Is State Intervention Necessary
Is state intervention necessary to the promotion of economic development? Illustrate your answer with reference to the experience of one or more countries of your choice.
State intervention is a must for the promotion of economic development. As our economy in Ireland is becoming more digitalized the government has intervened by bringing Internet to places where there was none previously. An additional 300,000 premises across Ireland, many of which are in rural are now able to access high speed broadband that they would of never been able to access before if it wasn’t for state intervention. In 2016, only 52% of premises in Ireland had access to high-speed broadband. With this latest development, the Government is promising that 77% of premises will have access by the end of 2018 – and the majority of the remaining premises by the end of 2020
When we talk about economic development we must also talk about times when there has been economic regression i.e. a recession. The recession caused The Irish economy has been one of the worst-hit Eurozone economies due to the high exposure of the banking sector to the property market and the boom associated with that over recent history. To prevent this, the Irish government has put in place a major state assurance scheme and a recapitalisation package to make sure that the financial system in Ireland continuously meets the financial needs of individuals, business and the overall economy,. This is a clear example of state intervention
State intervention has also been critical in the promotion of the agricultural development in many countries. For example EU agricultural ministers gave 500 million euro to farmers after thousands protested on the streets of Brussels. Not only have the government intervened to develop the agricultural sector they also stopped any further damage been done to the economy by stopping the marches by coming up with this aid package. The European commission were “well aware” of the difficulties that many farmers faced in the tough agricultural market and realised that only by giving aid to these struggling farmers would the agricultural economy develop further
The future of cars is a green one, due to the global demand for cars that run on electric and are not powered by gas or diesel which produce harmful emissions into the atmosphere. Many governments have intervened by providing subsidises to these car companies who make electric cars. These subsidies are necessary for the manufacturer as these cars are cheaper which makes them more attractive to the consumer. This is a clear example of countries intervening in the economy and providing funding for electric cars to promote economic development within the economy.
State intervention is not only seen through funding, it is also seen through giving tax breaks to encourage economic development within ones industry. For Example in Ireland we see that the corporate tax rate is 12.5% in Ireland which is much lower than any other country for example America have 39.1% corporate tax rate. The difference between the tax rates is huge which encourages many multi national corporations to come over to Ireland. Why exactly does the irish government do this? Well the irish government do this because these multi national corporations provide many jobs in Ireland, for example google provide 2,800 jobs in Ireland.
One strong argument for government intervention into the economy is the ability the goevrment has to promote equality across all sectors of ones economy. For example enterprise Ireland promotes economic equality by giving grants to businesses to help them develop and the businesses do not need to pay these back as long as they fulfil the contract that the grant was given under. This has allowed many irish companies to develop into the company they are today. For examples Broderick’s choclate bar were given a grant by the irish government which helped them to become one of the biggest premium chocolate manufactures in the country,
Governments also intervene to minimize the damage caused by naturally occurring economic events. Inflations and recessions are a natural part of business cycle but can have a huge effect on citizens through people loving savings because banks can no longer stay open. In these cases, governments intervene through subsidies and manipulation of the money supply to minimise the harsh affect that these situations can have in the economy. For example the government interviened when Anglo Irish Bank was about to go bankrupt, many would of lost savings which would have of had a devastating affect on the irish economy.
Governments may also intervene in markets to promote general economic fairness. Across all economic sectors, Governments often implement this through many stratagies such as taxation and welfare programs, to redistribute financial resources from the wealthy to those that are most in need. One May argue that the relocation of state examinations centre office to Athlone is an example of trying to bring economic development through direct and indirect employment in athlone. Other examples of market intervention for socio-economic reasons include employment laws to protect certain groups in the population and the regulation of the manufacture of certain products to ensure the health and well-being of consumers.
In many countries across the globe there is a culture of renting for accommodation, rather than assuming that all households either want or should achieve home ownership. At times especially in the celtic tiger renting would have been considered cheaper than buying as many houses were heavily inflated due to bank loans to property developers which allowed them to charge very high prices for houses
In Germany most households (54.1 per cent) are renters due to the long-term intervention in the marketplace by the government, as well as the accepted culture that renting is suitable over the long-term. There is regulation also put in place to make sure that rent can not increase drastically over an amount of time.