Advantages and Disadvantages of Government Intervention

Advantages and Disadvantages of Government InterventionGovernment noise is one of the hottest topics to the economists. Some of economists asseve outrank political sympathies intervention stand re subvent commercialise failure and block worse item from neglect. On the other hand, there are most arguments that governing body intervention put up reduce the efficiency of securities industry place. Both of ideas toilette make sense. Government intervention can improves the unconscious process of merchandise exclusively it is non always applicable. Now, we ordain focus both positive placement and cast out side of government intervention. There are so gobs instances about this topic and we will discuss about it.First of tout ensemble, the government needs to intervene to the market for fair distri scarcelyion of wealth. If the society is inconstant beca affair of distribution of wealth, it affects controvert effects like strike, unemployment and even crimes. It d oes not slip by total market environment to everyone. However, government can manage this accompaniment by intervention such as policies. We can focus on cardinal items for this topic, Education and Healthcare. Education has titanic relationship with stage calling opportunity and income. Lets look at the below display panel which is reported by the Infoplease (2013).Median Annual Income, by Level of Education, 20002010 (U.S) source (Infoplease, 2013) NOTE Year-round, full-time workers 25 years and older. () = not available. (U.S Dollar)This table shows us the average of annual income is quite different between the people who sure low level of education and high level of education. U.S is a veritable(prenominal) country of using free sparing system. If almost universities hope to call down their tuition bung to beat out higher income and to reinvest their universities, they can do it. However, the economic weak cannot apply the universities because of the high cost. If there is no any polity to solve the problem, the problem would be worse. The people who throw off enough specie can send their children to the expensive elite private universities, but curt people even cannot give chance to apply the universities because of the cost. Since 1965, U.S government expands scholarly person loan indemnity for the student. They suggest loan with less inte abatement or give scholarship to the students who is applicable their requirements. Even the policy still has some criticisms like low refund localise lots of U.S students have utilise this policy to help graduating their universities.We can focus on South Korean Medicare policy as an example of government intervention for fair health care from their National Health Insurance System. According to NHIS (2013), Korean Medicare amends faithfulness was established in 1963 to give health benefits to national people. There are two types of medical amends in Korea. One is employee health amends an d the other is community insurance. Employee health insurance (workplace insurance) can apply to the family of employee. It subject matter if one man is hired in a alliance, then the rest of his family is applicable for the medical insurance benefits. In addition, the amount of insurance fee is divided by half for the employee and the company. So it does not have big financial burden to house postponement. For the people who does not have job, they can intoxicate medical insurance benefits from community insurance. The autonomous communities search the people who do not register occupation and register them to community medical insurance automatically. The entire insurance fee is set by the amount of proportion and income, so upscale counterbalances more and downscale pays less. With medical insurance, patients bear only 30% of hospital expenses. Hospitals register the medical records and receive the rest of 70% from government. Korean government charge medical insurance tax to cover the receiving money to hospitals and medical institutions. So all of Korean people get medical benefits from most of basic illness and we can use this example as a government intervention for trusty distribution of healthcare. From the two examples of Korea and U.S, we can know how government intervenes for equitable distribution of income and wealth. It will gives good effects to the market such as good market environments. universal Motors is the biggest automobile maker in the USA which is located in Detroit, Michigan. popular Motors was called Big three with Ford motors and Chrysler in automotive industry. Moreover, it was too the company which symbolizes U.S capitalism. However it went bankrupt because of automobile recession in 2008.In 2008, U.S prudence has stalled due to financial crisis that occurred because of the subprime loan problem and Lehman Brothers. So G.Ms financial health has been tense. The financial results for the year ended December 31, 2008 it re ported a net loss of 30.8 jillion and 60 million dollars (U.S). G.M received arrest loans of $ 13.4 million from the U.S. government in the end of 2008. However the funding did not turn around and received additional support numerous times. In 2009, Saab, Swedish Car Company which was affiliated by G.M also went bankrupt. Debt decrease negotiations with creditors were not settled until the due date May 2009. In June 1, G.M utilize article 11 of federal bankruptcy law and went bankrupt. Total debt was $ 172.8 billion and asset size was $ 82.2 billion.However, November 18, 2010, G.M was re-listed on the New York Stock Exchange. G.M has returned to the stock market aft(prenominal) about a year and a half from bankruptcy. erupt of GMs scale was the largest ever in the manufacturing sector. U.S. and Canada both governments have carried out additional support a total of $ 39.6 billion. U.S government acquired the shares of 60%, government of Canada acquired the shares of 12%.And G .M was nationalized by U.S government. In 2013, December 9, the U.S government change all shares acquired as collateral for government funding in enunciate to bail out G.M, because the reconstruction was on track. Loss of about $ 10.5 billion was generated by selling of stock the U.S. government bought to help G.M.From this example, we can limit the intervention which U.S government made was effective and improved failed market. If U.S government did not intervene to automotive industry and let G.M bankrupted, all the small business which is related with G.M should bankrupted together with G.M and 2.63 million people lost their jobs. Even though we cannot get the final result of U.S governments intervention to G.M yet, we can think it was proper intervention currently because we can imagine the situation G.M and Lehman Brothers together.However, the government intervention has not only good effects but also negative effects against a market. We can use Nipponese government inter vention as an example. After World war , all japanese people worked very hard, and Japanachieved a rapid economic appendage. However, after the economic growth calledJapanese miracle, Japanese economic knock off into a colossal embossment called Lost hug drug during 1991-2001. Usually, Lost decade represents the period in which Japans wasting disease, employment rate and the rate of economic growth were very low. The Japanese government influenced much to the great depression for following reasons. The first reason is a lot of mischievousnessness loan owed by banks. According to Yukio Nakazawa, the Japanese government used to use regulated interest rate for determining the interest rate in bank. However, the Japanese government conducted financial deregulation due to a growth of information technology and deregulation of international flow of capital. As a result, many Japanese banks faced severe competitions and started to treat high risked real-estate lend to make profits . Fortunately, the prices of land were increased year by year and it would be a bubble situation. In addition, many Japanese people bought many lands to make profits using incredible rise of lands price and it speed up bubble saving, but the bubble economy collapsed suddenly. In 1989, Nikkei Stock medium reached peak and dropped rapidly. Similarly, the price of land fell terribly and loan on real estate became insolvent therefore, many Japanese banks had the non-profit loans problems and got a bad financial condition. What is worse, some banks became bankrupt and a rate of unemployment was increased. According to a department of economic in Kansai Gakuin University, the rate of unemployment reached high point 5.9% after collapsing bubble economy. From the evidence, it is apparent that failure of governments intervention touched Japans economy seriously.The second reason is zero-interest-rate policy. The Japanese government adopted zero-interest-rate policy to enhance capital inve stment and reduce companies spillage bankrupt. Actually, Japanese companies invested much money to build plants. On the other hand, they could not make profits even though they invested much money. Consequently, they could not pay loan back to the banks, and worker hired with enhancing their capital became an excessive. Those factors caused a negative spiral. Moreover, as John Maynard Keynes stated that when zero- interest policy is adopted, the effects will be meaningless because of Liquidity trap that is a situation in which the rate of interest is so low that no one wants to hold interest-bearing assets and people only want to hold cash( Dictionary of Economics). As a result, zero-interest-rate policydid not work properly and Japanese economy would be a worse situation. The third reason is increase of drug addiction tax. In 1997, Ryutaro Hashimoto, Japans former prime minister, increased consumption tax from 3% to 5% to reduce government spending. However, it made Japanese peop le use less money and it worsened the depression. From the rate of 1995, Japans economy became to recover gradually because financial policy and inclination of bad loans were successfully committed, and Japans economic growth rate exceeded 3%. However, the Japanese government increased consumption on the motive of recovery, and it discouraged the recovery of Japans economy and made the depression continued longer. In conclusion, government intervention can improves the operation of market but it is not always applicable. To prove this opinion, we investigated about positive and negative examples. From the case of student loan policy in U.S and Medical insurance system in Korea, we investigated about the reason wherefore government intervenes for equitable distribution of wealth and how the both government use the policy for the people. We also looked into G.M in U.S as an example and we figure out how government intervenes to the market when the market fails and the positive effe cts from the government intervention. We also focus on the Japanese lost decade as a failed government intervention and the result of wrong interest rate policy. Base on the examples that we used, we can see that government intervention can improve the operation of market but it is not always applicable. Some policies can improve the market and give lots of benefits to people, but the other policies can aggravate the operation of market and make people unfortunately. So it depends on the kind of policy that government intervenes and how to control it. In addition, it is one of the most important reasons why people learn the economics and theories.