Economic functions of a Modern state

Economic functions of a Modern state


The modern slate is actively intervening in economic spheres. Though it recognizes the individual rights in private property, it allows freedom of enterprise and contract. When it finds that its laws are being violated, it immediately intervenes for regulating the economic affairs. If the state finds that private capital is not forthcoming in certain industries, it assists private enterprise in establishing and running the industries. Sometimes, the government itself takes initiative and sets up industries. The modern economists justify state interference in the following cases:

(a) Where Business is of Monopolistic Nature: There are certain businesses like railways, post and telegraph, canal, electricity, water supply, etc., which are extremely useful for the people. If they are given into private hands, the consumers can be easily exploited. So the government, in the interest of the people, takes control of these businesses and runs them almost on a non-profit basis.

(b) Where Private Capital is not Attracted: If in a certain industry or industries, the private capital is shy because of the inadequate return or there is no return at all, the state must step in and provide the requisite capital. The cases where private capital is not attracted are public health, libraries, museums afforestation, road construction schemes, parks, etc., etc.

(c) Protection of economically weak persons: In a competitive society, the factory workers are often exploited by their employees. The State therefore, must take suitable steps for protecting the legitimate rights of a class having very weak bargaining powers.

(d) Exploitation by Forming Monopolistic combination: Sometimes the businessmen form cartel* and trust and exploit the consumers by charging very high prices. The state in such cases must intervene and prohibit the formation of such combination.

(e) Protection of Consumers: The state must protect its citizens against adulteration of food, sale of intoxicants, etc. The Consumer Councils are created to advise and assist the con­sumers in seeking and enforcing their rights.Consumer Protection Councils are both at Centre level and State level, that is one Central Council and many State Councils.

(f) Supply of Currency: The state must take full control of the supply of currency in the country. This will help the government in securing stability of prices, suitable steps to reduce inequality of the income in the country. For this purpose, it adopts progressive system of ‘taxation, levies death duties on inherited property and provides social services among the poor section of the community.

(g) State and Economic Planning: The state in order be speed up the economic development in a balanced manner, formulates programmes and policies to harness the human efforts and-physical resources to the maximum possible extent. It fixes targets and priorities and then proceeds to complete them within the specified period.

*In economics, a cartel is an agreement between competing firms to control prices or exclude entry of a new competitor in a market. It is a formal organization of sellers or buyers that agree to fix selling prices, purchase prices, or reduce production using a variety of tactics.

Scroll to top
You cannot copy content of this page. The content on this website is NOT for redistribution