V. Tanzi

Termites of the State: The Elusive Search for Harmony between State and Market

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This paper deals with the balance that sometimes exists, but often not, between the economic function of the State and that of the market. Some markets are more efficient and fairer than others. And some State interventions are more desirable and justifiable than others. Markets often require corrections: either because they suffer from «market failure» or because they lead to an income distribution that is considered too unequal by voters. Over the last century the ideology of «laissez faire» has become less acceptable in societies where the majority of citizens had achieved voting rights. Therefore, Governments have introduced higher taxes and have increased public spending seeking to reduce some financial risks for families and to adjust some market gaps. Some States have become «welfare States». Unfortunately, Government interventions have often become excessively complex, while markets have lost the simplicity and transparency they had in the past. These two problems have facilitated the growth of corruption and other abuses that have fostered populist policies.


  • Complexity
  • Balance
  • Welfare
  • State Function
  • Populism


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