Does Government Have A Role In The Economy?

At last week’s Northern Ireland Chamber of Commerce President’s Banquet the Finance Minister, Simon Hamilton MLA, suggested that government has a key role to play in the development of the economy. Given the need to reduce the dominance of the public sector and grow the private sector, it is worth asking a question. Is he right?

Traditional arguments range from the belief that government should not have any role in the economy, as it is suggested the most useful thing it can do is to get out of the way; to the belief that government involvement is essential, as market forces alone will not ensure a vibrant economy or an inclusive society.

Some commentators argue that government have a central role to play, however, it is acknowledged that too big a public sector acts as a barrier to business and restricts the private sector.

Other commentators argue that government should not interfere in the market and should simply focus on reducing barriers to trade as a way to encourage growth.

In reality, government has always played a role in the economy and the issue, as suggested by the Minister, is not whether or not government should play a role but what role it should play and how it should play it.

Government, for instance, has a key role when spending taxpayers’ money to ensure the right enabling infrastructure such as roads, water, electricity, hospitals, schools and telecommunications is in place.

Whether or not it should go beyond such infrastructure development is the question and the answer lies not in what it does but how it does it.

If government is entrepreneurial and innovative in its actions, it should do more; if it is bureaucratic and stifling, it should do less.

The difficulty for government is to move from bureaucrat to entrepreneur as it must, as suggested by the Minister, reform, reinvent and take some risks in order to make the transition.

This, of course, is not easy and represents the biggest challenge for the Minister in his quest to create the right conditions for business and drive the economy.

SO, government has a role to play but it must become more enterprising and innovative just like the rest of the economy.