Government Intervention And Its Disadvantages


Intervention And Its Disadvantages

Should our economy be run by a doctrine
that was made popular by a group of French writers called physiocrats in
the mid-1700s? This doctrine is called laissez-faire and it literally
means to let or allow to do(The Family Education Network). It is
a theory of economic policy which states that government generally should
not interfere with decisions made in an open competitive market.

These decisions include policies such as setting prices and wages.

According to the doctrine of laissez-faire, workers are most productive
and a nation's economy functions most efficiently when people can pursue
their own economic interest freely. The economy of the United States
is no where close to being a laissez-faire system. In fact, government
spending and intervention in the economic sector has ballooned. According
to the Federal Money Retriever, in 1998 alone, the government spent
over $37,733,526,000 in agricultural commodities, loans, marketing, and
stabilization. The role of government has grown to a point where
the benefits of government intervention are far outweighed by the negative
effects on the economy as a whole.

One of the major areas in which the
government intervenes is in the agricultural sector of the economy.

The government has three ways it can intervene and help its producers.

These ways include price policies, direct payments, and input policies.

Price policies have the largest effect on producers. Tariffs, quotas,
and taxes are just a few examples of price policies. While these
policies bring revenue into the government, in the end they hurt consumers.

Each of these policies raise the prices of both imported and native goods.

They are designed to help stabilize prices and give the native producers
a chance to compete with foreign goods. Under the doctrine of laissez-faire,
the government would not interfere with prices and the native producers
would be forced to lower their prices, giving the nation's citizens a better
deal in the market.

The use of taxes is one of the government's
favorite ways to make its presence known in the economy. While this
method seems blatantly obvious, many of the ways the government uses the
money collected by taxation is not. Some of the money it takes is
used to fund other programs designed to "protect" consumers and to "create"
jobs. Because of the money taken away from the consumer through taxes,
there is less money movement in the economy. This money movement
is what creates jobs in the economy. "So, each person's money lost
to taxes helps fail to create their part of a job" (Kaz).

Direct payments are another way in
which the government attempts to help its producers. Deficiency payments,
diversion payments, disaster payments, and marketing loans are all types
of direct payments. Deficiency payments are payments based on the
difference between the legislatively set target price and the lower national
average market price during a specified time. Diversion payments
are payments made to farmers who voluntarily reduce their planted acreage
of a program crop and devote the land to a conservation use. Disaster
payments are payments made to a producer when a disaster, such as a flood
or drought, occurs and the producer's crop is either destroyed or severely
damaged. Marketing loans allow producers to repay nonrecourse loans
at less than the announced loan rates whenever the world price or loan
repayment rate for the commodity is less than the loan rate(Arthur &

Mabbs-Zeno, 2).

There are many different types of
input payments implemented by the government. They range from below-market
grazing fees and below-cost rural electrification to fertilizer and irrigation
subsidies to loan interest rebates. These input policies are designed
to give the nation's native producers an edge by making various commodities
more accessible to them. Many of these input payment tactics are
implemented to lower costs and maximize output for producers. These
policies help the producers, but the consumers feel the draw-backs.

The consumers are forced to pay for the policies.

In a sense, the way the government
is involved in the agricultural sector is a necessity. If these procedures
and policies were not in place, the native producers would quickly go bankrupt.

While the people are now forced to "pick up the bill" for these policies,
it would be very difficult to completely dismantle the current system.

If it were dismantled, the goods the producer produces would come at a
much higher price to consumers, and yet government spending in the sector
would decline. Of course, through taxes, consumers had already been
paying to have lower priced goods.

The government not only intervenes
in the agricultural sector of the economy, it also intervenes in the business
sector. The ways it can do this are innumerable, but some