The need for state regulation of the economy. Scale of economic activity. Economic stabilization

2024 Author: Henry Conors | [email protected]. Last modified: 2024-02-12 02:40

There are many reasons explaining the need for state regulation of the economy, but not everyone understands them. The market mechanism of control is a potentially effective method of ensuring coordination and harmonization of various economic entities. The market determines a fairly high, and at the same time constant responsibility for making timely and high-quality economic decisions, as well as for the results of the activities carried out.

The need for state regulation of the economy is explained by the fact that if market prices are formed under the influence of supply and demand, then manufacturers will have the opportunity to obtain the most complete information about what exactly needs to be produced and in what time frame. At the same time, market prices determine the adoption of various decisions in the field of investment policy and many others.

The need for state regulation of the economy also arises for the reason that in the absence of control and predictability of the marketit is simply objectively impossible to achieve any really important long-term goals, as well as to solve any serious socio-economic issues. With insufficient coordination of relations, irrational costs may appear due to the release of unnecessary commercial products, frequent bankruptcy due to unforeseen changes in market conditions, solvency and solvency of counterparties, and other reasons. The laws of the market by themselves can establish the prospects for the development of society as a whole only spontaneously, with absolutely unpredictable results, and this is precisely their organic nature, which dictates the need for state regulation of the economy.

What is it?

Due to the fact that the market is imperfect and insolvent, even in developed countries, the state intervenes in the economy quite justifiably. At the same time, it should be noted that the higher the level of production possibilities, the higher will be the division of labor between all operating enterprises, and the higher the competition, the stronger the features of a market economy require state regulation.

Such control is the use of a certain set of measures aimed at the centralized influence of the state itself, as well as its regional and federal bodies, on the main elements of the market, that is, the conditions for implementation, supply and demand, market infrastructure, qualityproducts, competition and many others. It is generally accepted to single out the three most ambitious functions of the state: stability, justice and efficiency.

Efficiency

Features of a market economy have led to the fact that the state, when using various economic instruments, should create such an economic environment that will ensure the most efficient operation of production. In particular, special attention is paid here to the antimonopoly activities of the state, the intensification of the competitive environment in the market, as well as the provision of the most favorable conditions for the operation of market mechanisms.

Justice

For the modern market, a fair environment is that those organizations that provide price and pricing, and who have succeeded in competition in the market for services and goods, capital and labor, have high incomes, and at the same time low profit from those who failed in this area. Exclusively market distribution is not at all a guarantee of obtaining a living wage, and for this reason the state must redistribute the income received through various taxes, as well as ensure the full support of the elderly, the disabled and other people in need. In other words, the government should take care of the employment of all citizens, guarantee the lowest possible level of consumption through the definition of a minimum wage.

Stability

Governmenteconomic stability is maintained, in which the price and pricing are in extremely calm conditions, and the cyclical form of development is also smoothed out. It is also worth noting that they carry out antitrust policy.

The state must solve those functions that cannot fundamentally be carried out by the market on its own. Thus, the regulation of natural monopolies and other areas makes it possible to supplement and correct the purely market mechanism.

Different countries use a wide variety of technologies to control the economy, which are selected due to the experience acquired by history. This may be cost control, the tax system, expert assessments, marginal limits, the introduction of long-term standards, and a number of other measures. Thanks to this, the regulation of natural monopolies and other organizations provides an active influence on the market, and also allows you to regulate relations between consumers and producers. At the same time, it is worth noting the fact that the methods used must be continuously updated and modernized, adapting to new conditions and tasks for the development of the economic structure, and at the same time not hinder entrepreneurship and initiative. Thus, it is possible to achieve flexible use of market and planning principles, based not on their opposition, but on the most effective combination.

Basic concepts

The instruments of state regulation of the economy allow himinfluence the activities of various economic entities, as well as market conditions in order to achieve the most optimal conditions for the operation of various mechanisms.

Any negative aspects that are present in the modern market economy may well explain the reasons why the role of the state in it is constantly increasing. It is the prevention of any negative consequences of the work of market regulators or their smoothing that is the main task that the economic activity of the state apparatus sets for itself.

Functions

Given all of the above, it is possible to identify several of the most important functions for which the instruments of state regulation of the economy are used:

• creating a legal framework for the normal operation of private entrepreneurs;
• redistribution of profits through the use of a progressive taxation system, as well as transfer payments;
• adjusting the structure of production to change the distribution of resources;
• funding basic sciences and protecting the environment;
• monitoring and adjusting the level of employment, economic growth and the cost of various products;
• financing production capacity, as well as the direct production of certain public goods or services;
• ensuring the protection of competition.

On the last point, it is worth noting thatwe are talking about the work of antimonopoly structures, because any form of state regulation of the economy is aimed at eliminating the possibility of a monopoly. The dominance of certain companies in their field ultimately has an extremely negative impact on society as a whole, therefore maintaining a competitive environment is one of the most promising functions of any state.

It is worth noting that there are two main forms of state regulation of the economy:

• through the public sector;
• by influencing the work of the private sector through the use of various economic instruments.

How is it provided?

State regulation in the conditions of a modern market economy involves the use of a number of measures of an executive, legislative and supervisory nature, which are carried out by state authorized institutions or various public organizations in order to stabilize and further adapt the existing socio-economic system to constantly changing conditions.

In this case, according to the objects of influence, activities related to the regulation of three interconnected parts of the production process are determined: regulation of production, resources and finance.

According to the levels of the regional hierarchy, the goals of state regulation of the economy are carried out in two directions: at the regional and federal levels.

Guidelines

The strategy for ensuring such control is based on the following key principles:

• Under equal conditions, preference should always be given to the market form of economic organization. In practice, this suggests that the state should finance exclusively socially significant industries that are unattractive for representatives of individual businesses due to insignificant profitability.
• State entrepreneurship should in no way compete with private business, but, on the contrary, only contribute to its development, since this is contrary to the goals of state regulation of the economy. If this principle is ignored, in the end, state-owned enterprises simply begin to dominate private ones,
• Credit, financial and tax policy of state regulation of the economy should be aimed at ensuring social stability and economic growth.
• The state will be able to intervene in market processes more effectively if it has a market form.
• The state is strengthening regulation in order to ensure control of general economic crises, as well as various processes in the field of economic relations with other countries.

Goals and methods

The development of state regulation of the economy is carried out for the following purposes:

• minimizing the inevitable negative impact of various market processes.
• formation of legal, social and financial prerequisites for the effective operation of a market economy;
• Provision of social protection for those groups in the market society who are most vulnerable in specific economic situations.

At the same time, methods are divided into direct and indirect.

Direct methods used by the system of state regulation of the economy are based on various administrative and legal methods of influencing the work of various business entities.

Indirect ones differ in that they do not provide for any restriction of freedom of economic choice, but instead, on the contrary, provide additional motivation for making market decisions. The main area of their use is the entire economic environment. Such mechanisms of state regulation of the economy provide for the use of opportunities and means available to the country's monetary and financial systems.

It should be noted that these methods are interconnected.

Tools

If we talk about the instruments that provide state regulation of the economy, we can distinguish several main ones:

• administrative-legal;
• monetary system;
• financial system;
• government orders;
• state property.

It is also worth noting that, in addition to the abovetools for ensuring state control over the economy, which mainly have an exclusively domestic economic focus, there is also a whole arsenal of means by which foreign economic regulation is ensured. Almost all the levers that provide for the impact on the reproduction procedure within a particular country also significantly affect foreign economic relations. Thus, their use provides for a change in the discount rate and taxation, the introduction of new subsidies and incentives for investment in fixed assets, and many other measures.

Thus, the state ensures the regulation of the economy to achieve an optimal market environment.