Explain fully the reasons underlying government control over private business activities.

The main reasons underlying government control over private business activities are stated below:

Establishment of welfare state.

Government control private public pressure business because of the increasing of public pressure was there to ensure social welfare and protect interest of general public by various measures like establishing fair trade practices, controlling monopolies, ensuring equal distribution of income and wealth.

Planned economic development.

It is important for a government to control some industries that involve large investments or yield low returns. Private enterprises are located in areas where facilities are readily available because private businessmen work in order to fetch profits and not for the purpose of development.

Because of this, weaker sections or backward areas in a country would not be able to enjoy the benefit of industrial development. It is necessary to regulate private business and channelize private investment in the planned direction by government in order to achieve rapid economic development. In order to hasten the development process, it is essential for government to directly participate in industrial and commercial activities.

Evils of free enterprise and private ownership.

Evils that are linked with free enterprise and private ownership are stated below:

  • Private ownership has caused wide disparities among people regarding wealth and income because the wealth is concentrated in the hands of a few business houses.
  • New firms are not allowed to enter in the market due to the growth of large companies.
  • Such enterprises started indulging in wasteful advertisement and unfair competition in order to fetch profits.
  • Monopoly of large business firms often rose because of the freedom of enterprise. So as to restrict production and increases prices to earn profits, monopoly power was used.
  • Depressions and booms at periodic intervals were a part of business. During booms, business failures and economic crisis occurred because and speculative activities. Unemployment and human misery were caused due to depression.

Other reasons.

Government regulated the private business because of several other reasons like protecting the economy from dominance of foreign investors, encouraging and protecting small-scale industries, preventing the misuse of natural resources such as minerals, forests etc. by private firms for profit and ensuring proper use of scarce resources keeping in mind the future needs.

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