President Donald Trump is fond of saying that the US is living through an era of worse economic revival since the Great depression. The statement is right if we look at the average growth rate where the country has recorded slow expansion. Trump blames President Obama for the sluggish economic growth. I argue that the government’s role in controlling the economy needs to be reduced. During times of inflation, the government may put policies such as wage and price controls, resulting in joblessness and contributing to recession (Victor et al., 2021). The government’s intervention may be disadvantageous in cases where the government fails. For instance, the government can negatively influence the economy if it pursues short-term political considerations.
In a command economy, the lack of competition slows down innovations and keeps prices at optimal levels, slowing economic growth. Banking and mortgage regulations policies caused a financial crisis and an economic recession in 2007 (Sumner & Erdmann, 2020). Government housing policies caused the crisis because due to the evolution of modern financial systems, regulations that did not keep pace and real estate bubbles caused by lax lending standards caused the crisis to the economy.
Failure to regulate non-depository banking systems was also a cause of the crisis. Government intervention in the economy may be associated with low choice and a monopoly on services provided by the government lowering economic freedom to maximize productivity. Government interventions are at times in shifting consumer behavior where it is involved reducing some consumption that promotes human health, tax regulations and behavioral influences (White et al., 2019). Some individuals may feel these interventions as overbearing. If the government prohibits the consumption of some products like alcohol and cigarettes, a country’s economy may be affected negatively.
References
Sumner, S., & Erdmann, K. (2020). Housing Policy, Monetary Policy, and the Great Recession. Mercatus Research Series. Web.
Victor, V., Karakunnel, J. J., Loganathan, S., & Meyer, D. F. (2021). From a recession to the COVID-19 Pandemic: Inflation–Unemployment Comparison between the UK and India. Economies, 9(2), 73. Web.
White, K., Habib, R., & Hardisty, D. J. (2019). How to shift consumer behaviors to be more sustainable: A literature review and guiding framework. Journal of Marketing, 83(3), 22-49. Web.