Social Policy and Economic Policy? Social Policy

¶ … social policy and economic policy?

Social policy refers to guidelines, principles, legislation and activities that concern the way that humans live and interact. According to the Malcolm Wiener Center for Social Policy at Harvard University it refers to "public policy and practice in the areas of health care, human services, criminal justice, inequality, education, and labor."[1]

Another way that one can perceive social policy is that it is a cluster of rules and conventions that hedge in society and direct its actions in a certain way as well as direct appropriation of resources amongst the people. Important areas of social policy for instance are the welfare state, social security, unemployment insurance, environmental policy, pensions, health care, social housing, social care, child protection, social exclusion, education policy, crime and criminal justice.

Particularities of these include attitudes towards euthanasia, abortion, and homosexuality, legality of prostitution, drugs, marriage, and divorce.

In all ways, all these different areas are shaped by tradition, ideology, and politics. To illustrate, policies on crime are directed by current conception of crime (at one time homosexuality was considered subversive). Social policy too has been directed by different historical happenings such as the Victorian concern of the poor driving changes in the Poor law and in welfare reforms by the British Liberal Party. The New Deal in the U.S.A., to, another social policy revolution was brought about by a combination of politics and historical circumstance ( Roosevelt's need for popularity / votes and the Depression) whilst the Bismarckian welfare state of 19th century Germany was largely the result of the politics of a domineering statesman.

Social policy differs according to country and in each region it is affected by local and supra-local political influence.

Economic policy and wider economic forces also important

Economic policy on the other hand refers to the government's economic decisions and actions. These include for instance government setting of interest rates and government budget as well as the labor market, and national ownership. In short, it refers to government intervention in public economic concerns. These policies are frequently driven by actions and decisions of the International Monetary Fund or World Bank as well as by political undercurrents.

Note that although social policies and economic policies are both driven by social and political factors, social policies are rarely (or to an insignificant degree) driven by economic factors

Social Policy & Economic Policy

Social policy and economic policy are different fields of policy that are promulgated by as governing body. Social policy refers to guidelines, principles, legislation and activities that concern the way that humans live and interact. . Examples include the welfare state, social security, unemployment insurance, environmental policy, pensions, health care, social housing, social care, child protection, social exclusion, education policy, crime and criminal justice.

Economic policy, on the other hand, refers to the government's economic decisions and actions. These include for instance government setting of interest rates and government budget as well as the labor market, and national ownership. In short, it refers to government intervention in public economic concerns. These policies are frequently driven by actions and decisions of the International Monetary Fund or World Bank as well as by political undercurrents.

Note that although social policies and economic policies are both driven by social and political factors, social policies are rarely (or to an insignificant degree) driven by economic factors.

The two have a symbiotic relationship in that money is needed to retain and maintain the social policies and that social policies inevitably almost always effect economic decisions (such s Franklin's new deal or the Poor Laws). Economic decisions are often driven by politics; social policies are not only impacted by but also impact politics. The result of certain Social policies, therefore, can often impel changes in economic decisions as was seen in Thatcher's government of restraint in order to curb inflation and the New Labor that compelled Government to hire private contractors. Keynesianism, on the other hand, formulated policies that encouraged spending.

WHAT IS ECONOMIC POLICY

Economic policy consists of the following:

Controlling inflation - Attempts to keep the money supply growing at a rate that doesn't result in inflation.

Trade policy -- this concerns tariffs, trade agreements and international conventions that regulate them.

Policies for creating economic growth

Policies for redistribution of income and/or property

Other policies include regulatory policy, anti-trust policy, industrial policy and technology-based economic development policy

In short, economic policy consists of government intervention in the economic running of the country. It concerns direct and indirect taxation; tax relief; regulating the supply and cost of money, especially interest rates; public borrowing; public spending; and regulating markets, especially labor market measures and competition policy

THE WAY ECONOMIC POLICY AFFECTS SOCIAL POLICY

Social policy has an intransigent effect on economic policies. September 2011 was a watershed in the way that many countries in the world felt about their security. Their objective was to increase national security and reinforce the power of their armies. Concerned countries needed to make certain economic policies in order to achieve these goals. A lack of money would force the government to restructure its social policies and to either cut down on them or ignore certain projects altogether, shelving them for a time when they have a greater plenitude of funds.

In a different way, economic policies may impact development of certain social policies since evolvement of circumstances such as reducing inflation and maintaining currency stability provides the situation of increased unemployment which leads to social policies created to deal with this situation.

Available resources controls planning and implementation of social goals. All social policies need money. Unemployment, for instance, needs income support as well as government investment in job opportunities and training.

THE WAY SOCIAL POLICY AFFECTS ECONOMIC POLICY

Social policy has an intransigent effect on economic policies. One recent example was the need for greater security in Britain (as a result of the September 2001 attack and increase in aggression). This has prompted the economic objective of greater resources for military spending as well as investment in national security. To achieve these social policy goals (of for instance a stronger national army and increased national security), government forms certain economic policies that include adaptations to the interest rate and money supply, tax and government spending, tariffs, exchange rates, and labor market regulations.

Changes in the money supply (promoted by economic policies) can also discourage or encourage people to work as well as government investment in programs such as education, training, and nursery places. These can each improve productivity and ability in the labor market

In this way, therefore, social policies and economic policies have a mutually rebounding influence on each other. Political and historical events prompt social policies that in turn impact economic policy. These in turn affect social policy in the areas of for instance inflation, unemployment, or economic growth. To elaborate: economic policies may hinder or stimulate inflation; they may decrease or increase unemployment; they may generate or diminish economic growth. This in turn leads to other social circumstances that generate further social policies as reaction and, in turn, create reactive economic policies. The whole is, therefore, a vicious circle.

Schools of Economic Thought: Keynesianism

Keynes argued that fiscal policy could be actively used to dispel depressions, recessions and slumps. The crux of Keynesianism is that increase in spending impels increase in earning which encourages even more spending hence further increase in earnings and so forth. This is so because one person's spending goes towards (and increases) another person's earning; that person, in turn, by spending his earning, boosts the earnings of another, and so forth. In the meantime, you have a normal, functioning economy.

Keynes's theory impelled a host of interventionist economic policies during the Great Depression and formed the essence of Roosevelt's New Deal which influenced Britain and other countries in dealing with their own related depressions. The Great Depression in all countries had compelled people to hoard their money causing the economy to stop at a standstill. Keynes's theory urged governments to step in and to encourage public spending, which the government did by both increasing the money supply and buy buying things itself. This was an example of Government intervention to ensure full employment and to ensure return of economy to original stability.

Keynes's theory differs from preceding economic traditions in that it advocates active involvement of the public in contradistinction to past thought which advocated laissez faire capitalism.

Keyniasism also believes that trends at the macroeconomic level will influence trends at the micro (or individual) level. To that end, therefore, cutting taxes and/or increasing public spending may stimulate further spending in particular areas and to growth in economy. On the other hand, spending cuts and increase in income tax leads to reduced demand particularly in the wake of, or during a recession.

Economic Goals of Keynesianism

Keynesian government is against the unfettered market existence. It urges government intervention when needed in order to boost public spending. Keynesianism reason for redistribution of wealth is not only philanthropic: it concludes that poorer people are more likely to go into massive spending of money when given the chance. This, in turn, will be elevating for the economy.

Keynesianism goals are several:

1. Economic spending - where increase of ability spend boosts earnings in others. This in turn has a positive effect on the economy and encourages competition which stimulates innovation and leads to increase in employment.

2. Greater government investment in economy -- This promotes public spending and serves as model example. Government should invest and introduce incentives as well as engage in government spending in order to encourage people to spend.

If the government has little money at the moment, it should borrow money in order to boost demand by pushing money into the economy. The government can repay once the economy has stabilized.

Private investors too should be encouraged to contribute to the economy by encouraging spending.

3. Distribute earnings - By rising the earning of the poor the government will be giving the poor the ability to spend and the poor will readily do so. This will have an advantageous impact on the economy.

4. Boost salary -- so that people will have more money to spend. Unemployment is caused by people having insufficient money to spend.

In the 1970s, stagflation (i.e. inflation with low economic growth and high unemployment) undermined Keynesianism. This was because up till the 1970s, many economists believed that a stable inverse association existed between inflation and unemployment. According to Keyniasisnm, inflation meant that people were spending (the economy was growing) and that unemployment was consequently low. Increase in demand for goods would drive up prices; increase in spending would force companies to hire more people.

In the 1970s however, Britain and other industrialized countries entered a period of stagflation where there was a period of slow economic growth (exacerbated by problems of high oil prices and recession) that coexisted with high inflation and unemployment. It was only Milton Friedman's monetary policy that dragged these countries out of this slump.

Schools of Economic Thought: Monetarism

Friedrich Hayek and Milton Friedman were two economists who were prominent in the 1970s. Both wanted free markets with little government intervention. Contrary to Hayek, however, Friedman suggested monetary policy that could ease inflation. Hayek, however, argued that monetary policy caused boom-bust cycles in the first place.

Freidman believes that "inflation is always and everywhere a monetary phenomenon." In other words, he proposed that increase in the money supply prompted increase in prices.

Monetarism in short believes that the amount of money in the economy (otherwise known as the "money supply") determines the amount of demand of short-term economic activity. This can be illustrated in the following equation of exchange theory:

MV = PQ.

M= money; V= the velocity of turnover of money (i.e. The number of times in the year that the British pound is spent for goods / services); P= the average price for which goods / services are sold; Q= the quantity of goods and services that are produced.

As the money supply increases with V being constant and predictable, there is a corresponding increase in either P. Or Q. AN increase in Q. means that P. remains more or less constant with increase in P. only occurring if there is no increase in production / supply of goods / services. In short, changes in the money supply directly effects and regulates production, employment, and price levels of the economy. (britannica.com .)

For Freidman, the government should take an interventionist stance but only as it relates to increasing or controlling the money supply. This in turn would ensure a steady, moderate growth of economy with low inflation.

Control of inflation soon replaced policies on employment as a goal of economic policy. Using Freidman's ideas, the Government controlled the money supply using interest rates rises and tighter public spending control. It also deregulated markets, made tax cuts, and became anti-union. Finally Federal Reserve Chairman Paul Volcker drove interest down to double-digit levels in 1979, reduced inflation - but introduced a recession (Investopeida.)

Conservative Monetarist Policies

Monetarism was introduced in Britain by Thatcher who sought to curb inflation and deal with the rising oil prices as well as spectacle of unemployment. Monetarism is achieved by austerity chock treatment as recommended by the International Monetary Fund; and this was Thatcher's approach. She slashed government spending, deregulated markets, made tax cuts, implemented anti-union measures, and privatized many corporations as well as schools.

Thatcher succeeded in subduing inflation reducing it to 4.6% by 1983. She did this by introducing her New Public Management -- quasi-market reform as well as by insisting on the 3 E's, namely: Economy, efficiency, and effectiveness.

Many of these policies were disagreeable to the public as well as to some MPSs (such s former MPs of the Conservative party, Harold Macmillan and Edward Heath), and, indeed, Monetarism, proved decorous. The Bank of England failed to control money supplied and it resulted in provoking higher interest which resulted in recession, unemployment, and many businesses shutting down.