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Posted on May 4th, 2014, by

Explaining the essence of uneasy relationships between politics and economics, we can also mention that economic statement of a question how material wealth is produced and distributed affect the basis of vital relations. And in this situation, questions and answers are evaluated differently by people, classes, social groups because different aspects affected their vital interests. The problem of the relationship of politics and economics reveals the concept of economic policy in a full degree in the concept of economic policy. Being more specific, we can notice that economic policy is a system of economic activities of the state, set goals, resources, tasks, activities targeting the development of the economy. Economic policy is a crucial means of supporting the country’s political course.

The state has always played an important role in the development of a market economy. Even a free competition could not do without the state, which took the responsibility for organizing the circulation of money, providing the legal framework of a market economy upon itself.

In such a way, it is possible to conclude that government intervention in the economy can be justified from the economic position by virtue of insolvency and market imperfections. The pure market allocation does not guarantee the right to a standard well-being, without which democracy can exist in any society. In addition, the market mechanism does not provide work for all who can and want to work. Strategic breakthroughs in science, technology, structural changes in the economy can not be implemented without the participation of the state; they can not be solved without the state’s interaction even on the regional level. The negative consequences of market failures such as monopoly, inflation, etc. also require government intervention. Consequently, the market mechanism needs to be corrected, and only the state has enough power and possibilities to do it in a proper way.

The state is involved in a market economy in order to maintain economic stability and macroeconomic equilibrium, smoothing cyclical ups and downs in economic development. First of all, the state contributes to efficient economic activity of entrepreneurs. To do this, it increases the efficiency of the market mechanism.

In today’s world, economic role of the government has been steadily increasing. This process is reflected in the quantitative growth of public spending and a significant increase in the direct regulation of economic life. Total government spending is now a significant part of the gross domestic product. The main items of expenditure are the costs of defense, education and health. In addition to participating in the distribution of national product, the state is acting as an independent entity (the so-called public sector). In a more traditional sense for us it represents, above all, a set of state-owned enterprises whose products are once again on the collective public consumption. Public sector workers now make up a significant portion of employment. However, it should be borne in mind that the ”˜swelling’ of the public sector carries the risk of replacing the market mechanism by the public administration, management and growth of bureaucracy. The big problem is the efficient functioning of the public sector, because there is a tendency to decrease in efficiency, quality, etc. This is due, on the one hand, with less pressure on the state-owned enterprises to market forces, on the other – with the support of the state.

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