If a government chooses to intervene less in the market, what are possible short-term and long-term results?
Economic interventionism is an economic policy view that favors government intervention in the market. Interventions often take the form of regulations, policies, or subsidies. These may be administered in order to promote economic growth, increase employment, raise wages, raise or reduce prices, promote income equality, manage currency and interest rates, increase profits, or address market failures.
Several factors may influence a government deciding to reduce its intervention measures. Through interventions, a government may make the wrong decisions, leading to inefficient outcomes. They may intervene under political pressure. All interventions restrict personal freedom to an extent. A government may view the free market as the best means for economic growth. Economies can also see positive effects of limited government intervention through increased efficiency.
However, limited government intervention can also cause problems. In the short-term, large industries going out of business without government support can bring high regional unemployment and market failure. Market failure without government intervention can lead to underproduction of public or merit goods. In prolonged recessions, unemployment may not recover without government intervention. Another effect is greater likelihood of unregulated monopolies. Long-term effects can include greater inequality in income, wealth, and opportunity.