Government Aid vs. Development

In response to Simone’s post titled “Austerity = Free Market Economy?” I would agree that free market economies are indeed indicative of global financial growth, thus they allow for financing and investment in the private sector.

However, even if investors do not care what the government supports, they are constricted (to varying degrees) of the government’s stance and involvement in the economy. We discussed this issue primarily with the contrasting views of Stiglitz and Wolf, concluding that investors and other private actors cannot function as they please without some influence of the government’s stance.

I do not believe that increasing governmental aid necessarily helps the economy, and it can create dependence and decrease output. If we do not rely primarily on aid but on sustainable economic development, I don’t think government intervention is automatically harmful. Aid within a country can create dependence just as it can when given to foreign states; the analogy that giving a man a fish is not nearly as productive as teaching him to fish holds in the international and state-based economy. We must not consider government aid as “handouts” to companies only although it could potentially take this form. Greece is undoubtedly suffering and there is dependence on the government, as many capitalists and entrepreneurs emigrated out of the country when or before the financial crisis hit. Continuing to give its citizens government aid will only exacerbate the problem, but that does not mean we should cut off all funds and let citizens fend for themselves. If we do not raise their capability and give high-quality government intervention, we cannot expect capitalist competition to emerge from nothing. Having the government run the economy is not at all what I am suggesting, but by completely isolating citizens and corporations from guidance and capability raising endeavors, we will see the same if not worse effects from giving them continued aid.