Gillespie: Business Economics 2eChapter 03 Oxford University Press, 2013.

Additional case study: Government intervention

In Germany in 2009 there was considerable debate about the extent to which the

government should be intervening in the economy. For example, its citizens were worried

about the future of Opel, a German car brand that was part of the ailing General Motors.

Some wanted the government to make sure jobs were saved no matter what. Others,

however, were more hesitant and worried about becoming the government becoming too

interventionist. Traditionally since the Second World War the German government has

seen itself as a referee in market issues and has avoided trying to control parts of the

economy. It would regulate anti-competitive behaviour, for example, but not try to run

many industries. However in the recession of 2009 when the economy was shrinking the

government was forced to spend more to stimulate demand and had to intervene heavily

to save the banking sector from collapse. The government also had to offer aid to

businesses to keep them alive.

Questions

1. What are the possible benefits of a government intervening in an economy?

2. What are the arguments against government intervention in an economy?