In considering reasons for government intervention in the economy, economist shave traditionally pointed to the problem of ‘market failure’. This is the notion that if left entirely to their own devices, markets can operate in a way which is not always economically or socially desirable. To this extent interventionist policies can be portrayed as an attempt by governments of all political complexions to deal with the problems inherent in the operation of free markets.
The key areas of market failure are well known. Primary concerns include:
Government responses to these problems have normally taken a number of forms, including public ownership, legislation and administrative or fiscal regulation, and examples of all these approaches can be found to a greater or lesser extent in all countries. In recent years, however, under the influence of economists of the ‘new right’, governments have begun to take steps to disengage the state from some of its activities (e.g. public ownership) and have increasingly turned to market solutions to problems emanating primarily from the operation of the market system itself (e.g. schemes to charge for the use of roads which are heavily congested).
While all forms of government intervention in the economy invariably have direct or indirect consequences for businesses, it is possible to distinguish certain policies which are designed specifically to influence the industrial and commercial environment sometimes described as ‘industrial policies’. In the United Kingdom and elsewhere, these have typically included:
Though it cannot be claimed that such measures amount to a single and coherent policy for business, nevertheless they indicate that successive governments accept they have an important role to play in shaping the environment in which private businesses function. Competition and privatization policy tend to focus on the operation of markets and on the benefits which derive from private provision under a competitive market structure. Government spatial policies the subject-matter of this chapter are mainly concerned with addressing the problems of regional disparities in income, employment and output, and the associated problem of localized economic decline as businesses fail or decide to relocate their premises.
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Business Environment Tutorial
Business Organisations: The External Environment
Business Organizations: The Internal Environment
The Political Environment
The Macroeconomic Environment
The Demographic Environment Of Business
The Resource Context
The Legal Environment
Size Structure Of Firms
Government And Business
The Market System
International Markets And Globalization
Governments And Markets
The Technological Environment: E-business
Corporate Responsibility And The Environment
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