The objectives of economic policy are the set of actions and decisions that a government adopts in relation to the economy of a country.
In this sense, economic policy consists of decision-making, as well as the implementation, of measures that try to control the situation of the economy.
Thus, economic policy contemplates a series of objectives on which said policy is based. In other words, the application of a certain relationship of economic policies is always preceded by some agreed objective that pursues a certain end.
For this reason, we must be very clear that economic policy always pursues certain objectives. Objectives that can be established both in the short and in the medium and long term.
Thus, among the objectives of economic policy we can distinguish short-term (temporary) objectives and longer-term (structural) objectives.
Short-term economic policy objectives
Within the short-term objectives, economic policy focuses on three fundamental elements:
- Full employment : The Government focuses on creating jobs for the citizens of a country. Trying to eliminate, in the first place, unemployment. On the other hand, it seeks to end structural unemployment, as well as reduce seasonality in those more cyclical jobs. In short, it tries to provide the workforce with a job position to ensure a good standard of living.
- Price stability : Through the use of fiscal and monetary policy, it is to guarantee price stability in the country. For this, economic policy is responsible for orchestrating all the machinery in such a way that inflation remains at an optimal level for the economy and its economic agents.
- Improvement of the balance of payments : It consists of balancing the inflow and outflow of capital. The objective pursued is to guarantee, in the first place, the solvency of the country. On the other hand (and if there is one), another objective is to reduce the country’s foreign deficit; as well as, finally, maintaining an optimal level of the country’s reserves.
Long-term economic policy objectives
Thus, as in the short term, economic policy also focuses on the pursuit of a series of objectives that, due to the difficulty they present, are established in the long term.
- Expansion of production : First of all, one of the main objectives of economic policy, first of all, is economic growth. And since the gross domestic product (GDP) is the main measure of economic growth, this policy focuses on increasing the production of goods and services. Thus causing a broadening of production, with the consequent increase in GDP.
- Satisfaction of collective needs : Second, as another of the objectives of economic policy in the long term, we have collective needs. Given that resources are scarce and needs are unlimited, economic policy focuses on the distribution of those resources so that it is as efficient as possible; always guaranteeing that the collective needs are covered.
- Improving the distribution of income and wealth : As in the previous section, economic policy focuses on individual needs. For this reason, in general, it focuses on the efficient distribution of income and wealth, reducing levels of inequality and guaranteeing a minimum of justice and equity, it is one of the main objectives of economic policy.
- Protection and priorities for certain regions or industries : Economic policy, as with other elements, is responsible for protecting your economy. So, when a sector is a priority for a given economy, through it that sector is protected. Thus, establishing policies that try to favor this sector against foreign competitors. What is also known as strategic sectors.
- Improvement in private consumption regulations : Among the long-term objectives, the improvement of private consumption regulations should also be highlighted. Along these lines, the objective is also to organize economic activity. Avoiding, therefore, that there are cases in which a company can generate a monopoly, as well as other perverse effects of economic activity.
- Security of supply: Among the objectives pursued by economic policy is to guarantee a correct and continuous supply of the population. In this sense, basic goods that guarantee decent living conditions.
- Improvement in population size or structure : Economic policy also seeks to promote sustainable population structures. In PAYG economic systems, the economy must present a structure that guarantees the proper functioning of the economy. In reference to this, promoting public policies that try to control population levels in each of the population segments among which a society is classified.
- Reduction of working hours : Over time, one of the objectives of economic policy is to improve living conditions. Consequently, it focuses on developing policies that favor productivity. Thus, establishing conditions that allow to produce more in a more limited period of time, allowing healthier and less deteriorated living conditions.