Reference no: EM133734392

Question: Can government intervention in markets sometimes make the situation worse? Provide examples in your response. For example, consider the progress of the economy of Venezuela since 2000.

Reply to these two classmate's statements below whether you agree or disagree. State why and explain. or your faculty member. Be constructive and professional. You will respond in 100 words each statement

1)Good afternoon class,

Occasionally, government intervention in the market can make economic issues worse rather than better. One glaring example is Venezuela, where a severe financial collapse has resulted from solid government control over the economy since the early 2000s.

Hugo Chávez and Nicolás Maduro, his successors, nationalized companies, imposed price controls, and provided substantial subsidies, among other policies. The original goals of these policies were to guarantee social equality and redistribute wealth. However, in the end, they upset the workings of the market, resulting in shortages, inefficiencies, and a fall in production capacity.

For instance, imposing price limits on essential items like food and medication led to shortages. This was due to manufacturers' inability to keep up with demand and the breakdown of distribution networks. Despite the country's oil wealth, the nationalization of key industries, particularly the oil sector, significantly hampered the efficiency and investment of the private sector.

Moreover, hyperinflation was further fueled by the government's excessive spending, which was financed through borrowing and printing money. This led to a reduction in citizens' purchasing power and a general increase in hardship.

In conclusion, while government intervention can occasionally help to balance markets and address inequality, excessively invasive and poorly handled initiatives, like those in Venezuela, have demonstrated how disastrously they can backfire, aggravating social unrest and economic situations.

2)Government intervention in markets can make the situation worse. The initial goals of intervention are price stability, avoidance of excessive prices, and providing income for producers or farmers. The government intervenes by setting maximum and minimum prices, minimum wages, and methods used to nudge markets.

In some cases, the government has to intervene because it is the only entity that has the size and resources to fix the issue. This is typically the case in instances of natural disaster. An example of government intervention can be seen in Railroad Dilemma that took place in Chicago, Pullman workers in Chicago vacated their positions in 1894 due to low wage disputes. The government became involved because rail routes were halted and disrupted going farther West. The government intervened by sending military soldiers to force the Pullman workers to return to work and they were not having any of that. The workers revolted and the military used force. In the end, more than 30 individuals died related to the incident. The event drew ire from labor supporters and other groups.