Reasons for Government Involvement and Participation in Commerce

  1. To correct for market failure (this mainly arises where the buyers and sellers lack information and don’t understand the prevailing market conditions). i.e. to close the information gap.
  2. To achieve a more equitable distribution of wealth and income.
  3. To improve the performance of economy.
  4. To ensure legislation and regulation of the economic activities undertaken i.e. should be legal. This prevents abuse or exploitation of one group by another one.
  5. To ensure direct state provision of goods and services. mainly public services, public corporations etc
  6. For fiscal policy intervention so as to alter demand level for different products and also pattern of demand within the use of taxation, subsidies, expenditure etc.
  7. To offer subsidized services
  8. Assistance to the industry-some industries need assistance if they are to remain in business. it is quite normal for government to make grants or tax concessions to them.
  9. Government aims-every government has its own economic as well as political objectives, and the achievement of these may require further state interference in commerce eg on noting that the level of unemployment is higher in one region, to redress the balance, the government offers special incentives to firms to build new factories in areas of high unemployment and it may make special payments to them when they begin production.
  10. To ensure consumer protection in respect to; public health act, weight and measures act, sale of goods act, food and drugs act, rent control act.
  11. To encourage foreign investors.
  12. To prevent foreign dominance of economy in areas where locals are not able to.
  13. To create employment by initiating projects such as provision of electricity.
  14. To engage in business activities that are essential but unprofitable such that they do not attract the private sectors.
  15. Where an industry or a commercial undertaking requires a high capital investment beyond the ability of private investors power generations and airlines.
  16. sensitive business activities e.g. manufacturing of firearms or extraction and mining of oil which can’t be left entirely in the hands of private entrepreneurs.
  17. For political reasons/considerations, the government gets involved in business activities particularly where businesses are owned by foreigners. This is mainly to protect its sovereignty and prevent undue foreign influence in the economic affairs of country.

(Visited 1,619 times, 1 visits today)

Leave a Reply

Your email address will not be published. Required fields are marked *