• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Should the government take an active role in the management of national economies?

Extracts from this document...


´╗┐Should the government take an active role in the management of national economies? In the 15th and 16th centuries with the growth of trade, industry and banking, capitalism became more prominent. The Industrial Revolution brought changes to the economies of many countries. Factory owners did not want governments to control trade. They wanted to run their companies by themselves. Adam Smith suggested a laissez-faire approach should be followed, leaving consumers and producers to make their own decisions and thus gain maximum benefit from all of the market system. During this period countries produced more and more products and goods and many capitalists became rich. However, normal workers did not earn very much and had to work long hours. World War I lead to the destruction of the four factors of production: land, labour, capital and enterprise. Socialism after the war was promising and people thought of it to be a more just society. The principle being that fairness and equality determine government policy. ...read more.


Lenin knew he needed a different kind of policy. His institution became known as ?The New Economic Power System?. Lenin said farmers can sell their own goods, and own their own land. He said that small businesses can operate and they started to get an economic revival. After the death of Lenin, Stalin introduced ?central planning?. Under him the communist party planned and managed every aspect of the economy. While communism seemed to be forging ahead, capitalism looked to be doomed. In 1923, Germany and Austria were living with the economic consequences of the peace after the war. Forced to pay unbearable war reparations the defeated government simply printed more money. The result was inflation. More inflation. Hyperinflation. Hyperinflation wiped out the savings of the middle class, due the government intervening in the economy. The 1920s, was a boom time for American cities. Americans were buying stock. The stock market, the New York Stock Exchange, became a National Past-time. It was a classic stock market bubble. Then on Black Thursday, October 24th 1929, the bubble burst. ...read more.


It was the first time that the government took an active role in attempting to secure American individuals from unseen drastic changes in the market. For Roosevelt and the New Deal, they were at war with the Great Depression, and they responded with frenetic activity, relief programs for the unemployed, for the hungry; programs to get people back to work. They instituted a program of regulating capitalism in order to protect people from what they saw as the recklessness of the unfettered market. Privately, Roosevelt feared the market system had failed, so he created an entire alphabet of new agencies to regulate banks, the stock market, capitalism itself. In conclusion, in the battle of ideas, the pendulum had swung from government to market, from Keynes to Hayek. Today Keynes? theory is widely accepted and modern countries combine capitalism with some kind of government control. Most people feel that free market economy should remain but the government should still be around to see that economic rules are kept, and solve issues such as unemployment and inflation. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our International Baccalaureate Economics section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related International Baccalaureate Economics essays

  1. World Economics assignment. The core economic issues that are focused on in this ...

    If the value of a currency falls, domestic goods and services will be dearer in domestic markets. This should mean an improvement in trade in goods(21)." With regarding to the fixed exchange rate, according to the student guide, "a persistent surplus could be dealt with by measures which allow domestic consumers to feel confident to purchase more.

  2. Risk management

    The guaranteed bonus is a call option granted to you by your employer. If you accept the job, you can "purchase" the bonus by accepting the job. The premium is that you have to take this job; of course, you do not have to exercise the option by continuing to stay at the job.

  1. The role of MNC headquarter

    Responsibility To establish the role of the headquarter, we first need to establish responsibility, as these equals each other. You can divide a Multinational Corporation and its different offices, branches and manufacturing plants into local and global responsibility. Local responsibility In each country, the local subsidiary must be responsive to

  2. Strategic Business Management - Cadbury

    In 2007, the decision was made to separate the Beverage and Confectionery businesses. The demerger of the Americas Beverages Business on 7 May 2008 marked the beginning of a new era for Cadbury plc with its vision to be the world's biggest and best confectionery company.

  1. Korean War

    Conectar otro caim´┐Żn a la terminal positiva del generador. Finalmente conectar ambos camines por la parte anterior de los mismos de tal forma que la corriente fluya correctamente. 4. Realizar el paso anterior, pero con el electrodo negativo. Temperatura Mayor 1. Colocar el metal, es decir el Cobre (Cu)

  2. Transition economy: Georgia. Transition economies are the economies that have changed from one ...

    The reason for the deficit is the country's need for energy sources and how they are unable to produce all the energy they need. People are also migrating abroad (-4.45 migrants/ 1000 population (2007 est.). Therefore the labour force in the country is slowly decreasing.

  1. Role of ICT for "Make in India" government initiative.

    (4) (5) (6) 45(7) On-site Services 450.1 9.9 20.7 442.2 9.2 17.8 -1.8 Off-site Services 1720 37.7 79.3 2042.1 42.6 82.2 18.7 Total 2170.1 47.6 100 2484.3 51.8 100 14.5 Defence Manufacturing : ICT is the key for Modernization of Defence in India.

  2. 15 Historical Economic Questions on Mercatilism and the Development of European Countries.

    Government granted monopolies, needless to say shamelessly sucked up the vast majority of profits to be made. These policies which mercantilism implemented minimized competition and allowed them to keep high prices, hurting the people within their own borders. Mercantilism was an economic race between states, each state was represented by a select few and nobody else was allowed to participate.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work