Failures in Market Economies

Europe is a continent that currently experiencing a crisis. If the Eurozone crisis completely, and formed a new currency, there will be a serious threat, not only to international trade but also for economic growth and prosperity.

Examples of some countries in the euro zone such as Greece, Spain, Portugal, and Italy experienced a lot of economic problems, the prove that this situation getting worse is the increasing number of unemployment reached more than 25% and one of three young people in Spain can’t looking for a job. Reduction of government spending cuts coupled with tax increases have been enacted. However, the government still failed to ensure disciplined society to pay taxes. And it’s almost everywhere!

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In my opinion, it has become one of the factors that lead to market failure. Apparently a lot of international companies with big names such as in the UK only pay small payment ratio taxes, so it doesn’t match with the income that they had earn. Where the company is manipulating their data which still listed as a company with a lower tax payments. Whereas in reality, the company has been successful and has the name in various places. The condition is very profitable for company, where they get a lot of advantages but only pay a little tax.

Stephen C. R. Munday stated in his book entitled “Markets and Market Failure”, that the free market is the best way to provide economic efficiency in the economy, but when the free market does not provide the optimal allocation of resources, they failed. Reasons which could make those markets fail is the external factors, public goods, information failure issues, and the collapse of a perfectly competitive market. Examples of information failures, such discourses about market failures in the euro zone over the many companies or firms which are still recorded as companies with lower tax payments when they are successful and have a lot of profit, so their gain is not worth with the few taxes which they spend. Error data received by the government can be considered as an example of the failure of information.

Other comparative material is the book “In Government We Trust: Market Failure and the Delusions of Privatisation” by Warwick N. Funnell, Robert Jupe and Jane Andrew. They argued that market failures may occur from themselves, both individually and together, but it is unlikely that they will be able to remove the grip that the market is owned by the government. An example is an employer does not pay taxes, then the government asserts and requires employers to pay the appropriate provisions.

I think one of the market failures in the Eurozone due to the lack of responsibility for the payment of the tax which would harm the country. The opinions expressed by Stephen C. R. Munday is not much different from the opinions expressed Warwick N. Funnell, and friends. They believe that the core of market failure is the lack of awareness of both individuals and companies to fulfill tax obligations. Besides that, lack of government oversight also be an important cause of market failure.

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