The problem of state presence in socio-economic life has always been and will be the subject of heated discussions among economists, sociologists and political scientists. This issue is not only an ideological one, but also of significant importance for the state functioning. It is undisputable that the implementation of particular tasks by the state turns out indispensable for the functioning of society, however, in terms of market existence the underlying advantages, to be discussed below, are much less favorable.
The classification of social regulations
In the course of the recent 50 years the decrease of economic regulations is quite noticeable while the social ones ...view middle of the document...
Financing social services (education, health care) from the state budget, i.e. at the expense of all taxpayers, frequently coexists with the state monopoly for these services rendering. The investment of public means in education system and health care can be regarded as an investment in the state development. On the other hand, social security funding or the elimination of income inequalities often results in the escalation of such inequalities. E.g. an incorrectly constructed system of social benefits may result in an unemployment trap and becoming dependent on social aid and also lead to certain misuse or even abuse in this matter. The improvement of economic conditions incurs social costs, however, not as the result of value produced by individual labor.
The reasons underlying state expenditure, which has been increasing for decades, is the existence of special groups of interest which put pressure on state governments in order to carry out their own interests. Such activities are called “rent-seeking” and are performed by groups which seek for their own profits at the expense of the remaining part of society. Applying for annuity involves legal activities as opposed to corruption, however, these activities reduce the freedom of economic activities and destroy healthy competition. The supply occurring at this market is created by politicians, administration staff at different levels and judges. Farming policy is a good example of privileges granted to a particular social group in the EU countries. The means allocated to various programs come from public funds, while only a narrow social group, i.e. farmers, remain their direct beneficiaries.
Another example are all kinds of regulations passed in order to ensure the sales of products manufactured by particular enterprises, e.g. an obligatory use of child safety seats meeting the specific standards and made by a certain group of producers. Such regulation ensures sales for larger companies and eliminates the smaller ones which produce goods of similar quality, however, not meeting the standards defined in regulations due to the absence of technical or regulatory capacity, e.g. licenses, patents.
State intervention at private markets generates costs, unpredictable consequences and is often more damaging than purposeful. The state frequently builds obstacles preventing economic growth. In many cases state regulations raise company functioning costs, slow down decision-making processes and limit access to resources necessary for the production of goods and the provision of services. Finally, it is the consumer who suffers unfavorable effects of such regulations. One of the negative side-effects, in terms of the state interference in the social sphere, are administration costs covered by the state budget and spent on running and supporting federal agencies. Another negative factor takes the form of bureaucratic inclinations presented by clerks in creating regulations the objective of which...