Forces of demand and supply control prices in modern capitalist economies, government intervention has been limited to provision of social services. Prices of goods and services as well as cost of production are determined with minimal government intervention. A perfect capitalist economy can only exist in an ideal situation and since there is no ideal situation, there are always some government controls, rules and regulations in an economy (Pigou, 2006). In general, government controls the performance of an economy through fiscal and monetary policies. These policies are aimed at changing or controlling certain factors in the economy to enhance or limit production. Government participation varies among countries were developing countries need a higher involvement than developed countries (Ceccacci, Marchesiani and Pecchi, 2007) This paper discusses the role of the public sector in modern economies and factors public sector consider when making financial decision.

Political stability

The government is made up of political class, who control the economies of a country, they play the role of politicians and economic drivers, and however, political situation in the world is not stable. There have been changes and uncertainty in different countries. A country like Kenya in East Africa underwent tribal crashes in 2007 after a disputed election. The crisis affected the economy of the country. In November 2010, Ivory Coast in Central Africa had disputed election a move that have affected the country’s economic performance. In civilized countries like the United States of America, which is the world’s largest economy, the performance of the ruling class affects the economy positively and negatively. A country as China, which has the highest economic growth in the world, has a stable government (Dalton, 2003) from the above discussion, it is clear that one major functions of government is to ensure there is political stability in the country. If the political class maintains political harmony in an economy then growth and stability in the country is possible. One of the most surprising thing is that to destroy an economy that had been built for many years can take a matter of weeks in case of political unrests. For example, Zimbabwe was among Africans best performing countries, when there were disputed presidential economies in 2009; the country is now ranked as the poorest in the world. Other than local politics, international politics affects country economic, social and political performances. International policies and relations affect how economies conduct their business. There are times that goods from a certain countries have been limited to enter in the international market through tariff and non-tariff barriers (Buchanan, 1987).

Maintaining good International relations

Foreign ministry in different countries is given the responsibility of maintaining good international relations with different countries. Globalisation and international trade has opened the international market, assisted by transport and communication networks (Quigley, 2000). To ensure that a country participates in international trade effectively and reduce chances of international rivalry, it should ensure that there are good international relations. Switzerland has managed to be the world largest tourism country because of its political neutrality and maintaining of good relations with other countries. Sometime to be competitive, countries engage in economical alliances to be able to negotiate for better teams in the world markets. Such integration includes European Union, East African Community, and Pan African among others (Dietmar, 2000). Other than having a good international relations, it is the role of the government to ensure that its country have a good reputation. It should not be known for negative things like poverty, corruption and inequality. Such reputations are not built by word of mouth by through actions undertaken by the government.