The role of government


For centuries governments have performed regulating, controlling and management functions for many countries. Nowadays there is a great shift of the accents in the globalized world. It seems that the governments have turned into a huge regulating machine performing on a various backgrounds. Their roles and functions are blurred and the global community is often confused by the modern process of integration of economies, cultures and societies. Globalization is a direct way to unification on different levels. Under conditions of economies integration, a rapid growth of investments and industrialization, it is really hard for a modern business to adapt to these changes.  Thus, globalization triggers numerous ideas and the world comes across numerous opportunities of business development. Governments of the developed countries play on the arena a role of competitors. America has been known for years as a country with a highly-developed economy. Nowadays China and India are struggling for superiority in the world’s economy and politics. As a result, other global players following these changes and relationships among different countries are changing. 

Capitalist and command economy

Different countries of the world have different economic systems. The economic system of the state influences its economic showings. In the given paper we will discuss the capitalist and command economic systems and prove that capitalist system provides more opportunities for economic development.

The main difference between the capitalist and command economy is the degree of interference of the authorities in the economy of the state. Capitalist system is founded on the idea that stable system can be created by the society, where people preserve their own interests. In a capitalist economy, people can have private property and decide how to use it. The amount of the capital one can possess is not limited. An individual may have as much as he can get. The capital can be obtained by any means, which are not prohibited by the law. Richness is appreciated. A person can choose whether to work for state-owned enterprise or private company, he/she can’t be obliged by the government to implement a definite kind of work, he/she takes care of his own well-being first of all. The government interference presents in capitalist economy, but it is reduced to minimum. The USA, United Kingdom, India, Sweden, Germany, Japan have capitalist economies.

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 In command economy people can’t get property in their absolute possession. The property is owned by the government and people can only use it. People are also not free to choose a profession or job. They can be appointed to this or that job by the authorities. The theory that underlies the command economy implies that the authorities know and understand any aspect of the state economy and represent the main and only decision-maker.  It is clear that sometimes the government lacks the proper knowledge and understanding and that results in overproduction of some products and deficit of other goods like in former Soviet Union. North Korea, Vietnam, and parts of China have command economy.

The United States of America is one of the most successful because of its economy. In the United States consumers are the decision-makers and only they decide what they need and government tries to meet their requirements to make all the people rich and successful. The United States have the most stable type of capitalist economies. To maintain stability is the most important task for the countries with stable economy, otherwise all the wealth will be concentrated in the hands of small group of people and the rest will be very poor. The government of the United States successfully regulates stability.

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It is clear that capitalist economic systems are much more efficient than command. Countries with command economy are not characterized as successful. The main task of the government of the countries with capitalist economy is to maintain stability and the example of the United Stated testifies that stability can be regulated successfully.

Reviewing current conditions of government

Max Horkheimer and Antonio Gramsci underline that occurrence of hegemony evokes not only political or economic issues, but also determine a “holistic consideration” about the world and defining  human and social relationships on a diverse background (Keohane, 2001). Gilpin (2001) argues that there has always been a struggle among the states and the markets in the world. Neoclassic liberal economists talk about these competitive relationships on the global background too. Markets nowadays are deeply involved in the modern global context. It is relevant to advance control over different states (Gilpin, 2001).

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Under conditions of the modern economy the societies are able to transform. Very often researchers draw parallels between politics and economy.  Therefore, changes in the modern political world are triggered by many external changes and factors. There is a following framework for development of the modern business: imperialism, class, gender, and race-ethnicity. A challenge of “globalization” definition can be often misinterpreted. Regional trade blocks are dominant in the modern global market (European Union, NAFTA). The national interests of the states are reflected in the activity of the trade block. EU exists and it cannot be denied that its members are united and want to cooperate on the basis of common rules. 

A modern world operates under conditions of geopolitical hegemony (America as an example).  Governments nowadays are operating in accordance with the following conditions: on the basis of relationships of “globalization as interdependence” to “globalization as gradual balancing of international and domestic politics” (Harvey, 2005).  States have turned into forcible powers, which influenced development of relationships among the countries: from “pressure for the reduction the welfare state in developed countries and for the liberalization of the economy in developing ones” (Langley, 2000, p. 462).

Global shifts are often described in the following ways: “the rush to free trade and capital market liberalization, the reforms of many welfare states, and the creation of independent central banks globally” (Milner, 1998). Nowadays governments of the countries exert their influences on the economies to the greatest extent. Therefore, the role of the state is often diminished and the economy’s development is fostered on the international level.

It is relevant to refer to the principles of global economy development too.  Big countries are influential for small countries. Still, the role of the government is often underestimated in this context. It is possible to compare the role of the government in earlier years and nowadays. In the past the governments were responsible for the welfare of the society, economic development and increase of productivity.  Nowadays businesses are privatized and state welfare is not the only one possible option on the political arena. Primary the states performed more a paternalistic function. Currently the states intend to destroy what is present (Held and McGrew, 2002). Thus, developed countries play a role of a shark and open their mouths to consume developing countries. People want to gain more information and truth is revealed to them very often.  On the one hand, businessmen are looking forward to having numerous opportunities to initiate their own business and operate successfully.

The products can be bought at lower prices and a great number of competitors can diversify the market for sure. Previously the government played a role of a great promoter of competition and nowadays it plays a role of a great competitor itself (Blyth&Spruyt, 2003). Developing countries and businesses in those countries suffer greatly from increased tariffs. The states are looking for opportunities of making investments and gain profits. Such benefits of a global game in the global arena can be summarized in the following way: “independence of people, ideas, products, and information required to think globally because local solutions may not be possible or efficient.  A state’s power to use fiscal and monetary policies effectively is limited due to the ease of financial capital mobility” (Mahboobi, 2001). Thus, economic policies of separate governments are developed with respect to their own interests and needs. Local businesses suffer from hegemony and a lack of opportunity for further development. Different policies of the governments, such as fiscal policy, monetary policy and others disable local and small businesses to take control over different aspects of their activities. The countries, which gained much from globalization, were those, which obtained their investments in human resources development and infrastructure development.  Structural reforms were introduced in the countries of East Asia. They were much concerned about potential benefits from globalization.

Moreover, in the globalized world national stability of any country does not depend on its own policy, but also on policies of other players in the global arena. Different levels of economic and social changes in the developing countries should be correlated with global policies. Respectively, we can claim that the role of government has changed. Limited resources, advancement in regulations and other norms will remain on behalf of the government.

Government now plays a role of instrumentalists and they are able to create a favorable environment for foreign investments. Integration among different countries and the issues of integrity remain challenging issues for the modern global world.  Though the main emphasis is made on free trade of goods and services a freer mobility of capital depends on the governmental regulations. Such disadvantages as lowering of labor, changed laws and other negative outcomes are dependent on globalization. There is no doubt that the accents are changed and the local governments depend on interdependence among the governments. The economic size of the states and the roles of governments in the states are dependent on the international agenda. Global players set the rules of a game and they are responsible for the policies they have created.  Devastating social and economic consequences can occur in the result of a mass liquidation of enterprises and small businesses.  Regulatory burden can be regulatory tool facilitating the process of business’s performance. Moreover, small businesses are focused on the development of their own benefits, but it is more relevant to focus on the options of expansion than options of enrichment. We have a chance to change the vision about the government regulation on small firms, because an integrative nature of regulation is present in any sphere of human activity. Otherwise our doings will look like movement of molecules. Regulation is a vector for human activities. It can be said that regulations of small businesses is an option to redirect enrichment strategies into expansion strategies of small firms that are very important in the modern globalized context.

Currently the state performs an important role of rights advancement. Securing safety of the countries and guaranteeing rights of small businesses should be the issues of primary concern. The state performs a function of correcting policies for the small businesses. Globalization problems can occur in the result of state’s failure to work in compliance with the international regulations, which very often oppress independence and ability to perform on their own independent basis for small businesses. Creation and establishment of effective international institutions can contribute much to investment increase and productivity growth for the developing countries. Globalization and privatization are two important issues in the modern global context when small businesses are influenced. On the one hand, expansion of a private sector is an open alternative and a perfect option for stabilization of relations among different types of businesses. Globalization exerts influence significantly on tariffs reduction and taxes incorporation.

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In developing countries, small businesses are unable to perform outstandingly at the international level. Resources can be mobilized through taxes. It is often claimed that: “taxes are the main source of revenue for the government, but it creates direct costs for the taxpayers, indirect costs by causing economic distortion that alters relative prices, and creates administrative costs for compliance (collecting) and enforcement” (Biersteker, 1998).  Their finances are associated with numerous risks and financial sectors of many businesses are in danger. Governments of developing countries mobilize available resources and they can contribute much into local budget’s development.   


It is possible to claim that globalization has shifted the role of a government and the states are more reserved and promoting their interests. Regulation is an integrative part of the government environment of the country we are living in. It requires high costs to develop a new business and in case a new reform of taxation is imposed on the small firms, it does not mean at all that the economy of that country is constrained.  There are many challenges for firms and it is clear that regulation should be directed not on the restriction of the small firms’ operation, but on the advancement of operation of the small firms.

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Therefore, there is no need to consider government regulations in black or white color. It is much better to focus on the integrative and a constant nature of government regulations. There is no doubt that the government exerts disproportional influence on small businesses. Very often it is argued by the owners of small business, that in the organizations with 20 employees, there are higher unit costs than for businesses, where 500 employees are operating.  The nature of regulatory impact differs to the greatest extent and it is better to make this influence equal with respect to the nature, operating performance and the nature of the small firms. Small businesses can develop successfully, but they have to act in compliance with the international regulations and norms. A promotion of a better quality of life, education etc depends on financial conditions of the states. Globalization should play a role of a great integrator and the countries should be able to run economy on their own promoting their interests and views at the same time striving for a general welfare. The governments obtained different responsibilities in comparison with previous years. Now they are more focused on the issues of financial crisis reduction, creation of effective and sound regulatory bodies in financial sectors. Creation of international wealth can be reached in the process of cooperation among numerous governments and the international society in general.



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