"What is the Role of Government Vis-a-Vis Capitalism?"

What is the Role of Government Vis-à-Vis Capitalism?

Published:

November 4, 2009

Author:

Jim Heskett http://hbswk.hbs.edu/ Summing Up How broad is government's role in a capitalistic society? The debate this month boiled down to the extent of government's role in relation to capitalism. Those arguing for a relatively narrow role included C. J. Cullinane, who commented, "Government should have little to do with capitalism … there is a place for government, and economists, in the capitalistic system, but in this case less is more." Gerald Nanninga suggested that we "limit government's role to defining capitalistic criminal activity and the means of eliminating such activity." Marshall Cammack asked, "If we take the invisible hand of capitalism away would we ever learn from our mistakes? … The more government steps in the more accountability for actions decreases." Charles Green set forth an opposing view: "In the real world, competitors compete to get rid of competition. In such a world, it is absurd to talk about 'free' competition—it is inherently unstable, but for the good efforts of government." Alan Ecclesston added, "Let's not confuse 'free market' with freedom from rules and oversight." Elizabeth Doty commented, "…business and markets depend on … 'rules of the game' that we create together as citizens," but cautions that "… when we engage in that process, we need to be equally aware that we are foolish to try to prescribe HOW the game should be played within those rules." Marlis Crichewsky stated: "The overarching question is purpose: What do we need governments for? … as mediators between the different actors of society…. What do we need economy for? … value creation … For … those reasons we need laws and a government to enforce them." Edward Hare joined in, saying that, "Government's role should be to set the conditions for capitalism, practiced fairly and responsibly, to flourish. And to make the punishments for not doing so appropriately threatening and onerous for those who don't." Others were less definitive in their comments. As Philippe Gouamba put it, "Capitalism is an extremely efficient economic model…. The problem with this model is that we are …greedy … human beings." Paul Browne commented, "Capitalism as an economic ideology that confers control of productive institutions to the owners of capital is often at odds with democracy…. Hence the tensions that arise when a society commits itself to democratic capitalism…. Our focus should be on sorting out these tensions … rather than clinging to a notion that 'free markets' are efficient (good) and 'government' is inefficient (bad)." Several commented on the challenges that government faces in carrying out its role. In doing so, they left us with interesting questions. Fidel Arcenas described one such challenge: "A bureaucratic apparatus that's way off the pace of the market forces is useless." Do you agree? Jacoline Loewen commented, "Government is about setting the rules and boundaries but also reminding us about the nobleness of the game… (à la Thomas Jefferson)." Sergio Coutinho asked us to allow him to reframe the question thusly: "Is there an objective set of rules that can dictate when the government should and should not interfere?" What do you think? My POV (Posted at HBS Working Knowledge @ http://hbswk.hbs.edu/): Government and capitalism, within the context of a market driven economy, are interdependent and must therefore co-exist as harmoniously as circumstances require. There is ample research to prove that only when government authority asserts its role that a country's economy began to improve and flourish. Government, through laws, rules, and regulations lay down the ground rules and level the playing field. There is much truth to what Albert Camus said that if "the center cannot hold, anarchy will reign." The problem, however, arises when government's bureaucratic apparatus fail to cope with the pace of global economy. The technological revolution that drives the economy to a frenetic pace has left the bureaucratic machinery behind. This failure of government to track up-to-the minute major business transactions makes it impossible for the government to determine what measures are necessary to protect the economy. A bureaucratic apparatus that's way off the pace of the the market forces is useless. Fidel M. Arcenas PTA