Login with Facebook
Close

The Role of Government Policy in Improving Economic Outcomes

A nation, and indeed the world's economy depends on various factors. But before these factors are put into consideration, it is vital to first look at what economic development is all about. In many instances, people who refer to economic development are often thinking about economic growth. While the two terms are used interchangeably, there are several differences that make either of them unique. To put it simply, an economy may be growing but not developing when there is development in means an improvement in the general welfare of an economy to bring about a higher GDP. Besides the GDP, economic development also engulfs other economic indicators like improved literacy, excellent infrastructure, low poverty levels, and better health care standards, among others.

Economic growth, on the other hand, could be more on a firm level. When businesses are doing great, in terms of producing and supplying enough goods, and consumers are able to pay for the goods without any issues, we say an economy is growing. Economic growth can be both short-term and long-term when you factor in economic and business cycles. But economic development is usually looked at from a wider perspective and long-term considerations.

But one of the biggest questions that have raised debates among many experts is whether the government has a duty to play in economic development. The simplest answer is yes. Governments' decisions, policies, and political issues have a huge role to play in establishing a sustainable economy.

Government policies on economic development

The first role a government has to play is to create conducive macroeconomic conditions. This means it must ensure a stable economic climate with low inflation and positive economic growth. We know that inflation is something that happens in all levels of economies. But that does not mean nothing can be don't to cushion those involved in determining economic conditions. When there is a good business environment, a nation is able to attract international and internal investors, which drives an economy on an upward scale. It is vital to ensure positive growth in an economy so that everyone else in the society is pulled along.

The government is responsible for making economic regulations. Hence, they can either create laws that demean businesses or ones that uplift them. By creating, for instance, free-market supply policies, including privatization, deregulation, lower taxes, and less regulation, a government can easily stimulate more investments from the private sector.

Governments also intervene in many economic instances. They can, for example, create suppl-side policies, like increasing expenditure on 'public goods' to improve the general statues of society. When a government invests more in education, public transport, and healthcare systems, it creates a more conducive environment for economic development. This is because her citizens will be more concerned about working and creating job opportunities while getting to spend less.

And that is not all; economic development approaches depends on the general status of the economy. Throughout history, there have always been major economies and minor ones. And today, countries like the US, UK, and other European nations have a more stable economy that others. They are already developed, which leaves them to concentrate on sustainability and growth. For developing economies, there is much more they have to do in terms of export-oriented development, which includes a reduction of tariff barriers and promoting free trade in an effort to improve the development of their economies. Also, they have to focus on diversification far from agriculture and focus more on manufacturing. We are living in a different era far from the agricultural revolution, which leaves us to look at more manufacturing and information-oriented technology.

Macroeconomic growth

Macroeconomic looks at a wider perspective of an entire economy. It does not only consider individual consumers and firms like in the case of microeconomic approaches. And for this, it is important for a government to properly handle macroeconomic stability, which involves focusing on reduced inflation. By so doing, they create an environment where international investors well see better opportunities and have more confidence in a national economy. When inflation is through the roof, consequences could involve devaluation of the currency, which does not sit well with foreign investors. In order to create a low inflammatory framework, it will require a government to take several steps.

First, it has to create an effective monetary policy. Money is the biggest reason people struggle to achieve different goals in their lives. And for this reason, the government may, for example, give their Central Bank freedom to control inflation. This can be done through monetary policy, which, by default, touches all corners of an economy.

Second, the government will require a disciplined fiscal policy. When there are large budget deficits, it reduces economic progress and makes it harder for investors to trust the systems. It can, therefore, be a great idea for a government to work on reducing budget deficits.

The third requirement of a government to create a sustainable inflationary framework would involve putting a lid on inflation. Take an example of the current economies of China and India. They seem to have the highest rates of economic growth across the globe. However, economic experts have warned that these economies could easily 'overheat' and create bigger inflationary pressures. That is just a thing about a growing economy; it reaches its elastic point and may cause a major fall if the government is not careful enough to consider keeping it under control.

Even though it is vital to work on these issues affective inflation pursuit of macroeconomic stability, there are potential problems along the way, that policymakers have to be aware of. For instance, higher interest rates can be attractive to investors, but it can conflict with lower growth in an economy for the short-run. It is quite understandable when countries pursue low inflation with great vigor, but the ay cause recession and unemployment, which results in a strain on economic development. It is, therefore, important to find a balance between the two aspects by perhaps looking at both low inflation sustainable growth from the same bucket.

Different countries have different economic situations, and this is what determines the best approaches. In some states, for instance, exchange rates have been overvaluing currencies, and monetary policies tightened, which leads to a fundamental lack of demands. Based on this, we can say that economic development may call for demand-size laws and regulations that boost aggregate demand.

Another important approach to macroeconomic stabilization, many include reducing government budget deficits. The only flaw to this is that it may include spending cuts on social welfare programs.

Fighting corruption and more flexible regulations

In some of the developing countries, most of their regulations are over-restrictive, whereas corruption is highest. Such things increase the costs of doing business, hence chasing away investments from both local and international parties. It is possible to attract domestic and inward investment by removing these issues. A government will be able to create a more conducive environment for doing business.

Corruption is described as a thorn in the foot or economic development. It can greatly hurt and cripple any efforts to create a conducive climate for economic growth and development. Tackling this issue may not be easy, especially if it is deeply rooted in society. But it is still vital for developing countries to try eliminating it from all areas of their economy.

Also, it must be noted that too many levels of regulation may have a demeaning impact on economic development. A government must try to reduce these levels of regulation on useful ones, like protection on the environment. It is critical to protect the environment, but when it is overdone, it becomes difficult for investors to find an easy way out. The laws cannot be discarded, though, as this would attract great economic growth but at the expense of sustainable development.

Matter of privatization

China has been greatly applauded over the past few years from rapid economic growth. Experts have noted that this can be attributed to their dropping of a Communist economy and adopting a mixed one. In this case, many state-owned industries were taken over by private investors. In such situations, a firm receives a profit incentive, enabling them to cut on costs and put their focus on competition. Another important approach in this regard involves de-regularization, which opens competitive channels to state-owned monopolies. When this happens, a great competitive pressure opens and helps in the creation of incentives for reduced costs. Such pressure can also be created by the liberalization of trade and opening markets so that international competition can easily participate.

But great care must be taken when following the route for privatizations – it can encourage inequality in a society. A good example is Russia, where privatization gave power to a small number of individuals to control important industries at low costs. Experts advise that this does not help very much in economic development because all the most important resources are owned by a small fraction of rich individuals, who leave very little for the poorer members.

Tax-related process and investment in public services

In developing countries, there are different channels of tax collection, which are not very effective. In other words, they don't have a proper structure of how to do the collection. As you may already know, the wealthiest aspect of an economy is the production of natural resources. If a government is not able to collect sufficient tax from this aspect, it will not have enough funds to finance important investments in the public sector. A good example is the average tax rate in Sub-Saharan Africa, which is only 15% GDP as compared to 40% in the developed countries.

Apart from tax, there are often failures in public service areas like education, healthcare, and transport. For instance, a free market fails to provide sufficient levels of education. One of the most critical approaches to creating sustainable economic development is an increase in literacy and numeracy. If a society does not basic levels of education and training, their economy fails to develop into industries of higher values. Investing in education brings out mixed evidence on returns, as it may take a long time to get its impacts on the higher rates of growth in economies.

More on industries and less on agriculture

Developing countries are faced with a major constraint of producing primary products as their current comparative advantages. It may seem good idea at any level of an economy. Note, however, that this may put a limitation on development resulting from volatile prices, low-income elasticity of demand, and finite nature. For this reason, it may be a good idea for a government to encourage economic features of new industries such as manufacturing.

However, great care must be taken when diversifying agriculture because it may come with mixed results. Society depends on the food and production of consumables. If therefore, a government does not support this, it may be faced with another problem of hunger. In some instances, it is very difficult for nations with inadequate infrastructure to use capital investment in certain industries effectively. Also, experts have argued that there is mostly poor information about which industries should be promoted, a situation that leads to misplaced priority. They suggest, therefore, that it would be better to allow free markets to decide on their best investment ventures.

Conclusion

When it comes to restoring economic stability, policymakers must focus on bringing back the institutional purpose of governing. A government is in charge of building a stable environment that attracts both international and domestic investments. This process is dependent on currency stability, enforcement, and defense for property rights and offering oversights to assure citizens of the accountability of various stakeholders. A government comes with policies that allow participants to trust the systems in place. And in this case, both fiscal and monetary policies become a cornerstone of economic growth and sustainable development. It is easier for developed countries to create sustainability policies, as well as those that shield financial recessions again. Things may be different from emerging economiesGovernment policies on economic development, yet it is still critical for government interventions to work.

Author: James Hamilton


Need a custom
essay?

We will write it for you.
Order now

Free Essay Examples

Free essays:

All you need to know about Neuroendocrinology
All you need to know about Big data management
All you need to know about digital special effects
All you need to know Technical Writing?
Basics the Game Theory in Cryptoeconomics
Business innovation ideas for making money
Biosensors for cancer diagnosis
Business Analysis: Pricing strategies and Demand Curve
Cognitive Computing- How does Cognitive Computing work?
Consciousness: characteristics and peculiarities
Conservation Economics
Cybersecurity in business: challenges, risks, and practices
Demographic trends and how they affect Economic Growth
Dance as an art form and entertainment
Discrimination Economics
Determinants of Wages
Everything you need to know about short-term memory
Economic and Policy Impacts of Demographics
Ethics: an essay on the understanding of evil
Emotions: what are they? Theories explained
Factors of Demographic Data Collection
Factors Affecting Purchasing Behavior
Financial Statement Analysis
Factors Influencing Interest and Exchange Rates
Government's Intervention in The Labor Market
Guide on the Pathways of the nervous system
Game theory in microeconomics
Globalization: definition, causes, social impact and risks
How Relativism Promotes Pluralism and Tolerance
How to use the audience’s feedback to write a news report
History of silent cinema
How news report can be strengthened through multimedia
Introduction to Population Problems
Imperfect Information and Asymmetric Information
Imperfect Information in Insurance
Introduction to Labor Markets
Journalism: What is News?
Journalism: Broadcast media and Television Presenters
Journalism: Sources of News
Journalism and Law
Key Determinants of National Income
Key Factors That Affect Pricing Decisions
Kinetic models in biology and Related fields
Know about the different forms of traditional African dances
Latest technology trends
Latest dance trends
Magnetoencephalography (MEG)
Microeconomic Analysis to the Demand for Labor
Neuromuscular disorders
National Economies, Fluctuation, and Responses to Fluctuations
Neurotransmitters: what they are and different types
Nanomedicines to target tumors
Objections to utilitarianism
Organizational motivation and its effects
Overcoming Hiring Challenges for Nonprofit Organization
Population Demographics
Recurrent neural networks (RNN) for speech detection
Russian School of Mathematics
Research and Development
Risk Sharing in Insurance and Asset Markets
Stochastic optimization methods in deep learning?
Structure of the nervous system
Structure of a Corporation
Schizoaffective disorder: how to live better with it
The climate change denial
The techniques of basic cinematography
The Endosymbiotic Theory
The Role of Internal Audit in Corporate Risk Management
Unions
Unemployment
Utilitarianism Vs. Kantianism
Understanding Auctions and Auction Theory: Part 2
Various theoretical perspectives of sociology
Virtual reality, what it is and how it works
What are the linear models in machine learning?
What is Convolutional Neural Network
4 Facts about Origin of Mathematics!
5 techniques to create an animation
10 emerging technologies according to World Economic Forum
10 strategies to maximize corporate profits
3d Model Of Building
6 Medical Technologies that revolutionized the healthcare in 2020
All you need to know about the ACA Code of ethics
Architecture and Democracy: An Introduction
Architecture and Democracy: Democratic Values
Architecture and Democracy: Democratic Procedures
All You Need to Know About a Synthesis Essay
An essential guide to understanding Film Theory
Application of Artificial Intelligence in Cyber Security
Applications of electrical engineering
Augmented reality: what it is, how it works, examples
Advantages And Disadvantages Of Social Networking
All you need to know about Cryptography
Applications of astrophysical science
All you need to know about architecture engineering
Applications of geological engineering
Artificial intelligence and medicine: an increasingly close relationship
An insight into Computational Biology
ACA code of conduct
A Rose for Emily
Applications of Mathematics in daily life
Architecture mistakes to avoid
All you need to know about Toxicology
All you need to know about Holistic Medicine
All you need to know about linguistics
An introduction to Linguistics and its subfields
All you need to know about Anxiety disorder
All you need to know about Drones
A Brief Insight into Political Science
Assumptions related to feminism
All you need to know about Byzantine emperors
All you need to know about labour economics
An insight into xenobots -the first-ever robots
An ultimate guide about Biomaterials
A Comprehensive Introduction to the Mona Lisa
Analysis methods of Transport through biological membranes
An ultimate guide about biochemical reactions
Analysis of brain signals
Artificial Gene Synthesis
Application to synthetic biology of CAD methods
All you need to know about metabolic pathways
Applications of BIOMEMS
All you need to know about the epidemiology
Asian vs. western leadership styles
All you need to know about Smart prosthesis
Analysis of Economy: Output of Goods and Services (GNP), and GDP on Economic success
A Guide to Pricing Strategies
An Overview Of Economic Studies
Analysis of Fiscal and Monetary Policies
Analysis of Business Cycles
Analysis of Consumption and Investment
A Look into Regression Analysis
Analysis of Household's Consumption and Savings Behavior
All you need to know about Capital Budgeting
All you need to know about risk management
Art looted in wartime.
Appropriate use of Data in Economics
All you need to know about reaction kinetics?
A historical overview of Financial Crises
All you need to know about management discipline?
An insight into the error-correction models
All you need to know about Data visualization
All you need to know about Work-family balance
All you need to know Technical Writing?
All you need to know about digital special effects
All you need to know about Big data management
All you need to know about Neuroendocrinology
How to Write a Personal Essay
Housing Needs in America
How to Write a Description Essay
How to Create an Excellent Scholarship Essay?
How to write a cause and effect essay
How to Hire the Best Essay Writing Service Provider?
How to Write a College Application Essay?
How to get the most out of your English lectures
How to write Expository Essay
How to succeed in your psychology class?
How to Write an Academic Essay in the Shortest Time?
History of Journalism
How Different Sectors are Using Artificial intelligence (AI)
How to write an informative essay
How to deliver persuasive essays?
How to Give a Convincing Presentation
How to write an essay on leadership?
Historical Art Still Around Today
Humanoid robot: what it is, how it works and price
History of Chemistry
Healthcare Advanced Computer Power: Robotics, Medical Imaging, and More
Healthcare AI: Game Changers for Medical Decision-Making and Remote Patient Monitoring
How to understand different types of English
How to Cope with Chronic Pain
How African American choreographers and dancers have influenced American dance
How mobile robot can do in logistics or in production
How To Become a Successful Entrepreneur
History of the Philosophy of Feminism
How is the climate changing?
How to Track Your Content Marketing ROI
How to Gun control In the USA?
Historical and contemporary role of labour in the modern world
How breast cancers are classified?
How the cells of our body communicate?
How the Lymphatic System Works?
How Digestive System Works
How to complete your capstone projects effectively?
How to write a research project
Healthcare technologies that help patients with better self-management
How to choose the topic of the senior capstone project
How to make your business survive at economic crisis
How can immigrants blend in the American society?
How does the economics of war affect society?
Hate speech on social media.
How to Build an Economic Model
How to start a healthcare startup?
How can financial illiteracy harm you?
How cancer is developed - Cancer biology
How to define the Enterprise Value
How to conduct economic research?
How women can manage sexual harassment
How to use quotes in your news reports?
How news report can be strengthened through multimedia
History of silent cinema
How to use the audience’s feedback to write a news report
How Relativism Promotes Pluralism and Tolerance
Introduction to Urban Studies
Importance of dance in education
InMoov: how to build an open source humanoid robot
Importance of KYC verification to making the Blockchain secure
Importance of Rhythm
Importance of dance student evaluation
I/O control methods -types and explanations
Identity theft: what to do?
Introduction to Utilitarianism
Importance of 3d Modelling in Architecture
Importance of online journalism
Image processing in medical diagnosis
Introduction to USA Politics
Introduction to Comparative Politics
International Relations as a Major in Political Science
Importance of modern trade policy
Introduction to Journalism
Introduction to Writing a TV Script
Introduction of Microfabrication techniques
Introduction to Microeconomics
Interaction of Consumer and Firm Choices in Markets
Importance of corporate sustainability
Issues in International Monetary Macroeconomics
Introduction to Statistics and Data for Economics
Introduction to Data and Probability for Economics
Introduction to the Game Theory
Introduction to Econometrics
Introduction to Economic Information
Introduction to Market Equilibrium
Introduction to Economic Models and Application
Introduction to Empirical Research
Introduction to Econometric Data
Importance of Critical Thinking, Principles, and Goals
Introduction to Identification and Causal inferences
Introduction to Econometric Application
Intermediaries and Government in Financial Crisis
Importance and seven principles of quality management
Illiteracy in the USA
Introduction to Economics of Law
Introduction to Coase Theorem
Introduction to Social Choice and Incarceration
Intellectual Property and Product Liability
Investment in Human Capital
Introduction to Labor Markets
Imperfect Information in Insurance
Imperfect Information and Asymmetric Information
Introduction to Population Problems
The Looming Energy Crisis in America
Top benefits of performance-based engineering
The More Languages You Know, The More Times You Are a Man
Things to consider while writing an Argumentative Essay
Top Ways to Improve Your Academic Writing Skills
Tips to Excel in Creative Writing
The origins of films in the early 19th century
Top career options in Architecture
The Elevator Pitch
Top finance trends 2020
The basic Structure and functionality of robots
The Way to Success
The election system of the President in the United States of America
Two-party System in United States of America
Top trends in urban design
The history and theory of African American filmmaking
Top benefits of creative writing
Tinnitus Guide: Common Symptoms and Treatment Options
The language of dance
The digital image processing management
Top famous politicians of the World
Top methods of political science!
The history of the feminist movement
The blood flow in cardiovascular system - Biofluid Mechanics
The best of Leonardo Da Vinci
The Structure and Function of Macromolecules
The structure of cell: a research on the bricks of the human body!
Tissue and organ construction: Adhesion and recognition between cells
The kinetics of the transformation processes
The Modeling of Biological Systems
Tips for writing a great thesis statement
The Defense mechanisms against infections
The impact of the technological innovations in medicine
Top journalism trends to know about
The relation between mass media & politics
Theranostics: Diagnosis and Care through Nanoparticles
The practical Applications of X-rays
The applications of Ultrasound in medicine
Transfer mechanisms of genetic information in Bacteria
The regulation of cellular metabolism in the diagnosis
The Principles of MRI Contrast agents
The technical basis of optical coherence imaging
The New Media: Emerging Trends
The Structure of Interest Rates and the Yield Curve
Technological perspectives and reflections of neural engineering
Types of bioreactors and their applications
The Role of Government Policy in Improving Economic Outcomes
Types of corporate responsibility
The Role of IMF in International Monetary Macroeconomics
Tools for investment decision making
The concept of Organizational Culture and its applications
The Conduct of Monetary and Fiscal Policy
The Basics of Financial Accelerator Models
Tips for labeling medical devices- Medical Entrepreneurship
The different medical imaging techniques
The Economics of Uncertainty – Introduction
Theories of Public Policy
The Game Theory in Social Media
The political theory of Thomas Hobbes
The Use of Law on Economics and Vice Versa
The Role of Internal Audit in Corporate Risk Management
The Endosymbiotic Theory
The techniques of basic cinematography
The climate change denial
What is a Definition Essay?
What are diagnostic essays?
What is the relation between art structural engineering?
What is a Narrative Essay
What are robotics and intelligence systems?
What are the benefits of studying health sciences?
What is artificial intelligence and why it matters?
What is comparative Literature?
Why study neuroscience
What is Wi-Fi and how does it works
What is French history famous for?
What are Humanistic Studies?
What is covered in Biophysics?
What is modern journalism?
What is Virtualization? Benefits & Applications
What are modern public relations?
What is plasma physics?
What is teacher preparation?
What is rapid prototyping for 3D printing?
What is contemporary European Politics?
Why should you learn American Ballet?
What is engineering physics?
What is the purpose of African American Literature?
Ways to learn the Rhythm
What is digital art used for?
What are Enzymes and how do they work
Who is the father of political science?
Why Study Political Science - Job?
What is the Philosophy of Feminism?
What is a quantum computer?
Ways B2B Startups Streamline Their Conversion Strategies
Why do biomedical signals need processing?
What are the long term effects of climate change?
Why study labour relations
What is Holoprosencephaly?
What is antisocial disorder?
What are the important principles of evolution?
What is the cytoplasm and its function?
What is biopolymers?
What Makes a Good Leader
Women empowerment in modern generation
What is the history of political thought?
What is Gene recombination
What is synthetic biology
What is business cost analysis?
What is Inflation
What are the consequences of unemployment?
What is lithotripsy and its types?
What is transition elastography?
What is the purpose of deep brain stimulation?
What is a Brain-Computer Interface (BCI)
What is neuroethics?
What is Market and Supply and Demand
What is optogenetics?
What are the techniques to record brain activity?
What happens if the interest rate increases?
What is immunotherapy?
What is the economic role of the financial market?
What are the factors behind illegal immigration?
What is the lymphocyte activation?
What is financial market and its types?
What is the structure of financial markets?
What are the methods of measuring business performance?
What is the Credit market?
What is business ethics and code of ethics
What are the Causes of financial instability?
What is MBA with Concentrations
What is regenerative medicine?
What is Population ecology?
What is Microfinance: evolution, and practices?
What is biotechnology and its applications?
What are Workplace diversity and its benefits?
What is the difference between a leader and a manager?
What Is Branding and best branding Business strategies?
Why are microelectronics important?
What are biologic drugs.
What is the Foreign Exchange market?
What is the role of scientific research in times of crisis?
What are the risks of international trade?
What is financial management?
What is gene therapy?
What is education economics?
What is regression analysis, and why should you use it?
What Is Technology Marketing And How Should It Work?
What is Management Accounting
What are the methods of valuation of companies?
What is Immune System and Immunotherapy?
What is big data analytics?
What is the 7 layers of OSI model?
What is Neuroplasticity?
What are Sculpture art and its types?
What are the different genres of films?
What is Transcranial magnetic stimulation (TMS)?
What is TES-Transcranial electrical stimulation?
What is Relativism?
What is Vaccine skepticism, and what to do about it?
What happens in the brain when learning?
What is the deep neural network?
What is Convolutional Neural Network
What are the linear models in machine learning?