WHILE-READING TASKS

THE ROLE OF GOVERNMENT

The American economist Milton Friedman was well-known for his views on government. Read the
extracts from Free to Choose by Milton and Rose Friedman.

Though the United States has not adopted central economic planning, we have gone very far in the past 50 years
in expanding the role of government in the economy. That intervention has been costly in economic terms. The
limitations imposed on our economic freedom threaten to bring two centuries of economic progress to an end.
Intervention has also been costly in political terms. It has greatly limited our human freedom.

An essential part of economic freedom is freedom to choose how to use our income: how much to spend on
ourselves and on what items; how much to save and in what form; how much to give away and to whom.
Currently, more than 40% of our income is disposed of on our behalf by government at federal, state and local
levels combined.

As consumers, we are not even free to choose how to spend that part of our income that is left after taxes. Our
physician is not free to prescribe many drugs for us that he may regard as the most effective for our ailments,
even though the drugs may be widely available abroad. We are not free to buy an automobile without seat belts.

Another essential part of economic freedom is freedom to use the resources we possess in accordance with our
own values – freedom to enter any occupation, engage in any business enterprise, buy from or sell to anyone
else, so long as we do so on a strictly voluntary basis and do not resort to force in order to coerce others.

Today you are not free to offer your services as a lawyer, a physician, a dentist, a plumber, a barber, a
mortician, or engage in a host of other occupations, without first getting a permit or licence from a government
official. You are not free to work overtime at terms mutually agreeable to you and your employer, unless the
terms conform to rules and regulations laid down by a government official.
You are not free to set up a bank, go into the taxicab business, or the business of selling electricity or telephone
service, or running a railroad, busline, or airline, without first receiving permission from a government official.

Although these examples only scratch the surface, they illustrate the fundamental proposition that freedom is
one whole, that anything that reduces freedom in one part of our lives is likely to affect freedom in the other
parts.

Freedom cannot be absolute. We do live in an interdependent society. Some restrictions on our freedom are
necessary to avoid other, still worse, restrictions. However, we have gone far beyond that point. The urgent
need today is to eliminate restrictions, not add to them.

 Complete the guided notes:

1. The two areas that the intervention of the government affects

………………………………………………………………………………….
 2. The consequence of increased government intervention in the economy:

……………………………………………………………………………………………..

3. Two ways in which the freedom in terms of income is restricted:

……………………………………………………………..
4. What 40% refers to:
………………………………………………………………………………………………………
5. Examples of medical and road safety legislation that control consumers’ spending
……………………………………………………………………………………………………..

6. According to Milton, the necessary restriction regarding professional occupations business and trade
………………………………………………………………………………………………………….

7. The requirement for setting up a new business under the government’s control

………………………………………………………………………………………………………….

8. The condition for extra work under the government control

………………………………………………………………………………………………………….

9. Their objection to the law regarding labour contracts:

……………………………………………………………………………………………………………

10. The Friedmans’ argument for eliminating restrictions

………………………………………………………………………………………..

POST-READING TASK

➢ Vocabulary review: Fill in each gap with one suitable word / expression given in the box.

intervened – threatened – prescribed – coerced – voluntary – permit – permission – restrict – forced – possess
– regulation – eliminate – official – conform

1. We are funded by ……………….. contributions.

2. The dispute ……………….. to spread to other countries.

3. Visitors have to ……………….. to our rules.

4. He had received ……………….. to reproduce copyright material.

5. Some roads may have to be closed at peak times to ……………….. the number of visitors.

6. The doctor ……………….. her a drug called amantadine.

7. The universities were ……………….. to cut staff.

8. He did not ……………….. a sense of humour.

9. The companies must obey the ……………….. of financial markets.

10. He acted outside his authority when he ……………….. in the dispute.

FURTHER READING : TAXATION

➢ Which terms are defined below?

1. The tax people pay on their wages and salaries is called

A. capital transfer tax B. income tax C. wealth tax
2. A tax on wages and salaries or on company profits is a
A. direct tax B. indirect tax C. value-added tax
3. A tax levied at a higher rate on higher incomes is called a
A. flat tax B. progressive tax C. regressive tax
4. A tax paid on property, sales transactions, imports, and so on is a/an
A. direct tax B. indirect tax C. value-added tax

5. A tax collected at each stage of production, excluding the already-taxed costs from previous stages, is
called a/an

A. added-value tax B. sales tax C. value-added tax

6. Profits made by selling assets are generally liable to a

A. capital gains tax B. capital transfer tax C. wealth tax

7. Gifts to family members over a certain value are often liable to a/an
 A. capital gains tax B. inheritance tax C. value-added tax
8. The annual tax imposed on people’s fortunes (in some countries) is a
A. added-value tax B. capital gains tax C. wealth tax
9. Making false declarations to the tax authorities is called
A. fiscal policy B. tax avoidance C. tax evasion
10. Reducing the amount of tax you pay to a legal minimum is called
A. creative accounting B. tax avoidance C. tax evasion
11. Countries where taxes are low, where multinational companies often set up their head offices, are
known as
A. money launderers B. tax harbours C. tax havens
12. A small mistake or exception in a tax law, which allows you to avoid paying something, is called
A. an escape B. an excuse C. a loophole

B. Listen to the recordings again and fill in the blanks with the words you hear.
The second effect is whether we think unfettered free markets alone can ensure the long-term (1)
……………….. ………………... of resources and long-term (2) ……………….. ………………... Markets are
very important, I’m not denying that, but so is the role of government to actually help markets work better.
Often economists talk about notions of (3) ……………….. ……………….. or the fact that markets are not
working properly.

Let’s just think of some of the areas where governments should want to intervene. They may want to spend,
spend money on education, it’s very important, educated workforce. People may not invest enough in their
education if they have to pay for it themselves, and many people wouldn’t be able to access the resources,
wouldn’t be able to get the credit, OK, so it’s the importance of education. Similar things apply to health, we
may not actually buy enough health if we are left to buy it ourselves.

Let’s think about developing new products and technologies. Developing new products and technologies is
highly risky and highly expensive, and highly (4) ……………….. ……………….., but possibly very big
outcomes for the economy as a whole. So it makes ... it’s understandable that firms do not invest in very early-
stage technologies, OK, and ... because it may be (5) ……………….. ……………….. for them, there’s a
good chance they won’t succeed, and if they do succeed, somebody else will be able to (6) ……………….. and
……………….. and benefit from their effects.