Is it Politically Misleading to Say that Governments Do Not Play a Role in Capitalism?

One of the greatest fallacies of our time is the relationship between capitalism and the government. Politically, it is assumed that governments do not have any role or hand in capitalism, as governments are entirely meant to adopt socialism.

One of the core reasons why the statement is a fallacy is that the government is the core of capitalism as it sets and implements policies that create an environment that supports capitalism. Schumpeter (2013) explains that logically, by supporting the environment that encourages capitalism, the government is, by definition, a champion for the same.

Secondly, there has not been any capitalistic economy that has no government involvement. Barrington (2012) explains that all countries that practice capitalism have included the government in their economic strategies.

Take, for example, the US, France, and South Africa, all on different continents. The three countries all practice capitalism, and the governments are all involved. The US federal government supports the state governments with both financial policies and guidelines, and these policies and procedures make the country capitalist.

Indeed, some argue that the government has too much stake in a capitalistic economy than in a socialist economy, a theory that is also wrong. Even in socialism, the government still has some stake in the production process. The question remains, therefore, is how exactly the government is involved in a country’s economic strategies and approaches. The answer to the said question is simple.

The government has a mixed relationship with both socialism and capitalism. Without considering which of the two approaches a particular government entertains, one can argue that the government has a stake in the production processes of both a socialist and a capitalist economy as it sets the rules and regulations that create the perfect environment for either a socialist or capitalist country.

References

Barrington, L. (2012). Comparative Politics: Structures and Choices. Cengage

Schumpeter, A J. (2013). Capitalism, Socialism, and Democracy. Routledge