Long Term Decisions - Research Paper Example

This infrastructure is what fast tracts quick growth of business developments in the country and creates a workable business environment. This makes the country a good investment hub as it has the appropriate infrastructure for business development. The government’s involvement also leads to improvement in the infrastructure institutionally. This is where the government regulates performance of business to curb transaction vices such as corruption and fraud. Consumers would have to bear a heavy burden of high prices facilitated by calculated behind the scene moves by some unscrupulous traders who want fleece consumers of their hard-earned coin if price setting is left to the forces of demand and supply.

The government comes in to set price controls in order to make the goods affordable to low income earners enable the manufacturers get the right return on their investment. The government’s main role is to control and maintain this balance. Other cases of government’s involvement in the market system are the high investment projects. These are investment projects that need huge capital for them to pick up and that the country must have. The government has to take up the task since to private investors lack the financial muscle to undertake it.

Such projects include electricity generation and distribution for the entire country, harbors and airports of international stature e.t.c On the other hand, government’s involvement in business is discouraged considering its drawbacks such as the cumbersome procedures encountered due to the bureaucracy in formation of the business. This leads to market inefficiencies due to the time and money wasted in boardroom meetings to come up with the right policies and structures to legitimize every business transaction such as licensing, leasing, taxation, e.t.c leading to delay in decision making thus the industry is unable to take advantage of emerging opportunities due to its rigidity.

The civil servants who lack incentives from the government such as good salaries and allowances also lead to inefficiency in the market system. This is because they are not well motivated. Due to their low salaries, they, together with board members who are regulators of the system, engage in corruption and fraud to make an extra coin. This is common in tax officials who will opt to take huge tax bribes to wipe off a tax offender’s record instead of enforcing the set laws. Too much involvement of the government in the market system may lead to miscommunication in the industry.

These is because the participants feel the government is too strict or firm thus fear to pass across information that may be vital for the smooth running and operations of businesses in the market process. This eventually leads to turbulent effects in the market such as deflation, inflation, and economic depressions. Such tides are usually very unconducive for business performance as it wrecks its environment. The USA is the leading world economy. As such, the government intervenes in the market process to ensure that this remains so and that the USA citizens enjoy the best there is to offer.

The government intervenes to regulate FDI investments. This is because it wants to ensure that the country owns a major stake or controllable share in the establishment. The USA has the largest market in the world and many businesses seek to share part of it. The country has a mixed economy.