Before the advent of capitalism, the state used to intervene in economic activities of the people to a large extent but as capitalism grew, the provision of goods and services was left in the hands of market private sector.
Adam Smith was a serious advocate of laissez fare policy (free-market economy). He believed that the market was capable of generating efficient signals for economic units and that capitalist forces guided every economic unit. However, Adam Smith recognized that there are certain goods which their provision could not be left to market forces. The market could not provide them either due to lack of commercial profitability or some other reasons yet the state or the society needs these goods (social amenities, maintenance of law and order, defense among others).
These goods were supposed to benefit the whole country. Under the influence of this philosophy of providing public goods, the state expanded its activities in various directions and came up with the concept of welfare sate with the aim of providing welfare services.
The provision of social and economic services including education, social security, administration of labour, economic stability, economic employment, managing inflation, balance of payment, and regional imbalances were all left to the state. The precise scope of activities undertaken by state depends on its political and social ideology, resource availability, administrative system in place, other facilities at its command.
Dullayo answered the question on April 22, 2018 at 09:31
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