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As the world becomes more globalized through integration of markets and better communication systems, governments around the world are increasingly finding themselves with an increased role of market regulation. Governments all over the world are involved in markets through taxation, policy formulations, and regulations of market activities. However, the entry of machine production, as well as foreign investors in the local markets means that the role of governments is likely to change in order to reflect new characteristics of emerging markets. There is a need, therefore, to understand how the behavior of governments and different economic forces impacts markets in the context of public economics. There are views from economists who support governments’ interventions in the contemporary emerging markets. The governments’ inventions impact markets in more than one way. The purpose of the current paper is to identify ways, through which government’s involvement in markets affects activities of the market and importance of such interventions in contemporary marketing.
Ways, in Which Governments Intervene in Markets and Their Impact on Markets
All governments around the world intervene in markets through taxation. Taxation is a legal requirement for all market players to ensure that they remit part of their profits to the government for essential services. Governments have the responsibility to the public to provide infrastructure, security, education, and health services among many other things (Rose, 2014). These services require from the government to have a constant supply of financial resources. The resources are gained through taxation of businesses that operate in the country. Apart from providing essential services to the businessmen and people at large, taxation is also meant to ensure that there are ethical practices in the markets by the market players (Field, 2014). Only those who have paid their taxes to the government are allowed to operate their businesses in the market. Through this way, fraudulent business people are eliminated from the market.
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The impact of taxation on markets is that it enables the government to control who is to operate different businesses on the market. Taxation also leads to responsible behavior on the market by investors because they must recover their investment costs after paying the tax to the government and therefore execute their operations in line with the prevailing condition put forth by the government.
The second intervention takes place through price control of essential products, such as fuels and food staff. Governments usually have prices of such products fixed because of their volatility and effect on the economy. The price of fuel can cause a stable economy to collapse if it is left in the hands of scrupulous business people (Morton, 2001). The interventions in the market through price control ensure that there is a form of regulation in pricing of essential products and services that can negatively affect the entire economy of a country. In most cost cases, price control is meant to reduce the cost of the product that has a great impact on the economy of the country. Price control from government ensures that consumers are not exploited through high prices or the market becomes saturated with low-priced products.
In addition, price control ensures that supply and demand of products in the market are sustained through interaction of supply and demand as important building blocks of the economy. Price control has been used by governments around the world as a political tool to gain political mileage with constituents (Acharyya, & Marjit, 2013). The lowering of prices of essential products and services can be seen as promotion of the economic status of people who elect the government in power. Price control is important because it ensures that essential products remain within the reach of people. It also helps to avoid black market, where sellers might hoard some of the products in a bid to increase the price of them in the black market. The intervention also puts the government in direct control of the market in terms of excessive market activities.
The third intervention takes place through policies and regulations on the contact of local and foreign investors in the market. The laws enacted are expected to regulate behavior of investors, especially in market activities that might impact the environment, including manufacturing and production of chemicals. Such laws and policies affect market in a way that the number of market players is regulated (Bradley, 2014). The government is also able to determine, which foreign investors invest in the country, as well as ensure that activities of markets do not affect the environment or traditional lifestyle of people in the country. Laws and policies impact the market in many ways including avoiding monopoly, engaging in environment-friendly activities, and providing equal opportunities for different players to interact in the market.
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The fourth intervention mechanism of government occurs through participation in international business activities. Governments intervene in markets by forming business partnerships with other countries to provide essential services and products. Governments are directly involved in export and import of products with the aim of ensuring that the supply and demand remain stable (Greve, 2014). Forming partnership with other governments also ensures that the local market is accessed by necessary products and services and is also able to export any service or product that is in excess. For instance, the bilateral treaties between the government of China and many African governments have seen a proliferation of Chinese companies in Africa. It has helped the government to control the number of companies in the Chinese market (Huang & Yeung, 2013). Government-to-government partnership with a view of controlling markets of each country is good because it ensures that goods, which are in excess in a given market, are exported to a market, where the supply is low.
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The fifth intervention takes place through control of central markets as an important institution in the sustenance of markets. Central banks are responsible for remission of money into the economy. These institutions are under control of the government (Rose, 2014). Thus, government’s monetary policies through central banks can influence how money flows to the market. Control of central banks by the government ensures that there is no inflation of money as well as avoid depreciations of the country’s currency against major currencies of the world, which can affect businesses in the market (Wibe & Jones, 2013). Control of liquid money flow is important because it allows foreign investors and international business people to do their business in an environment that is predictable and highly controllable. This macroeconomic intervention of government is important for most markets because it ensures that the market is cushioned against prolonged recession and that there is no loss of jobs for marketers.
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Lastly, governments intervene in markets through provision of facilitative infrastructures, such as roads, electricity, and airports, to allow for faster movements of goods and products (Field, 2014). Other facilities, through which governments around the world intervene in markets, include the information and communication technology provision to allow business people to communicate faster and more efficiently (Greyserman & Kaminski, 2014). For instance, governments have been the main funders of fiber technology in most countries, which enables business people to have access to faster internet services. Due to this, many people in the market are able to do their transactions with other people from international markets effectively thanks to the intervention of government. In a global market, governments’ intervention through technology and infrastructural facilities is most welcome because it helps to attract investors from other countries to invest in a country.
Governments’ intervention in markets ensures that there is equality and fairness in pricing, business people adhere to environmental policies and other regulations, and that partnership with other governments facilitates import and export of goods and services in a country. Furthermore, regulation of central banks ensures a systematic flow of money in the economic system to avoid inflation and recession, which can be detrimental to businesses.
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