Economic Interventionism - Effects

Effects

The effects of government economic interventionism are widely disputed. Libertarians and other advocates of free market or laissez-faire economics generally view government interventions as harmful, due to the fallacy of central planning, the law of unintended consequences, and other considerations. Government officials tend to be naturally disposed to seek more power and authority, and the money that usually goes with those things, and this quest often takes the form of economic interventionism which they then seek to justify. Many modern liberals are inclined to support this agenda, seeing state economic interventionism as an important means of achieving wealth redistribution or other social engineering goals. A minority of Marxists and those towards the extreme end of the modern liberal movement, meanwhile, feel that government welfare programs in the context of a mixed economy might interfere with the ultimate overthrow of capitalism. Political conservatives of the nationalist variety also frequently support economic interventionism as a means of protecting the power and wealth of a country or its people, particularly via advantages granted to industries seen as nationally vital.

Regulatory authorities do not consistently close markets, yet as seen in economic liberalization efforts by states and various institutions (International Monetary Fund and World Bank) in Latin America, "...financial liberalization and privatization coincided with democratization". One study suggests that after the lost decade an increasing "diffusion of regulatory authorities" emerged, these actors engaged in restructuring the economies within Latin America. Latin America through the 1980s had undergone a debt crisis and hyperinflation (during 1989 and 1990). These international stakeholders restricted the state's economic leverage, and bound it in contract to co-operate. Multiple projects and years of failed attempts, for the Argentine state to comply, the renewal and intervention seemed stalled. Two key intervention factors that instigated economic progress in Argentina, were substantially increasing privatization and the establishment of a currency board. As one can see this exemplifies global institutions including the International Monetary Fund and the World Bankinstigate and propagate openness to increase foreign investments and economic development within places including Latin America.

Why the government intervenes in the market: (Within a Western Liberal Democracy) government officials theoretically weigh the cost benefit for an intervention for the population or they succumb beneath coercion by a third private party and must take action. Also intervention for economic development is at the discretion and self-interest of the stake holders, the multifarious interpretations of progress and development theory could mean. To illustrate this during the 2008 debt crisis; the government and international institutions did not prop Lehman Brothers up therefore allowing them to file bankruptcy. Days later when AIG waned towards collapsing, the state spent public money to keep it from falling. These corporations have interconnected interests with the state. Therefore their incentive is to influence the government to designate regulatory policies that will not inhibit their accumulation of assets.