State Intervention and Economic Development: Case of COVID 19 Pandemic (Term Paper Sample)

State Intervention and Economic Development: Case of COVID 19 Pandemic
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To what extent does the economy depend on state intervention? Illustrate your answer in relation to particular examples (e.g., Pandemic)
Introduction
This paper looks at the economy, state intervention, and the relationship between the two. The state plays a massive role in enhancing economic development at national levels and international levels. As discussed in the essay, the state has significant changes that allow for the proper management of the economy. Some of the state's tremendous roles to the economy enhance adequate control over the production and manufacturing sector, distribution, consumption levels, and enforcement of fiscal and monetary measures. According to Alexander Rustow, a scholar in economics, developed a concept in which the state could intervene and enhance growth in the economy—looking at the social democracy system, Alexander foregone Laissez-Faire Capitalist Society (Keynes, 2010).
The state plays a huge role since neoliberalism looks at social and economic ideas. Hence, the state has the power of the free market trade, financial markets deregulation, and facilitating the shift away from the state welfare provisions. Neoliberalism can also be described as the reverse of liberalism since it looks at the absolute gains other than the relative gains. Hence, when the state engages in neoliberal reforms, more profound changes are enforced, such as better healthcare systems due to the free markets. However, certain disadvantages, such as lower socioeconomic status due to the increased healthcare needs (Gledhill, 2018).
Another empirical example of the changing role of the neoliberal state is neoliberal policy enactment. The neoliberal policies led to increased debt crises, degradation of the severe environment, economic crash, increased number of unemployed people, fuel prices and cost of food products, and reduced wages (Sakellariou & Rotarou 2017). Thus, it is evident that the state is vital for economic development and social growth. Hence, this essay will look in-depth analysis of the extent to which the economy depends on state intervention whereas illustrating the case of COVID 19, a pandemic that offers the most recent example of state intervention for economic development growth.
The role of power in economics
To properly understand how the economy depends on state intervention for development, it is essential to answer the question: who runs the economy and what levels? This is because the government cannot solely dictate the whole economy's operations. Nevertheless, the government looks at combating market inequalities via taxation, subsidies, and enforcing regulations that offer better consumption levels to promote general economic fairness. This happens especially when the government breaks monopolies in the market and regulates negative externalities such as pollution (Skidelsky & Craig 2016).
However, other than the government, other players run the economy, such as transnational corporations, financial institutions such as the world bank and International Monetary Fund (IMF), non-governmental organizations, and inter-governmental organizations. This is evident since the 2008 financial crisis and the Great Recession that occurred during the same period. The crash in the economy led to substantial changes. The aid of power from the political influences and ideas about merging the economy led to the revolution of growth in the economy. Due to the neutral disciplines in the economy, human behaviors were altered, which led to a different shaping of the economy. In the case of international financial institutions running the economy, the funds are offered to promote globalization and integrate its economy.
Understanding the impact of gross domestic product and the laws used during supply and demand would be easier to understand the causes of recessions due to the bigger picture portrayed. This means that the consumption of products is an essential part of the economy due to net exports, government spending, and business expenditures. On the other hand, 70% of the economy is driven by demand; during the 2008 recession, there was an increase in unemployment (Islam & Verick 2011). The federal government also uses policies such as trade and fiscal policies to control the economy. Inflation and deflation are another reason for how the government impacts the economy (Skidelsky & Craig 2016). Therefore, who runs the economy and is highly dependent on the current economic status of a nation.  
The COVID-19 Pandemic
The COVID-19 Pandemic offers the perfect example of sudden induced economic uncertainty and how states acted in finding solutions to the economy's changes. The virus triggered a considerable spike in tension due to the virus's lethality, a sudden increase in the number of COVID-19 cases, reduced healthcare capacities, and insufficient personnel to cater to sick patients. Since it was the first occurrence, scientists were not aware of handling the increase in infection cases. Besides, the global spread of diseases also affected international trade due to lockdown measures. The massive increase in the number of infections in the United States led to economic recessions (Baker & et al., 2019).
There were still many challenges associated with the COVID-19, including the closure of some businesses as a safety precaution for the virus. Due to the economic impact of the global virus, temporary government interventions were put in place. They led to pandemic-induced shifts significantly in the spending patterns, forming a new business, research, and development work (R&D) for proper research of the virus solutions (Baker & et al., 2016). Notably, the interventions also led to the sustainability impacts on business survival and human capital investments. Nevertheless, productivity was affected both in the long-term and long-term due to the reduced levels of material access due to lockdown measures (Altig & et l., 2020a).
Some of the main challenges of the Pandemic include an increase in the number of unemployed. For instance, in February 2020, the unemployment rate was at 3.5% in the US, but later, in March 2020, the number of unemployed was about 10 million (Chaney and Morath 2020). Over the years, other pandemics occurred including, the Spanish Flu, which gave a better baseline of the mortality rate; however, with the COVID-19 Pandemic, there were different social, economic, and political changes due to the containment and the mitigation of policies, especially with the modern times of globalization (Altig, 2020b). Hence, due to economic uncertainties, the government had to intervene. The table below is outlined on the list of measures that are considered for the macro-uncertainty measurements.
Table 1 Measures of macro uncertainty for the US for the COVID-19 Crisis
Source: https://images.app.goo.gl/6zkJjhmLTzYD8pQ59
Additionally, COVID-19 Pandemic also affected the stock market volatility
Figure 1 VIX, implied stock returns volatility, daily since 1990
Source: https://images.app.goo.gl/S8E97rJbDUUJ26ez6
The business expectation surveys both in the United States and in the United Kingdom were also affected, as illustrated in the diagram below:
Figure 2 Survey-based measures of uncertainty about sales growth rates at a four-quarter look-ahead horizon for the United States and the United Kingdom, monthly from January 2017 to March 2020
Figure 3 Estimated impact of COVID-19 shocks on year-over-year US real GDP growth rate
Source: https://images.app.goo.gl/sabjLmBX21wY46Cd6
Conclusively, the COVID-19 Pandemic led to large output contractions that induced economic uncertainty; however, the government managed the issue by offering insurance money to the people, lockdown to avoid the disease's spread (Atkeson, 2020a). And due to the massive business expenditures cuts, especially in the innovation sector, various companies engaged in improvement measures to effectively cope with the situation (Atkeson, 2020b). Consequently, the Pandemic caused a tremendous shock than the 2008-09 Global Crisis or the 1929-1933 Great depression (Anderson, 2020).
The state
There are several definitions of what the state is; however, the state and the government depend on the functions. Various schools of thought define the state, some from the neutral entity perspective and others as a society of partisan instruments (Beran, 2019).  According to the liberal and conservative theories, it is evident that the state is a neutral entity that does not side with society or the economy. Hence, the approaches consider the state of being in a capitalist state. On the other hand, according to Marxist theory, the condition can be described as a partisan instrument that mainly serves the interest of the people in the upper class of society, showing a relationship between the economic and political powers (Los, 2016).
Additionally, another school of thought of the anarchists believes that the state apparatus should be dismantled completely. In place of state apparatus, the social relations that are not based on the state's power should be created. Consequently, the pluralists view shows that the state should act as a neutral body that should implement the majority's will, especially in the electoral process. Lastly, the polyarchy developed by a scholar, Robert Dahl, illustrates that the current democratic states often act on pressures applied by various interests of dominating the economy (Dahl, 2017). Hence, the condition can be defined as a poli...