Chapter 3:
The role of the Government
1. Government as a Provider of Goods and services
In every society, governments provide such services as national defense, police, firefighting services, and the administration of justice. In addition, governments make transfer payments to some members of society. Transfer payments are payments made to individuals without requiring the provision of any service in return. Examples are social security, retirement pensions, unemployment benefits, and, in some countries, food stamps.
In addition to the role of governments as a provider of public goods and services, governments can play a developing role in the economy. Taxes are also used in an attempt to discourage people from buying products that the government considers harmful. High excise taxes have been placed on liquor and tobacco, for example.
2. Government as a Help to Weak business groups and an organizer of income allocation
Because not all the economic sectors in the economy are ò equal strength, many thought that government should step in and help weak groups. Price support for agricultural products, supporting policies for small and medium infant enterprises is examples of government interference to aid weak economic groups.
Many other government programmers are designed to help people with special needs in the society. The money for these programmes comes, in part, from taxes. Since most taxes are paid by those who can afford to take care of themselves, these programmes have the effect of taking money from people with high income and passing it along to those with lower incomes. Thus taxes tend to make the incomes of a great many people more or less equal. The government plays its role as an organizer of incomes redistributing.
3. Government as a Stabilizer
Some communities have fewer job opportunities and higher unemployment than others. By way of attracting new businesses into those areas, the government directly creates aid to the development of these areas.
The government also uses its power to tax to protect certain industries. It protects domestic industries by placing a high tax on goods brought in for sale from foreign countries. These protective tariffs raise the price of the imported goods high enough to discourage domestic consumers from buying it. Governments may, of course, levy tariffs simply to generate income.
4. Government as a Producer in the Absence of Business Venture
Although most consumer needs are met by business, some are not. When unfulfilled needs exist, it is usually because business produces to make a profit and only indirectly seeks to fill needs. Government, in contrast, is obliged to consider the needs of its citizens. The provision of atomic energy, some utilities at the local level, and security at the national level are examples in which the government is a direct producer.
