Government Intervention : Political And Economic

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Government intervention takes two paths: Political and Economic. Political arguments for intervention are stressed with protecting the interest of groups such as producers, within a nation. This is the opposite of a free market, where government does not apply protectionism which can be defined as “Government actions and policies that restrict or restrain international trade, often done with the intent of protecting local business and jobs from foreign competition with the use of influence quota, duties, subsidies, what its citizens can buy, produce and sell from another country“ (Investopedia, n.d). Free trade is not always good, increasing trade means higher transport usage, which leads to higher cost and also greater environment…show more content…
The increase in net exports lead to the increase of GDP of a country, which in time causes a rise of employment to keep up with the increasing amount of demands Subsidies also benefit both producers and consumers. It is the payment to domestic producer in order to help them compete against foreign imports and gaining export markets through the medium of cash grants, low-interest loans, tax breaks and government equity participation (Hill, 2013). Watkins (n.d), mentioned that subsidy cover or offset losses from the producer, hence expanding production does not mean an increase in the final price to consumers. Holden received $2.17 billion in the past 12 years due to the jobs, technologies, investment and other economic benefits it provides to the country (ABC, 2013). Therefore, subsidy results in protecting consumer interests by keeping the price low and also the producers by covering the loss they incurred, and again it also increases domestic employment. The next instrument is Import Quota, which means a direct restriction of the number of goods that can be imported into a country. Indonesia has just recently decreased its import quota of beef from 250,000 heads to just 50,000. This decision is to help protect domestic production in Indonesia by
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