What is the Proper Role of Government in our Economy?

Last weekend I had an exchange on LinkedIn with a connection over what our government should be doing.  His argument was that the government should be focused on creating jobs, my point was that they:

1. Couldn't
2. Shouldn't try, and;
3. Should be focused on eliminating the barriers they have constructed that are now hindering economic growth

This piece by Joel Bowman showed up today in my inbox which add's fuel to the discussion....

Joel Bowman, from Punta del Este, Uruguay...

In his 1958 interview with Ayn Rand, a young Mike Wallace asked the following question:

 

"Suppose, under your system of self-sufficiency, one single corporation were to get a stranglehold on a vital product or a raw material, uranium for instance, which might be vital for the national defense, and then would refuse to sell it to the government, then what?"

 

To which the original objectivist responded:
"Under a free system, no one could acquire a monopoly on anything. If you look at economics and economic history, you will discover that all monopolies have been established with government help, with the help of franchises, subsidies or any kind of government privileges. In free competition, no one could corner the market on a needed product. History will support me."

 

The above exchange is pertinent today for multiple reasons.
First and foremost, it calls each and every one of us to ask some very important questions of the society in which we live today...and about where it is heading tomorrow and beyond. What is the proper role of government in economics? Should, as Rand argued, there be separation of economy and state, just as there is of church and state? Should the government be able to use force and compulsion against the will of free men and women, to supersede or suspend the rights of the very individuals it affects to represent? And in what special case, if any, would this be permissible?