The role of Government in Economic Development

The role of government in economic development

The government formulates policies, which aim at attaining economic development. The government creates good conditions for all sectors of the economy.

1. The government encourages farmers to join cooperative societies and gives them loans.
2. The government encourages society to have a culture of saving and investing. The culture and habit of saving and investing generates wealth for individuals, households, communities and the nation, in the same vein, a culture of wealth creation and accumulation for development must be reinforced by a culture of maintenance to prevent unnecessary loss of capital stock.
3. The government promotes a broad human development strategy; it encourages the society to upgrade itself and improve its productivity.
4. The government creates an incentive system that encourages and rewards individuals, groups, and firms to embrace initiative, creativity, innovation and excellence. This transformation is reflected in the education system, training institutions, and recruitment and promotion process.
5. The government provides a good environment for actors to effectively harness domestic resources in order to attain competitiveness in their diverse economic activities. Competence and competitiveness, as driving forces, are realized through sound macroeconomic policies, adequate and reliable infrastructural development, and quality education, effective utilization of domestic resources, higher productivity and strengthening of the capacity to effectively anticipate and respond to external changes.
6. The government also has a duty of providing security and favorable environment for investors in the country.

Effectiveness of the government in economic development

1. Signing weak contracts with investors, which do not consider the national interests, for instance mining contracts and privatization of Tanzania railway Cooperation (TRC) to Tanzania Railway Limited (TRL).
2. Poor tax collection where the government loses a lot of money due to unnecessary tax exemptions and tax avoidance.
3. Failure to control inflation. The increase in inflation is attributed to a combination of exogenous shocks. Some of the exogenous shocks include the hike in global oil and flood prices, the decrease in demand and price of primary exports in the world market. Other shocks include extreme weather conditions, which adversely affect agricultural produce and power supply, and consequently inhibit the growth of other sectors of the economy.
4. The poor transport system affects the economic development of Tanzania. For instance, traffic jams in cities is due to poor infrastructure and city planning.
5. Inefficiency of power supply. The government has failed to make proper use of the available waterfalls, natural gas, coal and uranium to solve the power problems in the country hence affecting economic production in various sectors like industries.
6. Lack of good governance and accountability shows the inefficiency of the government in spearheading economic development. There has been rampant corruption in Africa, which hinders economic development.
7. Dependence on foreign aid to finance the budget of the nation affects the economic development of the country especially where the aid is not given on time.