MECHANISVILLE, Va. (Originally written: June 21, 2020; Revised: May 7, 2025) — Should the government be involved in the economy? In a word, yes. Any responsible government must be involved in regulating economic affairs. In an ideal world, labor and capital would negotiate as equals to set a fair price for work done. Producers and consumers would likewise negotiate as equals to set fair prices for products, etc.
But this is not an ideal world.
Throughout most of history, capital—whether in the form of a lord of a manor or a wealthy industrialist—has had unfair advantage in negotiations over wages, assuming such negotiations were even permitted, which, as in the case of American slavery, was most decidedly not.
Sid Hatfield
In the early days of the labor movement in the United States, for example, industrialists employed private armies to threaten, main, or even murder union activists or their supporters, such as in the murder of Sid Hatfield, sheriff or Matewan, West Virginia. Hatfield was murdered on the steps of the McDowell County Courthouse by agents of the Baldwin-Felts Detective Agency at the behest of mine owners eager to break up unionization efforts by the United Mine Workers (Savage 2020).
Without the power to organize and negotiate with capital on a more equitable footing, workers were often treated as little better than serfs, with six- if not seven-day work weeks, long hours each day, low pay, and no benefits. In mining and logging towns across the U.S., workers were forced to live on company-owned housing, shop at company-owned stores, and obtain credit at company-determined (and usually exorbitant) rates. Such conditions were not conducive to the American fantasy of upward mobility.
Government intervention in the form of laws guaranteeing the right to organize and strike made it possible for workers to negotiate better wages and working conditions—a benefit to the average citizen (see, for example Weil 1990, Dornado and Wälde 2012).
Another area where the government should get involved in the economy is in the area of environmental protection (Dunlap and Scarce 1991). Traditionally, the federal government took a hands-off approach to environmental protection. That led to conditions where, as the 1970s began, big bodies of water such as Lake Erie were largely dead biologically; rivers, such as the Cuyahoga, caught fire; killer smogs stalked cities such as Pittsburgh, Pennsylvania; poorly regulated transport of hazardous materials led to disasters such as that which struck Texas City when a freighter carrying fertilizer caught fire and exploded in Galveston Bay, destroying much of the city as well as killing dozens of first responders. More recently, the Deepwater Horizon disaster devastated the environment and economies of the Gulf Coast—regulations put in place to prevent that have been dismantled by the current presidential administration.
Markets are not necessarily rational. Environmental disasters such as the ones above were allowed to take place because the markets ignored possible environmental effects. Profits were privatized, while costs, when they came due, were passed on to the public in terms of dreadful living conditions, lost economic opportunities, loss of valuable environmental resources and services, and short- and long-term health consequences.
It takes government intervention to restore some sort of balance to the system.
Certainly, some types of government interventions can cause deficits. One of the most recent ones involves the Trump administration’s series of tax cuts, which overwhelmingly benefitted the wealthy and corporations. The tax cuts early in his administration came at a time when the economy was booming, thus made little economic sense, and ended up driving up the deficit considerably without producing a compensating amount of economic growth (Weller 2020). The most recent rounds of tax cuts, during the COVID-19 pandemic, came during a period of intense distress and arguably had some economic justification, but again the benefits overwhelmingly went to those who needed help the least. The deficits have increased mightily as a result. The economic benefits are yet to be realized.
[Now we have Trump Mk. II. This new administration will not be remembered as fondly as a Deep Purple Mk. II or Black Sabbath Mk. II. Instead of reaching new heights, Trump, with his Elon Musk-driven disaster of a Department of Government Efficiency (remember, the Doge of Venice led the attack that ultimately led to the weakening and destruction of the Byzantine Empire), is seeking new lows in the name of getting the government out of the economy. Nevertheless, the government’s thumb is on the economic scales, tilting them—as in his previous administration—in favor of the billionaire class, not in favor of those who do the work that keeps the economy running.]
An activist government has its benefits. Franklin Roosevelt’s New Deal programs during the Great Depression drove up deficits in the short run, but the efforts helped millions find employment, boosted the nation’s psychological outlook, and some of the programs—such as the Civilian Conservation Corps—produced lasting benefits for the nation. On balance, his administration’s efforts may have yielded a long-term surplus.
As for me, I don’t care for willy-nilly government interference, but I am old enough to remember what many aspects of life, such as the environment and economic opportunities for minorities, were like before federal and state governments took a more active role in establishing protections against abuses. Sure, I love it when Wall Street does well—I am old enough to have and to need a 401(k)—but life is not so great when only Wall Street is doing well.
Editors Note: This piece was originally written for a macroeconomics class at J. Sargeant Reynolds Community College and submitted on June 21, 2020.
Literature cited
Dornado, A., and Wälde, K. (2012). How Trade Unions Increase Welfare. The Economic Journal 122(563): 990-1009.
Dunlap, R.E., and Scarce, R. (1991). Environmental Problems and Protection. The Public Opinion Quarterly 55(4): 651-672.
Weil, D. (1990). Enforcing OHSA: The Role of Labor Unions. Industrial Relations 30(1): 20-36.
Weller, C. (2020, Jan. 29). Trump’s Wasteful Tax Cuts Lead To Continued Trillion Dollar Deficits In Expanding Economy. Forbes. https://www.forbes.com/sites/christianweller/2020/01/29/trumps-wasteful-tax-cuts-lead-to-continued-trillion-dollar-deficits-in-expanding-economy/#624e714e66c4
When suitably inspired I will write something, maybe about a breaking story in science, maybe about my career as a scientist (specifically, a biogeographer). I may wage war against the forces of ignorance from the dubious bully pulpit of this blog. Or I may just tell some war story from my past in which I should have ended up dead as a result of my own stupidity.
Should the Government Be Involved in the Economy?
Posted by AbyssWriter on 6/21/20 • Categorized as Commentary,Politics
MECHANISVILLE, Va. (Originally written: June 21, 2020; Revised: May 7, 2025) — Should the government be involved in the economy? In a word, yes. Any responsible government must be involved in regulating economic affairs. In an ideal world, labor and capital would negotiate as equals to set a fair price for work done. Producers and consumers would likewise negotiate as equals to set fair prices for products, etc.
But this is not an ideal world.
Throughout most of history, capital—whether in the form of a lord of a manor or a wealthy industrialist—has had unfair advantage in negotiations over wages, assuming such negotiations were even permitted, which, as in the case of American slavery, was most decidedly not.
In the early days of the labor movement in the United States, for example, industrialists employed private armies to threaten, main, or even murder union activists or their supporters, such as in the murder of Sid Hatfield, sheriff or Matewan, West Virginia. Hatfield was murdered on the steps of the McDowell County Courthouse by agents of the Baldwin-Felts Detective Agency at the behest of mine owners eager to break up unionization efforts by the United Mine Workers (Savage 2020).
Without the power to organize and negotiate with capital on a more equitable footing, workers were often treated as little better than serfs, with six- if not seven-day work weeks, long hours each day, low pay, and no benefits. In mining and logging towns across the U.S., workers were forced to live on company-owned housing, shop at company-owned stores, and obtain credit at company-determined (and usually exorbitant) rates. Such conditions were not conducive to the American fantasy of upward mobility.
Government intervention in the form of laws guaranteeing the right to organize and strike made it possible for workers to negotiate better wages and working conditions—a benefit to the average citizen (see, for example Weil 1990, Dornado and Wälde 2012).
Another area where the government should get involved in the economy is in the area of environmental protection (Dunlap and Scarce 1991). Traditionally, the federal government took a hands-off approach to environmental protection. That led to conditions where, as the 1970s began, big bodies of water such as Lake Erie were largely dead biologically; rivers, such as the Cuyahoga, caught fire; killer smogs stalked cities such as Pittsburgh, Pennsylvania; poorly regulated transport of hazardous materials led to disasters such as that which struck Texas City when a freighter carrying fertilizer caught fire and exploded in Galveston Bay, destroying much of the city as well as killing dozens of first responders. More recently, the Deepwater Horizon disaster devastated the environment and economies of the Gulf Coast—regulations put in place to prevent that have been dismantled by the current presidential administration.
Markets are not necessarily rational. Environmental disasters such as the ones above were allowed to take place because the markets ignored possible environmental effects. Profits were privatized, while costs, when they came due, were passed on to the public in terms of dreadful living conditions, lost economic opportunities, loss of valuable environmental resources and services, and short- and long-term health consequences.
It takes government intervention to restore some sort of balance to the system.
Certainly, some types of government interventions can cause deficits. One of the most recent ones involves the Trump administration’s series of tax cuts, which overwhelmingly benefitted the wealthy and corporations. The tax cuts early in his administration came at a time when the economy was booming, thus made little economic sense, and ended up driving up the deficit considerably without producing a compensating amount of economic growth (Weller 2020). The most recent rounds of tax cuts, during the COVID-19 pandemic, came during a period of intense distress and arguably had some economic justification, but again the benefits overwhelmingly went to those who needed help the least. The deficits have increased mightily as a result. The economic benefits are yet to be realized.
[Now we have Trump Mk. II. This new administration will not be remembered as fondly as a Deep Purple Mk. II or Black Sabbath Mk. II. Instead of reaching new heights, Trump, with his Elon Musk-driven disaster of a Department of Government Efficiency (remember, the Doge of Venice led the attack that ultimately led to the weakening and destruction of the Byzantine Empire), is seeking new lows in the name of getting the government out of the economy. Nevertheless, the government’s thumb is on the economic scales, tilting them—as in his previous administration—in favor of the billionaire class, not in favor of those who do the work that keeps the economy running.]
An activist government has its benefits. Franklin Roosevelt’s New Deal programs during the Great Depression drove up deficits in the short run, but the efforts helped millions find employment, boosted the nation’s psychological outlook, and some of the programs—such as the Civilian Conservation Corps—produced lasting benefits for the nation. On balance, his administration’s efforts may have yielded a long-term surplus.
As for me, I don’t care for willy-nilly government interference, but I am old enough to remember what many aspects of life, such as the environment and economic opportunities for minorities, were like before federal and state governments took a more active role in establishing protections against abuses. Sure, I love it when Wall Street does well—I am old enough to have and to need a 401(k)—but life is not so great when only Wall Street is doing well.
Editors Note: This piece was originally written for a macroeconomics class at J. Sargeant Reynolds Community College and submitted on June 21, 2020.
Literature cited
Dornado, A., and Wälde, K. (2012). How Trade Unions Increase Welfare. The Economic Journal 122(563): 990-1009.
Dunlap, R.E., and Scarce, R. (1991). Environmental Problems and Protection. The Public Opinion Quarterly 55(4): 651-672.
Savage, L. (2020, May 19). Sid Hatfield. e-WV: The West Virginia Encyclopedia. https://www.wvencyclopedia.org/articles/282
Weil, D. (1990). Enforcing OHSA: The Role of Labor Unions. Industrial Relations 30(1): 20-36.
Weller, C. (2020, Jan. 29). Trump’s Wasteful Tax Cuts Lead To Continued Trillion Dollar Deficits In Expanding Economy. Forbes. https://www.forbes.com/sites/christianweller/2020/01/29/trumps-wasteful-tax-cuts-lead-to-continued-trillion-dollar-deficits-in-expanding-economy/#624e714e66c4
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