Understanding the Need for State Intervention in the Free Market Economy

Level: Undergraduate | Grade: 2:1 | Approx. Word Count: 1,500

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Overview

Historically, it has generally been considered by many economic and political observers that the concept of a ‘free market economy’ is the most efficient in terms of encouraging unfettered growth and competition in the national trade environment (Martinez 2009; Marquand 2013). However in reality, trading in economies are rarely permitted to operate without a degree of government interventionism, the objective of which is to deter abuse and anti-competitive practices by commercial organisations operating in the marketplace (Wallerstein and Collins 2013). Relying on the UK supermarket Tesco, this study examines the rationale behind this interventionist approach as it relates to the UK government.

The assumption that underpins the principle of the free market is that the processes involved in the development, usage, distribution and sale of resources and products/services should be driven solely by market forces, without external government intervention (Wallerstein and Collins 2013). More importantly, as indicated by Adams (1998), those who support the free market concept consider that these same forces are sufficiently efficient to be able to resolve any anomalies that occur without government intervention.