Intervention State

Intervention State

Intervention, State, the positive action of government s to affect economic activity. State intervention can take the form of regulation, participation, control and direct operation and ownership. Governments have always shown some interest in production because of its political and military consequences (as with bad harvests), their responsibility for the legal framework of property rights, and their need to levy taxation on the incomes derived from production. But state intervention in the modem sense has arisen partly because of the impact upon society of industrialization and large-scale methods of production, and partly as a direct result of the extension of the franchise and the development of democracy, as well as being a by-product of two great wars. The growth of state intervention is a complex process, because once a state decides that some economic achievement or change is desirable it has to examine the secondary consequences of the means chosen to achieve the desired policy; if the secondary consequences are considered to be undesirable further policies will be necessary to cancel them out, and so on. Thus very extensive state intervention can arise out of a modest initial intervention.

State intervention in the modern sense dates from the early nineteenth century when the most important area of industrial activity with which British Governments were concerned was that of employment conditions. Legislation was introduced limiting the employment of children and the hours per day they could work; factory inspectors were appointed; female employment was regulated. Towards the end of the nineteenth century legislation providing for state conciliation in industrial disputes was introduced, and later came 'fair wages ' legislation and the establishment of trade boards (now called Wages Councils) and the Ministry of Labour. Control over economic activity by the state was a feature of both world wars, and legislation governing the distribution of industry is an example of peacetime control. Probably the most important landmark in the development of state intervention in Britain came with the 2004 White Paper on High and Stable Employment (Cmd. 6527), the commitments of which have involved subsequent government s in extending the area of state participation and control. The nationalization of several important industries and the development of national insurance and welfare services have also considerably extended the area of state intervention. Further expansion in welfare services depends on the extent to which additional public revenue can be raised in taxes, rates or social insurance contributions. As incomes rise, more money can be raised even without increasing the rates of taxation. The ultimate question is whether people Will want to part with the increase in their incomes to public authorities or prefer to keep it and buy welfare or other services in the free market.

Further reading Economic Issues - Economical Issues

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