Chapter 24 – The Role of Government
24.1 Factors that influence the role of government
Government role depends on the economic system (market-based vs
mixed economy).
In mixed economies, the government’s involvement varies depending on:
o Perceived extent of market failure.
o Political priorities and policy measures.
24.2 Government’s influence on the local economy
Local economies may depend heavily on specific industries (e.g.,
shipbuilding, tourism).
If industries close, there can be high unemployment and economic
decline.
Local government:
o Provides infrastructure and services (e.g., roads, waste
management).
o Manages public land and housing.
o May receive grants from the national government.
24.3 Functions of government (local & national)
a. Provider of goods & services
Public goods & merit goods should be available where the private sector
may not provide them.
Governments support strategic industries (vital for national security or
economy).
May run state-owned enterprises or national champions.
Example: Subsidies, tariffs, or restrictions to keep industries alive.
b. Partner with private sector
Governments may contract private firms to deliver public services.
Example: private companies building roads, maintaining railways.
The private firm operates; the government funds/oversees.
c. Employer
Governments employ workers in public administration, education,
healthcare, etc.
Aims to reduce discrimination and improve working conditions.
24.4 Government role at the international level
Some governments encourage free trade (no restrictions on
imports/exports).
Others impose protectionist measures (tariffs, quotas).
Governments may:
o Attract or restrict foreign multinational companies (MNCs).
o Join trade blocs (e.g., EU, Mercosur) to boost trade within member
countries.
o Be part of organisations like WTO to promote global free trade.