1.10 ndian onom
role of the state in an economy.6 If we look back establishment of different economic systems in the
into the economic history of the world, we see past.
three possible roles for the state/government in an On the issue of regulating the economy
economy: there has been no debate, as we see all economic
(i) As a regulator of the economic system systems being regulated by the state only. But the
(where the state takes important economic selection of other two functions of the state in an
decisions, announces the required kind economy made the real difference. The economy
of economic policies, takes the sole which selected both the roles (ii and iii) for the
responsibility to get them implemented, state under monopoly we called them the state
and controlling and punishing those who economies. This category of economy had two
don’t oblige to those economic decisions). variants in the socialist economy at least the
(ii) As a producer and/or supplier of ‘private labour was not owned and exploited by the state
goods and services’ (these include all unlike the other—the communist economy where
those goods and services which constitute labour used to be under complete state control.
the part of market and which will be These economies had almost no market.
distributed among the needy according The economic system which left both the roles
to the principles of market mechanism. (ii and iii) as the sole responsibilities of the private
Here the state earns profit as a private sector was called the capitalistic economic system.
enterprise). Here the state had almost no economic role but
(iii) As a producer and/or supplier of ‘public played a passive role as the regulator.
goods’ or ‘social goods’ (these include Mixed economies had at least kept one
goods and services which look essential economic role fixed for the state (i.e., iii), of
from the perspective of social justice and supplying public goods to the needy people. In
well-being for the people. Education, some of the mixed economies the state went on
healthcare, sanitation, drinking water, to take some of the roles of supplying the private
nutrition, caring for the differently goods (i.e., ii) even by carrying a heavy burden of
abled and old, etc., come under this subsidies.
category. These goods which are generally The WB document—the World Development
distributed free of cost at times, might Report, 1999—was a judgement on the possible
reach the beneficiaries at subsidised prices. and suitable role of the state in the economy, which
The loss incurred by the state in this way suggested a timely shuffling of state’s role in the
is paid out of the public exchequer which economy as per the socio-economic and political
means that the whole economy pays for needs of the economy. We may understand the
the cause of a few people). moot question via Keynes for whom the political
As different economies select different roles problem of mankind is to combine three things:
for the state according to their socio-political (i) economic efficiency,
ideologies, the world had differing ways of (ii) social justice, and
organising the economy and had resulted in the
(iii) individual liberty
6. A highly concise and to-the-point idea on the issue comes In the process of realising the above-
from Joseph. E. Stiglits, ‘The Role of Government in mentioned objectives, an economy cannot go for
Economic Development’, the keynote address at the
Annual World Bank Conference on Development either allowing only state’s role in the economy
Economics, 1996. or only the market’s role in the economy. These