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'Market is a good servant but bad master'. Explain the statement in the light of contemporary crisis in neo-liberal global capitalism. (15 Marks) [ Political Science and International Relations (PSIR) - Answer Writing Practice Paper 1]
The crisis of global capitalism as evidenced by the US financial crisis of 2007-08, Eurozone crisis beginning in 2009, the resulting global recession, the recent developments such as Brexist and ‘America First Policy’ have brought out the limitations of a totally market driven model development and growth strategy.
Need for regulating the market
The recent global crisis of capitalism clearly demonstrated that ‘Market can be a good servant but bad master’. In the US subprime crisis and the Eurozone crisis, the root cause has been highlighted the unregulated growth of the financial institutions and the market forces. This underlines the crucial fact that even though markets do lead to economic growth by bringing in competitive spirit, efficiency, professionalism, optimum utilization of available resources etc., those cannot be left totally free or unrestricted. If left unregulated, market would essentially cater to interests of the capitalists to the detriment of the broader public interests. Hence, there is a pressing need of market regulation by state. There cannot be a question of ''state or marke’t as both have important and irreplaceable to play in the economic development.
The World Bank report - "Challenges of Development (1991)’ has made it clear that even though market has been the best way for organizing production and distributing goods and services, the market cannot operate in a vacuum. It needs a legal and regulatory framework provided by the state.
As put forth by Amartya Sen and Jean Dreze, operations and successes of the market mechanism can be deeply influenced by the nature of government actions that go with it. The markets need to be regulated by the government in following ways:
(1) By providing a legal framework, by enforcing contracts, property rights, maintaining law and order
(2) By encouraging competition through anti-monopoly and anti-restrictive practices legislations; trade liberalization policies etc.
(3) By intervening for better functioning of market by encouraging balanced regional growth
(4) By contributing to human resource development through investing in education, research, training
(5) By building physical and social infrastructure necessary for economic development
Left unattended and unrestricted, the markets can play havoc as seen by the contemporary global crisis of capitalism. Hence in order to correct the imperfections of the market, government regulations are a must.
POSTED ON 21-07-2025 BY ADMIN
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