Role of government – Part 3
HELLO AGAIN. This is our third and final lesson on the role of government. At the end of the lesson you will find two essay-type questions. Use the information in this lesson as well as in previous lessons to answer the questions. These questions should prove to be very useful to you as you prepare for the external external examination.
FORMS OF GOVERNMENT ASSISTANCE TO BUSINESSES
One of the roles of government is to assist businesses. In doing so, these businesses will be able to expand and produce more. As they produce more and accumulate a surplus, this excess or surplus can be exported and earn foreign exchange which will, in turn, benefit the country, as they will be able to pay for their imports and perhaps have a surplus to go towards economic growth and development of the country. Governments assist in a number of ways.
They lend some businesses money/capital. This is especially true if the business is a small one. Government institutions for lending include the Small Businesses Association of Jamaica, (Micro Investment Development Agency) and JAMPRO. These loans are usually at low rates of interest and, therefore, are cheaper than elsewhere.
They are involved in training and technical assistance. For example, they have HEART and NYS.
Governments set up research and information centres to assist businesses in getting accurate and timely information that may benefit them. For example, the Statistical Institute of Jamaica and Jamaica Information Service.
Governments also give subsidies and grants to businesses, both of which help them to cut costs of production and, ultimately, to produce more. Subsidies can be in the form of money or materials, while a grant is a money gift that does not have to be repaid. For businesses that have just been set up, governments may grant tax concessions for a while until they can ‘stand firmly on their own two feet’.
THE IMPACT OF SOCIAL SERVICES PROVIDED BY GOVERNMENT
A large proportion of government revenue is used to provide social services for the country. These social services have a positive impact on the country in that the welfare or well-being of individuals, families and businesses is improved. Social services are usually granted according to the need, i.e., low-income families and families with persistent difficulties. These services are often regarded as merit goods and result in lessening the inequalities between the rich and the poor. In welfare states such as Sweden, there is no extreme poverty. Let us consider some specific social services and the positive impact that they may have.
GOVERNMENT HEALTHCARE
This results in a larger portion of the population being healthy as a result of general health, dental, optical and medical care. These are provided through government clinics and hospitals. A healthy population means a healthy future labour supply and, ultimately, increased efficiency and greater production.
NATIONAL INSURANCE SCHEME
One positive effect is the provision of pensions and security for the elderly. There are also widow’s benefits, funeral grants and assistance given in cases of loss of earnings through illness. All of these benefits help to maintain the standard of living of people and prevent them from falling into a state of poverty.
EDUCATION
Government provides public schools and assists them through ministry grants. The result is that a greater portion of the population becomes informed and literate than if education was entirely through private means. More persons will be able to get jobs through being educated and this will reduce the unemployment rate.
ROADS AND TRANSPORTATION
Improved roads and transportation by government will mean increased access to goods and services. Greater access means improved standard of living for persons on a whole.
Now for your homework.
QUESTIONS
1. (a) Define the term ‘government’. (2 marks)
(b) Outline THREE responsibilities of governments in your economy. (6 marks)
(c) Discuss the functions of THREE government agencies involved in the protection of the environment. (6 marks)
(d) Explain THREE ways in which the government may regulate business activity in your country. (6 marks)
Total marks: 20
(a) Distinguish between the terms, ‘tax’ and ‘taxation’.
(4 marks)
(b) Discuss THREE purposes of taxation. (6 marks)
(c) Distinguish between a ‘proportional tax’ and a ‘regressive tax’. (4 marks)
(d) Define ‘Direct taxes’ and ‘indirect taxes’. (4 marks)
(e) Give ONE example of EACH type of tax named in (d) above. (2 marks)
Total marks: 20