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The Strength & Limitation of Government Intervention VS Market…
The Strength & Limitation of
Government Intervention
VS
Market Approaches
Government Intervention
Strength
Protect the industries and market
Redistribution of income - income are more equal
Solve the problem of unemployment
Investment in human capital - building high quality workers
Social welfare of the people are being taken care properly
Correcting market failure
Protect the welfare of the worker with minimum wages
Limitations
Require high budget - risk of budget deficit and debt - involve opportunity cost
lead to bureaucracy - too much rule
Inefficient market - ineffective allocation of resource
Too much protectionism
High level of corruption
less competition
low quality products
Market Approaches
Strength
Maximized social surplus
Because market is always at equilibrium due to independent decision
Markets become more competitive - high quality good and service - increase consumer choices - lower price of g & s
Attracts more foreign investor
Expand the market and local industries as trade barrier is eliminated
Increase efficiency - better allocation of resources
Increase potential production - promote economic growth
Limitations
Lead to market failure - negative externalities of production/consumption
Depletion of common access resources
insufficient provision of merit good (public health / low cost education / clean water infrastructure)
Does not prioritize the welfare of its people.
weak institutional framework (legal system, property right etc. )
Income inequalities & high poverty
unemployment (structural )
gender inequality (discriminate women without government policies)
high concentration of informal economy and hidden market
Market-based
Also known as
free market
/
New classical
/
neo-liberal policies
policies that minimize the role of government and maximize the role of supply and demand
Export-led growth
Growth through FDI
Privatization
Deregulation
Government Intervention
strategies that involve active role of gavernment and manipulation of markets
import substitution
protectionism
exchange rate intervention
nationalization of industries
more regulation