Is Less Government the Answer in Market Economies or the Other Way Around ?

The Debate between Neoliberalism and Socialism

An ongoing debate in the United States and in Europe is whether there must be less government or more government. This means that there are proponents of the government extending its sphere of influence into all sectors and opponents of this view who see this as socialism creeping into the West.

In other words, the debate is over whether the governments in the West have to assume powers over the functioning of the economies or let the private sector do its job without governmental interference. The genesis of this debate dates back to the 1970s when neoliberalism as an ideology first appeared on the scene.

The proponents of free markets and governmental non-interference carried the day as those on the other side of the debate lost in the battle of ideas. Since then the West has been an exemplar for how the private sector and free markets work without governmental interference.

However, the global economic crisis of 2008 brought the issue back into focus because many experts saw the crisis as a manifestation of how neoliberalism failed as an ideology.

Further, the fact that big banks and financial institutions along with manufacturing behemoths had to be bailed out by the government provided impetus to the argument that free markets left to themselves create mayhem and chaos and hence, there has to be governmental supervision and regulation in the market economies.

A Case for Governments and the Private Sector to work hand in hand

Without taking sides in this debate, it needs to be mentioned that markets left to themselves totally are not the solution and at the same time, total governmental control over the economy is not the answer as well. Therefore, the considered view being propagated here is that governments and the private sector both have a role to play in ensuring that markets work to the advantage of the people and in the best interests of the countries.

For instance, in both China and India, capitalism is managed with active governmental assistance and in other Asian countries as well, the government and the private sector works hand in hand to steer the economies and ensure that social welfare and social justice remain on the high priority of the economies.

The fact that markets need to be guided and regulated is borne from the statement that though the invisible hand of the market is supposed to make them self correct, sometimes a moderation and a steadying of the invisible hand is needed to ensure that markets do not go out of control.

The Return of Capitalism minus the Negatives

Having said that, it must be remembered that free markets and market-based economies have until now been left to themselves and as mentioned earlier, the triumph of neoliberalism as an ideology has led to many positive contributions to society.

Of course, the recent trends indicate that free market ideologies far from being buried are staging a comeback in the West and the net result of the crisis has been a chastening of the private sector in the sense that it has learnt not to overdo the neoliberal experiment.

Apart from this, the fact that there is no serious competitor to capitalism as an economic system means that there is no alternative to the world except for capitalism.

As one expert noted, one can predict the end of the world but one cannot predict the end of capitalism. This is the core idea that has ensured that market economics around the world has taken deep roots and hence, a balance between the unrestrained capitalistic tendencies and the need for social welfare and social justice has to be maintained.

Concluding Thoughts

Finally, the recent crisis has also served to highlight the fact that one needs to separate the locusts from the bees when it concerns capitalism.

In other words, just as a bee contributes productively to the ecosystem and the locust is like a parasite on the ecosystem, there are both good and bad things about capitalism and hence, one must take the good and leave the bad parts out.