must be the key reason why in most states, the question whether economy should be government-driven or powered by private entrepreneurships solely remains open.

Like many other dilemmas, the given one seems to have its solution concealed in between the choices. While private entrepreneurships must be the key driving power behind the state economy, in the instances of crises, the interference of the government is crucial for the state economy to be stable; however, in an attempt to control the market and prevent the possibility of a crisis, the government creates obstacles in the way of private enterprises development.

Government Control vs. Freedom of Entrepreneurship: The Golden Mean

Whenever government tries to take control over the state economy and coordinate the actions of private entrepreneurs, the progress of the state is threatened, mostly because authorities tend to impose their vision of what strategies the companies should adopt.

Therefore, basically, by intruding into the sphere of private entrepreneurship, the government creates only two problems, yet these problems affect the business sphere immensely, shaping the economy of the state and influencing other fields, such as finances, social life, the international image of the state, etc.

To be more exact, with its interference into the realm of private business, government restrains entrepreneurship and intrudes rudely into the financial operations of private businessmen, which can be viewed as the infringement of the latter’s rights.

Another obvious problem with the intrusion of the state into the private business sphere is that the solutions to the problems, as well as the strategies, cannot possibly take into account every single specifics of the company in question; otherwise, the state would have to control every single move of every single company, which would be practically impossible.

To make the matters worse, the principles of organizational and industrial psychology would be ignored completely in the cases when the state would have to make a decision for the company.

Therefore, not only the financial state of affairs in the company would gradually turn worse, but also the company culture and the quality of the organizational behavior. Finally, being ruled by the government, an organization can possibly lose the track of the updates on the company data, which will definitely lead to the organization’s rapid decay.

The last, but definitely not the least argument concerns personal freedom. Even though the state control over entrepreneurships might be viewed as the means to make certain that the state economy is going in the right direction, it must be admitted that the unceasing manipulation of private companies by the government can be regarded as the infringement of people’s rights to run their own business.

It would be wrong, however, to claim that the government must not interfere into the state economy under any circumstances. While in the realm of reasonable competition and great financial assets of the country, private entrepreneurship will most likely flourish even in the foreign market, combining their own advantages with the support that the state gives them, in the crisis environment, private enterprises will need considerable help.

At this point, the government should provide businesses with financial, economic and moral support for them to feel safe even in such critical situation. Therefore, the positive aspects of government interfering the economic affairs of the state enterprises is that in cases of crises, government helps find the ways to deal with the crisis faster, offering at the same time financial support.

In case of a crisis, there are three basic steps that the government can take to help entrepreneurships, including cutting taxes, providing the growth of money supply and making the interest rates rise. Though cutting taxes might lead to the problems regarding free state services, for example, providing free medical help (Medicare), or offering free tuition in public schools, together with the pension cuts, state grants and other monetary supplies.

That being said, it becomes clear that the growth of money supply for the private entrepreneurships will most likely strike a fraction of the state population, who are just as vulnerable towards shifts in the state economy as private entrepreneurships. However, the changes listed above often happen to be very difficult to carry out. Since the slightest change in the governmental policy regarding a specific issue will inevitably trigger a rapid change in the related fields, the government is often quite reluctant to shape the existing policy.

Therefore, once the government takes actions, the rest of the fields in economy, politics and finances will demand further changes. Hence, it can be concluded that the governmental impact on the economic progress of the state can be quite positive as long as the government does not impose its will on the private enterprises for them to change their strategy and shape their course of actions towards the one that the state authorities consider more reasonable.

Working on the Probable Solutions: Reaching a Compromise

Although the issue concerning the state control over entrepreneurship is rather complicated, it can still be solved once the owners of private enterprises, as well as the representatives of the government structures, try to find a common language and search for possible compromises. However, one issue must be made perfectly clear; on no account may private entrepreneurship be ruled by any other person than its legal owner.

After the owners of private companies realize that they have the right to control their enterprise on their own, they will be able to work on a reasonable solution to the given issue. Among the already existing suggestions, the mixed economy should be mentioned. According to the existing definition, a mixed economy is the economic strategy that defines the role of the government as protecting public companies and preserving the private ones.

It is important to keep in mind that the economical performance of a state should be defined by its GDP (Gross Domestic Product, i.e., the productivity of the companies within a particular country) and GNP (the productivity of the companies belonging to the residents of the specified country). Therefore, it is essential that private enterprises should be encouraged and not restricted by the governmental policies.

Needless to say, the sphere of the governmental influence should be restricted to consulting and drawing possible plans for the further development; however, according to what Gitelson, Dudley and Dubnik say, the current American government seems to have adopted a more compromising policy towards private companies: “On the fiscal side, the Obama Administration asked Congress for both tax cuts and a massive ‘stimulus package’ that would boost government spending” (Gitelson, Dudley and Dubnik 395). Therefore, it is clear that compromise is achievable, yet both sides need to work on the strategy that will allow for as much flexibility as possible.

Conclusion

Judging by the fact that the state economy rates are predetermined by the GNP and GDP indices, which are shaped mostly by private entrepreneurships, which seem to be well aware of their strengths and weaknesses, as well as the strategies that are most likely to help them succeed both in the domestic and foreign market, it is most reasonable to allow private entrepreneurship choose their own ways of development and create marketing strategies.

However, in the case of an economic or financial crisis brought on by the outside factors, the interference of the government is essential for the well-being of the national economy.

Therefore, it can be considered that the best strategy for any government in general and the American government in particular will be to leave the economic strategies development to the owners of the enterprises and private analysts, and appear only when there is the need to use the help of the governmental authorities specializing in economic issues. Unless private enterprises are given an opportunity for growth, the state is most likely to be stuck in the economic recession.

Works Cited

Gitelson, Alan R., Robert L. Dudley and Melvin J. Dubnik. American Government. Stamford, CT: Cengage Learning, 2011. Print.

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