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Economic interventionism, sometimes also called state interventionism, is an economic policy position favouring government intervention in the market process with the intention of correcting
market failure In neoclassical economics, market failure is a situation in which the allocation of goods and services by a free market is not Pareto efficient, often leading to a net loss of economic value. Market failures can be viewed as scenarios where indivi ...
s and promoting the general welfare of the people. An economic intervention is an action taken by a government or international institution in a
market economy A market economy is an economic system An economic system, or economic order, is a system A system is a group of interacting Interaction is a kind of action that occurs as two or more objects have an effect upon one another. The ide ...
in an effort to impact the
economy An economy (; ) is an area of the production Production may be: Economics and business * Production (economics) * Production, the act of manufacturing goods * Production, in the outline of industrial organization, the act of making products ...

economy
beyond the basic regulation of
fraud In law Law is a system A system is a group of Interaction, interacting or interrelated elements that act according to a set of rules to form a unified whole. A system, surrounded and influenced by its environment, is described by ...

fraud
, enforcement of contracts, and provision of public goods and
services Service may refer to: Activities :''(See the Religion section for religious activities)'' * Administrative service, a required part of the workload of Faculty (academic staff), university faculty * Civil service, the body of employees of a governm ...
. Economic intervention can be aimed at a variety of political or economic objectives, such as promoting economic growth, increasing employment, raising wages, raising or reducing prices, promoting income equality, managing the money supply and interest rates, increasing profits, or addressing market failures. The term ''intervention'' is typically used by advocates of ''
laissez-faire ''Laissez-faire'' ( ; from french: laissez faire , ) is an economic system An economic system, or economic order, is a system of Production (economics), production, allocation of resources, resource allocation and Distribution (economics), d ...
'' and
free market In economics Economics () is a social science Social science is the branch A branch ( or , ) or tree branch (sometimes referred to in botany Botany, also called , plant biology or phytology, is the science of pl ...
capitalism and assumes that, on a philosophical level, the state and economy should be inherently separated from each other and that government action is inherently exogenous to the economy. The terminology applies to capitalist market-based economies where government actions interrupt the market forces at play through regulations, subsidies and price controls (but
state-owned enterprises A state-owned enterprise (SOE) or government-owned enterprise (GOE) is a business enterprise Business is the activity of making one's living or making money by producing or buying and selling Product (business), products (such as goods a ...
that operate as market entities don't constitute an intervention).
Capitalist Capitalism is an economic system based on the private ownership of the means of production and their operation for Profit (economics), profit. Central characteristics of capitalism include capital accumulation, competitive markets, a price s ...
market economies that feature high degrees of state intervention are often referred to as a type of
mixed economy A mixed economy is variously defined as an economic system An economic system, or economic order, is a system of Production (economics), production, allocation of resources, resource allocation and Distribution (economics), distribution of go ...
.


Political perspectives

Liberals Liberal or liberalism may refer to: Politics *a supporter of liberalism, a political and moral philosophy **Liberalism by country *an adherent of a Liberal Party Arts, entertainment and media *''El Liberal'', a Spanish newspaper published betw ...

Liberals
and other advocates of
free market In economics Economics () is a social science Social science is the branch A branch ( or , ) or tree branch (sometimes referred to in botany Botany, also called , plant biology or phytology, is the science of pl ...
or ''
laissez-faire ''Laissez-faire'' ( ; from french: laissez faire , ) is an economic system An economic system, or economic order, is a system of Production (economics), production, allocation of resources, resource allocation and Distribution (economics), d ...
'' economics generally view government interventions as harmful due to the law of
unintended consequences In the social sciences Social science is the Branches of science, branch of science devoted to the study of society, societies and the Social relation, relationships among individuals within those societies. The term was formerly used to ...

unintended consequences
, belief in government's inability to effectively manage economic concerns and other considerations. However, modern liberals (in the United States) and contemporary
social democrat Social democracy is a Political philosophy, political, Social philosophy, social, and economic philosophy within socialism that supports Democracy, political and economic democracy. As a policy regime, it is described by academics as advocating ...
s (in Europe) are inclined to support interventionism, seeing state economic interventions as an important means of promoting greater income equality and
social welfare Welfare (or commonly, social welfare) is a type of government support intended to ensure that members of a society can meet basic human needs Maslow's hierarchy of needs is an idea in psychology Psychology is the science of mind and b ...
. Furthermore, many
center-right Centre-right politics (British English British English (BrE) is the standard dialect of the English language English is a West Germanic languages, West Germanic language first spoken in History of Anglo-Saxon England, early medieval ...
groups such as
Gaullist Gaullism (french: link=no, Gaullisme) is a French political stance based on the thought and action of World War II World War II or the Second World War, often abbreviated as WWII or WW2, was a World war, global war that lasted from 1 ...
s, paternalistic conservatives and
Christian democrats __NOTOC__ Christian democratic parties are political party, political parties that seek to apply Christian principles to public policy. The underlying Christian democracy movement emerged in 19th-century Europe, largely under the influence of Cat ...
also support state economic interventionism to promote social order and stability. National-conservatives also frequently support economic interventionism as a means of protecting the power and wealth of a country or its people, particularly via advantages granted to industries seen as nationally vital. Such government interventions are usually undertaken when potential benefits outweigh the external costs. On the other hand,
Marxists Marxism is a method of socioeconomic Socioeconomics (also known as social economics) is the social science that studies how economic activity affects and is shaped by social processes. In general it analyzes how modern society, societies socia ...
often feel that interventions in the form of social welfare policies might interfere with the goal of replacing
capitalism Capitalism is an economic system An economic system, or economic order, is a system A system is a group of interacting Interaction is a kind of action that occurs as two or more objects have an effect upon one another. The idea o ...

capitalism
with socialism because a developed
welfare state The welfare state is a form of government in which the state (or a well-established network of social institutions) protects and promotes the economic and social well-being of its citizens, based upon the principles of equal opportunity Equal o ...
makes capitalism more tolerable to the average worker, thereby perpetuating the continued existence of capitalism to society's detriment.
Socialist Socialism is a political Politics (from , ) is the set of activities that are associated with making decisions In psychology, decision-making (also spelled decision making and decisionmaking) is regarded as the Cognition, cognitive pr ...

Socialist
s often criticize interventionism (as supported by social democrats and social liberals) as being untenable and liable to cause more economic distortion in the long-run. While interventions might solve single issues in the short term, they cause distortions and hamper the efficiency of the capitalist economy. From this perspective, any attempt to patch up
capitalism Capitalism is an economic system An economic system, or economic order, is a system A system is a group of interacting Interaction is a kind of action that occurs as two or more objects have an effect upon one another. The idea o ...

capitalism
's contradictions would lead to distortions in the economy elsewhere, with the only lasting solution being the replacement of capitalism with a socialist economy.


Effects

The effects of government economic interventionism are widely disputed. Regulatory authorities do not consistently close markets, yet as seen in economic liberalization efforts by states and various institutions (
International Monetary Fund The International Monetary Fund (IMF) is an international financial institution, headquartered in Washington, D.C. ) , image_skyline = , image_caption = Clockwise from top left: the Washington Monument The ...

International Monetary Fund
and
World Bank The World Bank is an international financial institution An international financial institution (IFI) is a financial institution that has been established (or chartered) by more than one country, and hence is subject to international law. Its o ...
) in
Latin America * ht, Amerik Latin, link=no * pt, América Latina, link=no , image = Latin America (orthographic projection).svg , area = , population = ( est.) , density = , ethnic_groups = , ethnic_groups_year = 2018 , ethnic ...

Latin America
, "financial liberalization and privatization coincided with democratization". One study suggests that after the lost decade an increasing "diffusion of regulatory authorities" emerged and these actors engaged in restructuring the economies within Latin America. Through the 1980s, Latin America had undergone a
debt crisis Debt crisis is a situation in which a government (nation, state/province, county, or city etc.) loses the ability of paying back its governmental debt Debt is an obligation that requires one party, the debtor, to pay money or other agreed-u ...
and hyperinflation (during 1989 and 1990). These international stakeholders restricted the state's economic leverage and bound it in contract to co-operate. After multiple projects and years of failed attempts for the Argentine state to comply, the renewal and intervention seemed stalled. Two key intervention factors that instigated economic progress in Argentina were substantially increasing
privatization Privatization (or privatisation in British English) can mean several different things, most commonly referring to moving something from the public sector into the private sector. It is also sometimes used as a synonym for deregulation when a heav ...
and the establishment of a
currency board A currency board is a monetary authority In finance and economics, a monetary authority is the entity that manages a country’s currency and money supply, often with the objective of controlling inflation targeting, inflation, interest rates, re ...
. This exemplifies global institutions, including the International Monetary Fund and the World Bank, to instigate and propagate openness to increase foreign investments and economic development within places, including Latin America. In Western countries, government officials theoretically weigh the cost benefit for an intervention for the population or they succumb beneath coercion by a third private party and must take action. Intervention for economic development is also at the discretion and self-interest of the stake holders, the multifarious interpretations of
progress upright=1.14, alt=Painting depicting a woman draped in white robes flying westward across the land with settlers and following her on foot, John Gast, ''American Progress'', Progress is the movement towards a refined, improved, or otherwise de ...

progress
and development theory. To illustrate this, the government and international institutions did not prop up
Lehman Brothers Lehman Brothers Holdings Inc. () was a global financial services firm founded in 1847. Before filing for bankruptcy in 2008, Lehman was the fourth-largest investment bank Investment is the dedication of an asset to attain an increase in val ...

Lehman Brothers
during the
financial crisis of 2007–2008 The financial crisis of 2007–2008, or global financial crisis (GFC), was a severe worldwide economic crisis An economy (from Greek οίκος – "household" and νέμoμαι – "manage") is an area of the production, distribution and t ...
, therefore allowing the company to file bankruptcy. Days later, when
American International Group American International Group, Inc., also known as AIG, is an American multinational finance and insurance corporation with operations in more than 80 countries and jurisdictions. , AIG companies employed 49,600 people. These corporations have interconnected interests with the state, therefore their incentive is to influence the government to designate regulatory policies that will not inhibit their accumulation of assets. In Japan,
Abenomics refers to the economic policies implemented by the Government of Japan The is the central government of Japan. The Government of Japan consists of legislature, executive and judiciary branches and is accountable to the Emperor of Japan. ...
is a form of intervention with respect to Prime Minister
Shinzō Abe Shinzo Abe (, ''Abe Shinzō''; ; born 21 September 1954) is a Japanese politician who served as Prime Minister of Japan and President of the Liberal Democratic Party (LDP) from 2006 to 2007 and again from 2012 to 2020. He is the longest-servin ...

Shinzō Abe
's desire to restore the country's former glory in the midst of a globalized economy.


United States government interventions

President
Richard Nixon Richard Milhous Nixon (January 9, 1913April 22, 1994) was the 37th president of the United States The president of the United States (POTUS) is the and of the . The president directs the of the and is the of the . The power o ...

Richard Nixon
signed amendments to the Clean Air Act in 1970 that expanded it to mandate state and federal regulation of both automobiles and industry. It was further amended in 1977 and 1990. One of the first modern environmental protection laws enacted in the United States was the National Environmental Policy Act of 1969 (NEPA), which requires the government to consider the impact of its actions or policies on the environment. NEPA remains one of the most commonly used environmental laws in the nation. In addition to NEPA, there are numerous pollution-control statutes that apply to such specific environmental media as air and water. The best known of these laws are the Clean Air Act (CAA),
Clean Water Act The Clean Water Act (CWA) is the primary federal law Federal law is the body of law created by the federal government of a country. A federal government is formed when a group of political units, such as states or provinces join together in a ...
(CWA), and the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) commonly referred to as
Superfund The United States The United States of America (USA), commonly known as the United States (U.S. or US), or America, is a country Contiguous United States, primarily located in North America. It consists of 50 U.S. state, states, a Washin ...
. Among the many other important pollution control laws are the
Resource Conservation and Recovery Act The Resource Conservation and Recovery Act (RCRA), enacted in 1976, is the principal federal law in the United States The United States of America (USA), commonly known as the United States (U.S. or US), or America, is a country Contiguous ...
(RCRA),
Toxic Substances Control Act The Toxic Substances Control Act (TSCA or TOSCA) is a United States The United States of America (USA), commonly known as the United States (U.S. or US), or America, is a country Contiguous United States, primarily located in North America ...
(TSCA), Oil Pollution Prevention Act (OPP),
Emergency Planning and Community Right-to-Know Act The Emergency Planning and Community Right-to-Know Act of 1986 is a United States federal law The law of the United States comprises many levels of codified and uncodified forms of law, of which the most important is the United States Constitutio ...
(EPCRA), and the Pollution Prevention Act (PPA)."Laws and Regulations, United States"
Pollution Issues. Retrieved 8 July 2012.
United States pollution control statutes tend to be numerous and diverse and many of the environmental statutes passed by
Congress Congresses are formal meetings of the representatives of different countries A country is a distinct territorial body or political entity A polity is an identifiable political entity—any group of people who have a collective identity, ...

Congress
are aimed at pollution prevention. However, they often need to be expanded and updated before their impact is fully realized. Pollution-control laws are generally too broad to be managed by existing legal bodies, so Congress must find or create an agency for each that will be able to implement the mandated mission effectively. During
World War I World War I, often abbreviated as WWI or WW1, also known as the First World War or the Great War, was a global war A world war is "a war engaged in by all or most of the principal nations of the world". The term is usually reserved for ...

World War I
, the United States government intervention mandated that the manufacturing of cars be replaced with machinery to successfully fight the war. Government intervention could be used to break the United States dependence on oil by mandating American automakers to produce electric cars such as the
Chevrolet Volt The Chevrolet Volt is a plug-in hybrid A plug-in hybrid electric vehicle (PHEV) is a hybrid electric vehicle whose battery can be recharged by plugging a charging cable into an external electric power Electric power is the rate, per ...
. Michigan Governor
Jennifer Granholm Jennifer Mulhern Granholm (born February 5, 1959) is a Canadian-American politician, lawyer, educator, author, and political commentator serving as the 16th United States secretary of energy The United States secretary of energy is the head of ...

Jennifer Granholm
said: "We need help from Congress", namely renewing the clean energy manufacturing
tax credit A tax credit is a tax incentive which allows certain taxpayers to subtract the amount of the credit they have accrued from the total they owe the state (polity), state. It may also be a credit granted in recognition of taxes already paid or a for ...
and the
tax incentives A tax incentive is an aspect of a country's tax code designed to incentive, incentivize or encourage a particular economic activity by reducing tax payments for a company in the said country. Tax incentives can have both positive and negative imp ...
that make plug-ins cheaper to buy for consumers."Electric Carmakers Focus on Incentives, Not Carbon Prices"
Carbon Offsets Daily. 3 August 2010. Retrieved July 8, 2012.
It is possible that government mandated
carbon tax A carbon tax is a tax levied on the carbon Carbon (from la, carbo "coal") is a with the C and 6. It is lic and —making four s available to form s. It belongs to group 14 of the periodic table. Carbon makes up only about 0.025 pe ...

carbon tax
es could be used to improve technology and make cars like the Volt more affordable to consumers. However, current bills suggest carbon prices would only add a few cents to the price of gasoline, which has negligible effects compared to what is needed to change fuel consumption. Washington is beginning to invest in car manufacturing industry by partially providing $6 billion in battery-related public and private investments since 2008 and the White House has taken credit for putting a down payment on the American battery industry that may reduce battery prices in the coming years. Currently, opponents believe that the carbon dioxide emissions tax the United States government introduced on new cars is unfair on consumers and looks like a revenue-raising fiscal intervention instead of limiting harm caused to the environment."State puts cart before horse on vehicle carbon tax"
Carbon Offsets Daily. 13 August 2010. Retrieved 8 July 2012.
A national fuel tax means everyone will pay the tax and the amount of tax each individual or company pays will be proportional to the emissions they generate. The more they drive, the more that they would need to pay. While this tax is supported by the motor manufacturers, stipulations confirmed by the National Treasury state that minibuses and midibuses will receive a special exclusion from the emissions tax on cars and light commercial vehicles which went into effect on 1 September 2010. This exclusion is because these taxi vehicles are used for public transport, which opponents of the tax disagree with. During
George W. Bush George Walker Bush (born July 6, 1946) is an American politician and businessman who served as the 43rd president of the United States The president of the United States (POTUS) is the head of state and head of government of the Un ...

George W. Bush
’s 2000 campaign, he promised to commit $2 billion over ten years to advance clean coal technology through research and development initiatives. According to Bush supporters, he fulfilled that promise in his fiscal year 2008 budget request, allocating $426 million for the Clean Coal Technology Program."U.S. Coal Facts"
''The Indypendent''. 7 June 2007. Retrieved July 8, 2012.
During his administration, Congress passed the
Energy Policy Act of 2005 The Energy Policy Act of 2005 () is a federal law signed by President George W. Bush on August 8, 2005, at Sandia National Laboratories in Albuquerque, New Mexico. The act, described by proponents as an attempt to combat growing energy problems, ...
, funding research into carbon-capture technology to remove and bury the carbon in coal after it is burned. The coal industry received $9 billion in subsidies under the act as part of an initiative supposedly to reduce American dependence on foreign oil and reduce carbon emissions. This included $6.2 billion for new power plants, $1.1 billion in tax breaks to install pollution-control technology and another $1.1 billion to make coal a cost efficient fuel. The act also allowed redefinitions of coal processing, such as spraying on diesel or starch, to qualify them as "non-traditional", allowing coal producers to avoid paying $1.3 billion in taxes per year. The Waxman-Markey bill, also called the
American Clean Energy and Security Act The American Clean Energy and Security Act of 2009 (ACES) was an energy In physics Physics (from grc, φυσική (ἐπιστήμη), physikḗ (epistḗmē), knowledge of nature, from ''phýsis'' 'nature'), , is the natural sc ...
, passed by the House Energy and Commerce Committee in 2010, targets dramatic reductions after 2020, when the price of the permits would rise to further limit consumers' demand for CO2-intensive goods and services. The legislation is targeting 83 percent reduction in emissions from 2005 levels in the year 2050. A study by the
Environmental Protection Agency A biophysical environment is a biotic Biotics describe living or once living components of a community; for example organisms, such as animals and plants. Biotic may refer to: *Life, the condition of living organisms *Biology, the study of life ...
estimates that the price of the permit would rise from about $20 a ton in 2020 to more than $75 a ton in 2050. The Office of Management and Budget (OMB) shows that federal subsidies for coal in the United States were planned to be reduced significantly between 2011 and 2020, provided the budget passed through Congress and reduces four coal tax preferences, namely Expensing of Exploration and Development Costs, Percent Depletion for Hard Mineral Fossil Fuels, Royalty Taxation and Domestic Manufacturing Deduction for Hard Mineral Fossil Fuels. The fiscal 2011 budget proposed by the
Obama administration Barack Obama's tenure as the List of presidents of the United States, 44th president of the United States began with First inauguration of Barack Obama, his first inauguration on January 20, 2009, and ended on January 20, 2017. Obama, a Democr ...
would cut approximately $2.3 billion in coal subsidies during the next decade.(February 2, 2010)
"Obama budget would cut coal subsidies"
McClatchy. 2 February 2010. Retrieved 8 July 2012.


See also

*
Regulatory economics Regulatory economics is the economics Economics () is a social science Social science is the Branches of science, branch of science devoted to the study of society, societies and the Social relation, relationships among individuals ...
*
American School (economics) The American School, also known as the National System, represents three different yet related constructs in politics, policy and philosophy. It was the American policy from the 1790s to the 1970s, waxing and waning in actual degrees and details ...
*
Austrian School The Austrian School is a heterodox In religion, heterodoxy (from Ancient Greek Ancient Greek includes the forms of the Greek language used in ancient Greece and the classical antiquity, ancient world from around 1500 BC to 300 BC. It ...
* Crowding out *
Deficit spending Deficit spending is the amount by which spending exceeds revenue In accounting, revenue is the income or increase in net assets that an entity has from its normal activities (in the case of a business, usually from the sale of product (business) , ...
*
Developmentalism Developmentalism is an economic theory Economics () is the social science that studies how people interact with value; in particular, the Production (economics), production, distribution (economics), distribution, and Consumption (economic ...
*
Dirigisme Dirigisme or dirigism () is an economic doctrine in which the state plays a strong directive role as opposed to a merely regulatory Regulation is the management of complex systems according to a set of rules and trends. In systems theory, these ...
*
Fiscal policy In economics Economics () is a social science Social science is the branch A branch ( or , ) or tree branch (sometimes referred to in botany Botany, also called , plant biology or phytology, is the science of plan ...

Fiscal policy
*
Indicative planning Indicative planning is a form of economic planning implemented by a state in an effort to solve the problem of imperfect information in market economies by coordination of private and public investment through forecasts and output targets. The ...
*
Keynesian economics Keynesian economics ( ; sometimes Keynesianism, named after British economist John Maynard Keynes John Maynard Keynes, 1st Baron Keynes, ( ; 5 June 1883 – 21 April 1946) was an English economist, whose ideas fundamentally changed the t ...
*
Mixed economy A mixed economy is variously defined as an economic system An economic system, or economic order, is a system of Production (economics), production, allocation of resources, resource allocation and Distribution (economics), distribution of go ...
*
Monetary policy Monetary policy is the policy adopted by the monetary authority In finance and economics, a monetary authority is the entity that manages a country’s currency and money supply, often with the objective of controlling inflation targeting, infla ...

Monetary policy
*
National debt of the United States The national debt of the United States is the total national debt owed by the federal government of the United States The federal government of the United States (U.S. federal government) is the Federation#Federal governments, national ...
*
Rent-seeking In public-choice theory, as well as in economics Economics () is the social science that studies how people interact with value; in particular, the Production (economics), production, distribution (economics), distribution, and Consumpt ...
*
Sales tax A sales tax is a tax A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or legal entity In law Law is a system A system is a group of Interaction, interacting or interrelate ...


References

{{reflist, 30em Ideologies of capitalism Libertarian theory Economic policy Market failure Economic nationalism