Government Business Relations Assessment Answer

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BOTH ESSAYS AND BUSINESS SUBMISSIONS: PRESENTATION & REQUIREMENTS

Written assignments both essay and business submission must conform to the standards specified below:
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•    When words are taken directly from other sources (books, articles and web sites) and reproduced in an essay/submission quotation marks must be used.
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Introduction

Economics defines free market by saying that it is an idealised system where the prices of goods are determined by the demand and supply between the sellers and the consumers only, and not by the government, monopoly businesses or other price setting authorities. It is completely in contrast to a regulated market, which means that the government controls the price of commodities and alters it using tariff, taxes and other kinds of added costs.

A great hue and cry has been around whether there should be any government interference in a free market economy. It is a market where the buyer and seller contact directly and agree to buy or sell a thing at a commonly determined price. In this, the price is set by simply a supply and demand thing, and not by government organisations or private companies competing together. In the year 2017, a study conducted by Index of Economic Freedom found out that Hong Kong has the most free economy market, being 89.8% economically free. It was followed by Singapore, Australia, New Zealand and Switzerland respectively. The US is only 75.1% economically free by the 2017 study, falling by a lot in the recent years. But there market is not controlled by the government, but rather by the private companies (Bakvis, 2016).

This led to a huge concern whether it is actually possible to have a completely free market and whether the government should interfere in its operations or not. Also it has been seen that in several countries, active interference and control by the government, especially in North Korea, Venezuela, Cuba, Republic of Congo and Eritrea, has led to several problems. This leads to the question whether the government should have a little, but some say, in the matters of the free market to stop it from turning into a capitalist market, which may decide prices and look like a free market, but is actually a market which strives and earns simply from the profit motive and tries to monopolise or take shares, or lets the free market to decide the prices. But it can also have a private owner to have a monopoly on the system and hence prevent free competition.

Actual Role of the Government in a Market

The government usually has to play a role in the market in almost all the countries around the world. Practically, there is no free market economy which is devoid of any external regulations and only runs on the basis of supply and demand. Even the most free market is controlled by external sources by 10.2%. This shows us that even in the markets where there is no interference from the government, there are a few other external interferences, for example, market monopoly by some private companies. This is one of the most important aspects of a market where the government doesn't regulate anything, people still don't get a completely free market (Ball, 2012).
In other cases, where the government takes up the task of regulating the market economy to a certain level, it does so by introducing several tariffs, taxes, and other kind of charges and duties on the market. These regulations if limited to a certain level are usually helpful for the economy. But in several countries, the scenario is not so. Instead the government uses these regulations to fill their own pockets and satisfy their own needs, or change it to adorn the election manifestos of the party. No one actually cares about the people and their welfare on a larger scale. This is why there has been such a huge protest against giving the government the right to interfere in a free market economy, which is considered to be the ideal around which the economy of a country should be built.

Government Interference in Free Market

In a true free market, the government technically has no write whatsoever to interfere and regulate how the market should run. Neither does any other private entity or authority have it. The market and price of commodities should run solely on the basis of supply and demand that is a direct relation between the buyer and the seller. Nothing else should bother or change it (Thurbon, 2012).

But in the current world, it is impossible to achieve it as such, and even after much protests to eradicate government interference from the free market, so as the market cannot be used as a stage to achieve their political goals, it is still controlled by the monopoly of other private companies and entities, which can sometimes make things ugly like running a cartel. This is where the need comes for some little government interference in the free market.

But a bar has to be set about the limits and the issues the government can actually put a regulation on, and how it doesn't get the right to actually levy anything on the prices as this will lead to only the deterioration of the free market. The government should make rules and regulations on how the market should be free from any form of monopolisation or other form of illegal back door dumping, which is usually the biggest disadvantage of the non-interference of government in free market. Instead I believe that the government shouldn't take an active participation in the market, thus keeping it actually free, but also look out for the economy by limiting any private company from monopolising certain things, or from stopping capitalist economy take over free market, where everything is profit motivated and there is only competition among the private sector (Baird, 2011).

The case of US can act as an example. US is famous for government free trade as the government takes no part whatsoever in the market, thus making it a free market economy. But this acts as an disadvantage, as the private sector starts having a control over the economy, thus making the free market totally dependent on the private companies striving and competing among each other for more and more profit, tuning the free market into a capitalist market and also makes several company have a monopoly over certain aspects over the market. Also the free market nature of the economy makes it act as an dumping ground for the other countries, who take an advantage of the trade deficit over US, thus boosting their own economy, while the private company see to their own benefits and use this circumstance to the benefit of themselves than their countries benefit. This leads to the fall of truly free economy of the use, demoting it to 75.1% (Nelson, 2012).

In these situations, the role of the government can be found to be quite befitting. Several rules can be passed by the government to take care that there is a limit in the amount of trade coming in from one single country, so that the trade deficit can be balanced by taking less from everybody. Also monopoly of certain trades can also be banished by using certain guidelines. All this can be done without the government actively participating in the market prices, keeping the pricing totally dependent on the supply and demand, and thus keep the economy a truly free market economy. This is how Australia has gone to become one of the most free economies in the world, rising to the third rank, being 81% free according to the study in 2017 (Ostrom, 2012).

Conclusion:

Thus, the final view is that government shouldn't actively interfere in a free market, as it goes against the technicality of the term and makes it a regulated market. Instead the government should passively be related to the market, by making rules that would not let private parties or other countries exploit the free market by monopolising trades or using the country as their dumping ground and taking profit from the trade deficit. All these will only help in securing and protecting the free market economy into becoming a capitalist economy and also lose their economic value for other's personal interests (Ho, 2011).
To stop this from happening, several countries have taken a step in this way. But a thing needs to be taken care of. That is, while passively interfering in the free market, the government does have a certain bar of limit. If they start making laws that directly hit the pricing system of commodities or start levying taxes that are only burdening and not fair, then this could go against the definition of free market and thus destroy its credibility in a much worse way that monopoly by a private company would. What should be taken care of is that the free market is not used as a stage to achieve political goals by the parties (Potrafke, 2010).
Thus it can be finally concluded that Government actually has little or no role in a free market, but to look after its well being and whether or not it is being run in a fair way and not being controlled by private entities, they should take passively interfere in its proceedings.

Reference 

Bakvis, H., Rhodes, R.A.W. and Weller, P. eds., 2016. The hollow crown: countervailing trends in core executives. Springer.
Cavusgil, S.T., Knight, G., Riesenberger, J.R., Rammal, H.G. and Rose, E.L., 2014. International business. Pearson Australia.
Ball, D., Geringer, M., Minor, M. and McNett, J., 2012. International business. McGraw-Hill Higher Education.
Thurbon, E., 2012. From developmentalism to neoliberalism and back again? Governing the market in Australia from the 1980s to the present. In Developmental Politics in Transition(pp. 274-295). Palgrave Macmillan, London.
Baird, M., 2011. The state, work and family in Australia. The International Journal of Human Resource Management
Nelson, H.W. and Nikolakis, W., 2012. How does corporatization improve the performance of government agencies? Lessons from the restructuring of state-owned forest agencies in Australia. International Public Management Journal
Dodgson, M., Hughes, A., Foster, J. and Metcalfe, S., 2011. Systems thinking, market failure, and the development of innovation policy: The case of Australia. Research Policy
Ho, H.W. and Madden-Hallett, H., 2011. Knowledge sharing between agency and customers to strengthen market orientation: A case study of a state government agency in Australia. Journal of Business Studies Quarterly
Potrafke, N., 2010. Does government ideology influence deregulation of product markets? Empirical evidence from OECD countries. Public Choice
Ostrom, E., Chang, C., Pennington, M. and Tarko, V., 2012. The Future of the Commons-Beyond Market Failure and Government Regulation.