The activities undertaken by the modern state are complex and varied. This is
due to the fact that there is a strong demand by the people for active state
intervention in the social and economic affairs of the country. The statesmen of
today do not place any limitation on the powers of the government to interfere
in the social and economic spheres. The only governing principle is whether
state action promotes general welfare. In every country of the world, the laissez-fair
policy has been discarded and there is a strong swing towards adoption of
Socialism, Frase is right when he says that "Socialism or Collectivism is
upon us, horse, foot and gun".
The main functions which the
modern state now performs are as follows:
(i) Provision of defense and
security? The primary function of the state is to protect the country from external invasion and to maintain peace and
security within the country. For smooth and progressive working of the economic
machinery, it is very essential that people should live in perfect peace. They
should not be in fear of external aggression. Every member of the society should
have full protection from the injustice or oppression of every other member of
it. The stale expenditure providing security and justice is productive because
it helps indirectly in carrying out the activities which are labeled as
(ii) Economic Function: The
modern slate is actively intervening in economic spheres. Though it recognizes the individual rights in private property, it
allows freedom of enterprise and contract. When it finds that its laws are being
violated, it immediately intervenes for regulating the economic affairs. If the
state finds that private capital is not forthcoming in certain industries, it
assists private enterprise in establishing and running the industries.
Sometimes, the government itself takes initiative and sets up industries. The
modern economists justify state interference in the following cases:
(a) Where Business is of Monopolistic Nature:
There are certain businesses like
railways, post and telegraph, canal, electricity, water supply, etc., which are
extremely useful for the people. If they are given into private hands, the
consumers can be easily exploited. So the government, in the interest of the
people, takes control of these businesses and runs them almost on a non-profit
(b) Where Private Capital is not Attracted: If in a certain industry or
industries, the private capital is shy because of the inadequate return or there
is no return at all, the state must step in and provide the requisite capital.
The cases where private capital is not attracted are public health, libraries, museums afforestation, road construction
schemes, parks, etc., etc.
(c) Protection of economically weak persons: In a competitive society, the
factory workers are often exploited by their employees. The State therefore,
must take suitable steps for protecting the legitimate rights of a class having
very weak bargaining powers.
(d) Exploitation by Forming Monopolistic combination: Sometimes the
businessmen form cartel and trust and exploit the consumers by charging very
high prices. The state in such cases must intervene and prohibit the formation
of such combination.
(e) Protection of Consumers: The state must protect its citizens against
adulteration of food, sale of intoxicants, etc.
(f) Supply of Currency: The state must take full control of the supply of
currency in the country. This will help the government in securing stability of
prices, suitable steps to reduce inequality of the income in the country. For
this purpose, it adopts progressive system of 'taxation, levies death duties on
inherited property and provides social services among the poor section of the
(g) State and Economic Planning: The state in order be speed up the economic development in a balanced manner, formulates programmes and policies
to harness the human efforts and-physical resources to the maximum possible
extent. It fixes targets and priorities and then proceeds to complete them
within the specified period.
(iii) Direct Social Activities: Every modern state takes keen interest in
providing social services to its citizens. The government gives funds to the
needy, sick and unemployed persons, ft provides them free education, free
medical and old age pensions. It takes care of public health and provides them
housing facilities. It opens parks, libraries, for the benefit of the people.
In short, the state's intervention in
economic affairs takes the form of:
(a) Provision of facilities to the businessmen for carrying on their
(b) Direct encouragement of the
business by providing them protection from foreign competition, granting of
bounties, subsidies, relief and taxation, etc., etc.
(c) Regulating economic enterprise on
(d) Taking actual control and
ownership of certain important industries.
In the last decade of the 20th century and in the 21st century, the role of
the state is being considerably reduced. Instead of performing the role of
producer, controller and regulator, it will act as protector, promoter and