The role of the state in a market economy

The problem of state intervention in the economy is, apparently, one of the main for any modern state, regardless of whether it is a market economy or a distributive one. The need for the state to perform certain functions in the economic sphere is not denied by anyone. However, on such issues as the correlation of state and market regulation and the direction of state intervention, there is a fairly wide range of theoretical views and practical approaches to them, from complete state monopoly in the management of the national economy, to extreme economic liberalism, when it is argued that an effective can only be an economy in conditions of unlimited private enterprise. Between these extreme variants there are a number of intermediate variants, for example, the Chinese version of a combination of market and state regulators, the so-called socially oriented market economy of Germany and Austria, the Swedish model of a mixed economy, etc.

A kind of economy in which there was an extremely high degree of state monopoly was the centrally-managed economy built in our country. Planning was based on planning. a centralized solution to the questions of how much and what to produce, what resources should be used, the amount of labor and capital spent, what wages should be, and so on. Here we can not talk about regulation: the state simply has no one to regulate. In this case, we are talking about replacing the whole variety of forms of ownership and ways of answering the question «What, how and for whom to produce?», One single form of ownership - state, and the answer to the basic economic question - strict centralization and distribution. However, such a system actually proved ineffective. The task of drawing up a balanced plan is almost impossible to solve because of its colossal dimension and static nature. But even in the unlikely event of a balanced plan, a system where all actions of economic entities are signed for five years ahead turns out to be inactive, poorly adapting to changes.

There remains a market path of development. However, in the market economy, the state has to constantly adjust its influence. The state does not face such tasks as direct production and distribution of resources, goods and services. But it also has no right to freely dispose of resources, capital and manufactured goods, as is done in the distributive economy. In my opinion, the state must constantly balance, then, increasing, then, reducing the degree of intervention.

The market system is, above all, flexibility and dynamism in decisionmaking, both on the part of consumers and on the part of producers. State policy simply has no right to lag behind changes in the market system, otherwise it will turn from an effective stabilizer and regulator into a bureaucratic superstructure that hinders the development of the economy.

The purpose of this work is to review and analyze modern concepts and practices of the functioning of the state as a subject of economic relations in countries with a developed market economy.

First of all, it is necessary to determine what the concept of state regulation includes. According to the generally accepted definition, state regulation of the economy is a system of indirect influence on the behavior of economic entities and thus on the economy as a whole by changing legislation, the taxation system, customs duties, exchange rates, the use of other instruments of restriction or, conversely, the motivation of an activity.

It is advisable to consider the reasons for state intervention in the economy. Back in the XVIII century. A. Smith defined the following functions of the government:

• •    ensuring national defense;

• •    administration of justice;

• •    organization of public works, unfavorable for private entrepreneurship, but necessary for citizens;

• •    education of youth;

• •    collection of taxes to pay for state needs.

As the market economy developed, economic and social problems arose that could not be resolved automatically on the basis of private property. There was a need for significant investments, unprofitable or unprofitable from the point of view of private capital, but necessary for the continuation of reproduction on a national scale. Sectoral and general economic crises, mass unemployment, irregularities in monetary circulation, and increased competition in world markets demanded a national economic policy.

To this day, no one disputes the need for these functions, in addition, new ones have been added to them. But, what is especially indicative, the central authorities intervene today even in the pricing process. Of course, in a market economy they do not directly set prices for individual goods, as in central planning. But by regulating, say, the interest charged by banks for a loan, they can accelerate or slow down the overall growth rate of prices. The question is, why does the state take on such economic functions, which the market should ideally solve in theory? The real market is far from the abstract model of perfect competition, and hence, from the very perfection. Therefore, the state has to intervene.

It is worth noting that among economists there is no common opinion about how much and in what form the state should do it. Some believe that it should partly solve for the market the problem of efficient allocation of resources. Others, on the contrary, warn that nothing good will come of such direct intervention and the functions of the state should be reduced solely to maintaining the rules of the «market game», for example, limiting the power of «dictators» in the market.

In a planned economy, the state plays a decisive role in determining all economic proportions. When building a system of state regulation of the economy, the principle of «maximum opportunity» prevails here: all economic processes, which in principle are amenable to centralized regulation, should be managed by central bodies. Common to all countries with a planned economy is that the system of public administration appears as the main regulator of economic proportions, whereas in countries with a market economy it always performs auxiliary functions.

In the market economy, the main regulator of economic proportions is the market. State regulation plays a supporting role. It is based on the principle of «necessity»: only in those areas where market regulators are ineffective for various reasons, state regulation is acceptable and appropriate.

As already noted the views of various economists and politicians about what processes can be regulated by the state and which ones - the market, do not coincide. Therefore, the degree of state intervention in the economy is not the same in different countries with a market economy. For example, in Sweden or Holland, the state is more active in influencing economic processes than in the US. Each country has its own model of state regulation. So, in the USA tax-budgetary methods prevail at small sizes of the property. For Western Europe is characterized by a combination of a high proportion of public expenditure in GDP with the presence (especially in the 50-80-ies.) Of a significant public sector, primarily in the financial sector and infrastructure. In Japan, with a relatively small share of budget expenditures in GDP and the small size of the public sector, there is a unique system of interaction between state bodies and the largest corporations for the implementation of strategic goals in the economy.