What is the role of government in capitalism?

[greatearthquake989]

Please help me. I have been through a lot of pain lately and not able to do this.

[Jake Blackburn]

Well, this is a pretty controversial topic (especially at the moment) for some reason. If one is a libertarian, they will be against regulation and social services for example.

Here's some common answers though:

1. Regulate businesses (ie. the FDA makes sure companies don't put poison in your food, etc)
2. Break up monopolies (if a company gets too big and too powerful, they can jack up prices and do all sorts of bad things so the government breaks them up into multiple companies)
3. The Federal Reserve controls interest rates through monetary policy which can make it easier or harder for companies to pay for loans and invest in their products. So if the Fed brings down interest rates by increasing the money supply, businesses can more easily finance the construction of a new factory.
4. Taxation. The government takes your money/a business' money and puts it into public services.
5. Provide public goods/services. Some services aren't best done by the free market (although this is somehow occasionally a point of contention). Examples are roads, street lights, police, fire departments, education, etc. They are best done via the government, financed by taxes (in my opinion).
6. Protect property rights. This is a role of government that even libertarians believe in. The government makes sure that people can't steal your intellectual or physical property.

[Peter]

Jake has provided you with some good answers. However I would like to add my view.

People will argue that the government and capital are un- separatable.
Capital does need the intervention of the state.The answers will also depend on you polictical bias.
In many countries, the state has to use regulations, and protection to safeguard their economy.Some of these countries are Japan,West Germany and France.
The New right has different ideas on governement intervention, with privatised prisons, alongside state run prisons, the state owning pwer stations but leasing out the entity to another enetity.
The governement has a right to have a police force, and military force,
David Friedman argued that there is a place for private police force, however Sam Brittan said that this would just degenerate into a civil strife. So the government maintains the police, and military.
The intervention of the state arose because the free market system was unable to express the collective interests of capital. The state had to enforce labour laws, and other regulatory reform, regarding capitalism.The individual capital does not always promote the interests of capital in general. When the state has to step in, and the market is pushed aside to some degree.

This question is one of the most controversal, and I would feel there would be several correct answers, depending on the point of view.

[simplicitus]

Mostly I agree with Jake.

The points to note are:

1. No two people agree on what "capitalism" really means.
http://en.wikipedia.org/wiki/Capitalism
At one extreme you have the Laissez-Faire people that argue that the government has no role at all
http://en.wikipedia.org/wiki/Laissez-faire
and at the other extreme you have people that call the system the U.S. has capitalism even though the government has been heavily involved in the economy from the very beginning.
http://en.wikipedia.org/wiki/Tariff_of_1828
http://www.essential.org/features/corpor...alism.html

And while some Americans call what they see in Europe "socialism", those in Europe call what they see in the U.S. "Anglo-Saxon capitalism" and what they have "Rhine capitalism"
http://en.wikipedia.org/wiki/Rhine_Capitalism

2. The U.S. and every developed country, as well as most other countries, have mixed economies:
http://en.wikipedia.org/wiki/Mixed_economy
That is because every society recognizes that leaving _everything_ to the market is a big loser.

Even Adam Smith, whom the capitalists sometimes regard as their originator, pointed out the need for the government to provide infrastructure (roads, canals, etc.) and fund education.

And Milton Friedman, another capitalist icon, in his "Capitalism and Freedom", agreed with these and went further - noting the government responsibility to deal with externalities such as pollution and helping the poor.
http://www.schoolchoices.org/roo/fried1....fic_models

3. Just as no two people agree on what capitalism means, no two agree on just what the role of government is in a capitalist economy.

For example, many attack Keynesian economics and FSR's New Deal as socialist,
http://mises.org/freemarket_detail.aspx?control=515
while Keynes argued that both were necessary to save capitalism from itself.
http://www.hoover.org/publications/hoove...ticle/7076
http://hbswk.hbs.edu/item/6198.html