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State Intervention And The Economy Essay

1251 words - 5 pages

It is widely believed by scholars that many of the varying levels of economic development between states are the direct result of a negative correlation between the aforementioned and the varying degrees of state intervention. In most cases it is evident that the more a state intervenes in its economy, the less the country will develop. While, at the same time, a country whose intervention exists at a minimal level will tend to have a stronger economy and a more rapid rate of development. However, it is also important to understand that as with many concepts there will always be extreme cases where the states may not strictly follow this model; in some cases they may even behave completely opposite. These extreme cases are often due to the idea that a state will either behave in a predatory or developmental manner.
In order to fully grasp the ideas of predatory and developmental states it is important to first understand that they are directly connected to the two polar views of market and government failure. An individual who is an advocate of the market failure would be likely to say that all markets will eventually fail unless the states intervene in attempts to correct or prevent this failure. While at the same time, a person who believes in government failure is likely to think that although a market may fail, that it is better for the market to correct itself compared to a government intervening. This idea roots from the belief that governments can also fail and that often times they may not be intervening in a way that promotes overall social good.
One major cause of market failure is often the inefficiency of a market to produce more or the same amount of goods while utilizing the same or fewer resources. If this were to occur an advocate of the market failure standpoint would argue that it is essential for the state to intervene and begin regulating the amount of goods produced and the ways in which they are produced. However, an advocate for government failure would argue that were this to occur the market would be worse off due to the fact that bureaucrats often pursue their best interests which may not necessarily coincide with those of the public. In support of this belief it can be argued that since bureaucratic agents are not elected officials they are able to implement various policies without fear of any negative consequences such as not winning a reelection.
As can be inferred from the concepts of market and government failure; government intervention is not necessarily always a bad thing. In fact, sometimes it can lead to the advancement of a nation. Governments whose bureaucracies act in such a way can also be referenced as "developmental states"; which means that although the government is interfering with the economy, the bureaucracy is focusing on the long-term interest of the country versus the personal gain of a select few in the short-term. Amsden writes about this concept in his article, Getting Relative...

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