Question

What words would you use to describe the government of the United States? Be sure to explain your response.

Answer 1

A government with a more liberalized way of functioning , more influenced  by the merits of capitalism.Capitalism is an economic system where the resource owners are the people who form the basic entities of the system- the households or the consumers and the firms. Economic decision regarding the effective allocation of resources are taken by these entities . The government , which is the other most important entity of the system has comparatively smaller role to play. However pure capitalism, with minimum government intervention does not exist. Government’s role is rather limited ,   to providing ‘public goods’, undertaking welfare projects, building basic infrastructure , law and order and defense. The federal government as well as the state governments coordinate effectively towards giving more importance to economic liberalization, a policy of reducing rules and regulations and giving more’ decision making’ power to the private sector since the government is of the view that the economic activities should be undertaken by the private entities under the purview of the law.

The government’s idea is that the public sector should be restricted to provision of those goods and services which are the basic essential requirements to run the economic system—social security, police and so on, the other activities should be allowed to run under the control of the private sector which has ‘productive efficiency ‘—producing at low cost and allocative efficiency—optimum usage of resources – as its goals.

Since a large number of enterprises are run and operated on profit basis by the private sector, this effectively reduces the burden of operating ‘ economically sick’ or loss making units on the part of the government.

The globalization policy has put United States on the international arena , as the’ leader nation’ that is able to efficiently transact with various other countries , whether it is exchange of goods and services or investment or capital flows, and so on. This has been possible because of the liberalized and flexible policy –which is market friendly , flowed by the US government.

The price mechanism is the base for the functioning of the capitalist system such that whenever , for example, a commodity is in excess supply when compared to demand , its price will fall automatically, on the other hand an excess of demand over supply will raise the price level. This happens both in goods and factor market.

However , price mechanism does not consider ‘social costs-benefits’, hence externalities are not analysed. This could lead to both positive and negative effects on the society. The positive effects could be increase in the number of goods and services available, technological progress, greater impetus to entrepreneurial activities and so on. But the negative impact could be much more greater, in the form of faster rate of depletion of resources, increased levels of pollution , public health issues    and so on.

Hence it is the responsibility of the government to lay down laws, and ensure that the private enterprises as well as the households adhere to these ‘environment’ friendly laws strictly. The government has already undertaken to ensure imposing heavy fines and punishments for law breakers in such cases.

This ‘social responsibility’ aspect of the government make the country more conscious of its environment and the resources.