Political Economy of Development

Running head: ECONOMICS 1
10Political Economy of Development
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1ECONOMICS
10Political Economy of Development
Question two
The market forces of demand and supply sometimes fail to bring about efficient allocation
of resources which bring about market failure. Government intervention in solving the
challenges of market failures is very beneficial both in the short and long run period.
Government intervention is beneficial in saving the environment. Sometimes pollution
cannot be effectively addressed by the market mechanism meaning that Government has to
intervene and set pollution limits and taxes on the pollutants to save the population and the
environment at large. Government’s intervention is beneficial in availing the population
with public goods like the erecting of light houses which may not be provided by the private
sector. Lastly, Government intervention is beneficial in limiting monopoly powers
(Alperovitz, 2011).
The capitalist system is based on expropriation and exploitation. Therefore, Government’s
intervention is essential in enhancing the welfare of the population like the workforce,
eliminating corruption and at the same ensures that there is sustained economic growth
and development. It is important to note that by its very nature, capitalism is centered on
profit maximization at all costs but not service provision (Kotler, 2015). Government has to
intervene and ensure that the rights of the workforce are protected through better working
conditions and salaries; there is effective environmental protection and inclusive growth.
Government’s intervention in capitalistic states can be in form of regulations aimed at
enhancing social and economic welfare of the population (235 words).

2ECONOMICS
References
Alperovitz, G. (2011). America Beyond Capitalism: Reclaiming Our Wealth, Our Liberty, and
Our Democracy, 2nd Edition. Democracy Collaborative Press. ISBN 0-9847857-0-1.
Kotler, P. (2015). Confronting Capitalism: Real Solutions for a Troubled Economic
System. AMACOM. ISBN 978-0814436455.
Question three
William easterly argues that foreign aid is not a solution to development problems in less
developed countries (Easterly, 2014). He argues that the only way poverty can be eliminated
in poor economies is through economic and home grown political reforms (Foreman, 2013).
In other words Bono is not the biggest hope for the less developed countries but rather the
citizens of the third or less developed economies .On other hand, Jeff sach believes that
there is need to amplify the successes other than pointing to failures of aid. In other words
foreign aid from developed economies has a strong impact in addressing some of the
challenges in developing economies like disease.
Basing on William easterly argument it is clear that foreign aid is not a solution to Africa’s
problem. Recent studies carried out how that there is no single economy that has ever
emerged out of poverty due to foreign aid (Foreman, 2013). In fact foreign aid in less
developed countries has killed the spirit of creativity and innovativeness, discouraged hard
work and also impacted on the overall independence and sovereignty of developing
economies. Therefore for developing countries to grow there is need for proper institutional
frame work aimed at encouraging home production and other forms of macroeconomic
stability (Moyo, 2010).