The 2008 economic recession

The Recession of 2008

The recession of 2008 is one of the undesirable experiences of the US Government. A close examination shows, however, that the government has failed to take action which would have avoided the situation. Haufler (2013) suggests that the government is designing legislation to direct different sensitive economic sectors. A big stakeholder in controlling public debt in the American economy is the Federal Reserve System. Firstly, unscrupulous homeowners and mortgage companies have been permitted to overprice the immovable market. As a government, it has the power to control the data that concerns some of its vital sectors of the economy. The Bureau of Statistics should have ensured that the information revealed to the public is not misleading. Due to this, investors would have known the actual status of the real estate industry, and therefore there would have been controlled investing and lending for the housing sector. Evidently, the government did not create mechanisms that would resolve financial irregularities such as those that were perpetrated by JP Morgan, Mayer, Cava, and Baird (2014). JP Morgan was part of a conspiracy, participating in the selling of mortgages that were fraudulent.

The Role of Government in Running a Business

As a result of liberalization, the role of the government in running a business is minimal. This aspect could be the reason for the situations that arose in 2008. On the one hand, the government needs to place measures that create sanity in the market. When the one displays disorder, dishonest businesspersons will lead to an example of the 2008 case. On the other hand, if the government designs restrictive market rules, it might discourage investors from the market. Therefore, the involvement of the government in regulating market conditions should be average.

Discussion Two

Considerably, the government is the only stakeholder which helps the market to have an ethical environment for doing business. In trade, certain unethical issues such as price-fixing are likely to happen. Although the market has self-control mechanisms such as forces of demand and supply, some monopolies can use their financial prowess to create market contexts that favor them. In such instances, the role of the government is vital since it is supposed to legislate and enforce regulations that target unethical practices. When there is a need to create sanity in a market, the government achieves this through its respective legislative authorities. Parliaments enact laws that resolve unethical practices in the market. For example, some of these regulations empower the government to set up independent institutions such as Competition Authority which role is to ensure that there is a healthy price competition among investors within a particular form of investment (Baldwin, Cave & Lodge, 2012). Apart from creating conditions to be followed, these regulatory organizations have the power to prosecute persons that indulge in unethical business behavior.

Involvement of Government in Business

However, the involvement of government in business could be affected by political ideologies. In the liberal political environments, business stakeholders tend to argue against government interference in the activities of the market. According to the proponents of liberalism, market forces should be left to operate spontaneously without the participation of the government. Alternatively, for a political situation that subscribes to conservative ideologies, government involvement is an ideal way of creating morality in the world of business. Further, conservative governments prefer possessing increased control of businesses to ensure that it prevents cases where investors fund their opponents.

References

Baldwin, R., Cave, M., & Lodge, M. (2012). Understanding regulation: theory, strategy, and practice. Oxford University Press on Demand.

Haufler, V. (2013). A public role for the private sector: Industry self-regulation in a global economy. Carnegie Endowment.

Mayer, D., Cava, A., & Baird, C. (2014). Crime and punishment (or the lack thereof) for financial fraud in the subprime mortgage meltdown: reasons and remedies for legal and ethical lapses. American Business Law Journal, 51(3), 515-597.