Continuing with our special series on GD topics we present to you the hot topic for today: Greater role of Government in monitoring the economy with respect to the global economic recession 2008-09. This article has been written by Sidharth Balakrishna, MBA expert, Author and IIM Calcutta alumnus exclusively for MBAUniverse.com.

Let’s have a look at Mr. Balakrishna’s take on the topic:
 
The main focus for a topic such as this is on analysis: the pros and cons of Governments stepping in and playing a greater role in terms of monitoring etc to prevent the kind of crisis that we saw in 2008-09.
 
Before commencing the discussion, you should look to provide the context and introduce the topic. This could mean a few lines on the economic crisis: how it began, how it spread, how big it was etc. One could speak about the failure of several financial institutions in the US-such as Lehman Brothers, AIG, Fannie Mae, Freddie Mac etc.
 
You could also mention the reasons why this occurred. This would be important, given the topic on hand: in order to decide whether Governments should play a greater role, one has to look at the causes and see whether the Government could have prevented these.

Also, you could talk about events in the past when Governments have intervened. For example, the US Government intervened during the ‘Great Depression’ to help the economy: the US President at that time, Franklin Roosevelt, is credited with having come up with what was called the ‘New Deal’.
 
The focus of the discussion is of course, on the pros and cons of the Government playing a greater role. Some of the points that could be mentioned are outlined below:
 
Pros
-- Government intervention at the right time and to the required extent may help in checking the panic that often sets in at such times. It could help to restore confidence among consumers and investors. If this is not done, the crisis may spread rapidly.
-- The livelihood of people is at stake. People’s jobs need to be protected. If the Government does not help during a crisis, then what do we have a Government for?
--  Governments can also help bring long-term stability to the system. Many corporations may have a short-term outlook, based on maximizing profits. The Government may bring in different perspectives, keeping in mind social objectives.
 
Cons
-- The Government playing a greater role can mean increased bureaucratic procedures, hassles and interference. This could decrease the speed of decision making.
-- Government assistance can be highly controversial and there could be accusations of selective assistance provided. For example, the US Government lent billions of dollars to Citibank and AIG, but not to Lehman Brothers.
-- Governments could end up having to spend huge amounts of public funds-taxpayers’ money. Couldn’t this money be better utilized elsewhere? For example, on social sector spending, better health and education facilities etc.
-- Pumping in large amounts of public funds normally raises the fiscal deficit and this could cause inflation.
-- Inflation is the last thing that people need at a time when their jobs are at risk, for items of daily use/ necessities may become more expensive.
-- There are issues of accountability. There have been widespread complaints that the Government has ended up protecting those that were responsible for the crisis in the first place. Some of the firms that were helped have paid huge bonuses to their staff.

For Further Reading
http://www.pwc.com/ca/en/public-sector-government/economic-crisis.jhtml
http://www.pimco.com/LeftNav/Viewpoints/2009/governments+role+in+the+financial+crisis+spence+April+2009.htm

To read the previous articles click the following links:

http://www.mbauniverse.com/mbaexam/mbaexamfullstory.php?id=2831

http://www.mbauniverse.com/mbaexam/mbaexamfullstory.php?id=2844

For any more queries you can email Mr. Balakrishna at: bsiddharth_2001@yahoo.co.in