In recent years, governments throughout the world have tended to put more reliance on markets as the means of allocating resources. Policies of privatisation, deregulation, cutting government expenditure and taxes, and generally ‘leaving things to the market’ have been widely adopted, not only by conservative governments, but also by those of the centre and centre left.
But despite this increased reliance on markets, markets often fail. Despite our growing wealth and prosperity, our rivers are polluted, our streets are congested and often strewn with litter, our lives are dominated by the interests of big business and the quality of many of the goods we buy is very poor.
Governments are thus still expected to play a major role in the economy: from the construction and maintenance of roads, to the provision of key services such as education, health care and law and order, to social protection in the form of pensions and social security, to the regulation of businesses, to the passing of laws to protect the individual.
In this chapter we identify the various ways in which the market fails to look after society’s interests (Sections 6.1–6.3). Then we look at how the government can set about putting right these failings (Sections 6.4–6.6). Finally, we look at some of the shortcomings of governments, and ask: should we have more or less intervention?
