In Germany in 2009 there was considerable debate about the extent to which the government should be intervening in the economy. For example, its citizens were worried about the future of Opel, a German car brand that was part of the ailing General Motors. Some wanted the government to make sure jobs were saved no matter what. Others, however, were more hesitant and worried about becoming the government becoming too interventionist. Traditionally since the Second World War the German government has seen itself as a referee in market issues and has avoided trying to control parts of the economy. It would regulate anti-competitive behaviour, for example, but not try to run many industries. However in the recession of 2009 when the economy was shrinking the government was forced to spend more to stimulate demand and had to intervene heavily to save the banking sector from collapse. The government also had to offer aid to businesses to keep them alive.
Questions
1. What are the possible benefits of a government intervening in an economy?
2. What are the arguments against government intervention in an economy?
3. What prompted greater intervention by the German government in 2009?
4. What would determine whether the German continued to intervene on this scale in
the future?
Answers
Answer:
nvnklkhdpyjijhttukuytyujhgftuinvvvv.
In Germany in 2009 there was considerable debate about the extent to which the government should be intervening in the economy.
Explanation:
Possible benefits in an economy intervening in an economy are:-
• Germany benefits from its membership in EU.
• Germany profits the most from its membership.
• Its strong manufacturing base means it has plenty to export to other members of eurozone and does so more cheaply.
Arguments against government intervention in an economy:-
Free market economists argue that government intervention should be strictly limited as government intervention tends to cause an in efficient allocation of resources. Others argue there is strong case for government intervention in different fields, like public goods and monopoly power.
• Soft protectionism through trade and investment policy.
• Fiscal policies provided the German government with important instruments for economic inventionalism.
Great intervention by the German government in 2009:-
Germany is facing its biggest economic intervention since the second world war.
• Modernization of eastern Germany cost dollar 70 billion per year. By 2008, spending had dropped to dollar 12 billion.
• Germany depletes its social security fund faster via payroll taxes.
• Germany managed to get its budget deficit below 3% of GDP.
German continued to intervene on this scale in the future:-
The government intervention lowers the corruption due to regulation and transparency requirements.
Better welfare, education, services of all kinds funded by taxation, lower crime due to higher community and social awareness in cultures which recognize the value of governance.
Protection of commercial property rights at public expense.
Strategic industries can be maintained at negative profit if required for national economic, political and military security reasons.
Environmental standards can becontrolled and government can control money supply via interest rates, lending rules and reserve requirements.