The Impact of Government Policy on Economic Growth

Why Education Is Key to National Development

Understanding Taxes for Small Business Owners

Current Technology Trends in Africa

Governments made decisions every day that affect the economic lives of millions. Others may be significant and obvious, such as the new national budget or a trade agreement. Others are simple and unnoticed, such as a raising of building codes or a licensing charge. But, whatever policy choices, good or bad, are made, they have an impact on the economy at large. This is vital to any citizen if they desire to hold their leaders accountable and vital to businesses who want to plan for the future.

This was Direct Link Between Policy and Prosperity.

Development is not an isolated phenomenon. It is shaped by government rules, incentives, and restrictions. Well-designed policies can ensure economic growth, investment and job creation. Poor policies can hinder innovation, attract withdrawals of capital and reinforce poverty.

One example is mobile money in East Africa. Officially, Kenya didn't need Safaricom to get a traditional banking licence, so opening up of M-Pesa was actually a policy decision. This path paved the way for millions of Kenyans who didn't have a bank account to send and receive funds, pay their bills and get credit on their cellphones. Mobile money is a major part of Kenya's economy today, and has been replicated throughout Africa. Doing so was a policy decision that altered the course of an entire region.

On the other hand, consider changes in tax policy that may impact business which can come out of the blue. If a government imposes a new, and unannounced, tax on the import of raw materials, the manufacturers are not able to adjust to it in time. Expenses go up, costs go up and consumers are inconvenienced. Some businesses might have to shut completely. Perhaps because of legitimate revenue considerations, the policy decision has a real impact on people.

The Policy Areas That Matter Most

Economic development is influenced differently by different policies. In particular, several areas are important.

Taxation and government spending influences the economic environment in the form of fiscal policy. Business taxes are an impediment to investment and job creation. The loss of resources through inappropriate spending should be directed to improving roads, schools, hospitals, etc. Development is fostered by efficient tax collection, fair rates, and strategic public investments.

The control of monetary policy through central banks has an impact on inflation, interest rates and currency value. When the price of goods remains constant, businesses can more accurately predict and plan for the future. Predictable rates enable borrowing to be possible. The security of a currency promotes trading and investing. If monetary policy is failing, an economy can come to an end with a hyperinflation or currency crisis.

Trade policy is about the ease of trade for goods and services. Tariffs are very beneficial for domestic industries but hurt consumers. Open trade reduces prices and expands choice, but can damage local producers who are uncompetitive. The correct correct ratio is important based on the level of development of a country and industries.

All economic activity is impacted by regulatory policy. Labour laws and legislation dictate the ease with which businesses can add and remove employees from their payroll. Environmental laws are designed to carry a cost to the polluter and to help ensure the health of his or her neighbors. Licensing requirements can be used as a way of ensuring quality or likewise become an obstacle for newcomers to the market and benefit the incumbent(s). Regulations which safeguard the general public should not unduly burden business.

Infrastructure policy is the policy that establishes the presence or absence, construction and maintenance of roads, ports, power, or internet networks. If there are no reliable infrastructure, then no economy can grow. There are no roads, no produce is transported to market. There is no way of manufacturing without power. There is no internet, therefore no student can learn online. Investment in infrastructure is one of the most powerful means of government action for development.

The impact of policy certainty on investment.Policy Certainty and its impact on investment.

The predictability of policy is a huge factor beyond the substance of specific policies. Businesses hate uncertainty. If a company is planning on investing in a new factory, it is important to be aware that there is no expected significant change in tax rates, labour laws or trade rules next year. Frequent policy changes result in postponing investment or leaving the business.

Countries with stable and predictable policies are more attractive for investments. Investors are informed and can plan their investing accordingly. When policies flip-flop with every election - or officials do as they please - then countries have a hard time attracting capital. Policy certainty, not a tax holiday, is the best thing that a government can provide.

Independent bodies, such as central banks and regulatory commissions, are important, for this reason. But when they are not subject to political pressure, they give stability. Interests will not rise without warning just prior to an election and business will not see safety laws changed to favor parochial groups or be exempted from safety rules.

The Unintended Consequences of Well-Intentioned Policies" is the name of the report.

Well-meant measures can have unwanted side effects. A rent control, for instance, is being imposed to make housing affordable. Economists, however, have demonstrated that more stringent rent control rules dampen the supply of rental units, encourage existing units to deteriorate and result in black markets. This policy affects existing tenants, but not prospective tenants or landlords.

The purpose of minimum wage is to reduce poverty. However, if they are set too high, they have a negative effect on employment, especially among low-skilled and young workers. Automation and/or relocations to lower labour cost areas are possible for businesses. The targeted groups might end up being without work.

Local content requirements try to build domestic industry by requiring foreign companies to buy from local suppliers. All of these requirements might increase costs, decrease quality and create a possibility for reciprocation from trading partners. Sometimes protection can backfire.

Students need to understand that governments should NOT avoid such policies. It's that policymakers need to think about the unintended consequences and tweak policies accordingly. Things that work in one place or at one time might not work elsewhere and at other times.

How can citizens influence policy?What is the role of citizens in the making of policy?

Decisions made on social policy are not secret permeate of remote authoritarians. In a democracy, citizens can be a force in policy development. Until the time comes when citizens put it into practice, however, this power will not matter.

The lowest of its tools is voting. If citizens are knowledgeable on these matters and know the impact of policies on the economy, they can trust candidates to support policies that are growth-oriented. They are able to turn down candidates even if policies presented to them would be destructive and even if they are popular on the national agenda.

Citizens can participate directly in addition to voting. They have the opportunity to attend public hearings regarding proposed rules. They are allowed to put forward comments about draft policies. They are able to participate in business associations or civil society organizations that promote good governance. They have the opportunity to interact with their elected officials and to hold them accountable for their decisions.

The best indicator of good policy is an informed populace. If citizens comprehend the free market, they are less inclined to advocate shrinking policies. They can differentiate between promises