5 - Supply-side Policies And Policy Application Flashcards
Why would the government try to encourage more competition by using market-oriented policies
To increase national output and reduce inflation
What are the 5 major types of Market oriented supply-side policies pursued by the government to increase and encourage competition
1) Privatisation
2) Deregulation
3) Introducing market relationships into the public sector
4) Public-private partnerships
5) Free trade and free capital movements
What is privatisation
The transfer of assets or companies from the public sector (government) to the private sector
- This increases efficiency as private companies can move goods quicker and more efficiently, therefore reducing costs and therefore prices.
- Increase competition, which also leads to lower prices
- Reduces government intervention, saves money for the government
- An example: British Gas, British Rail, British Airways
What is deregulation
Removing government laws and regulations on certain industries and activities (barriers to entry) for new businesses.
- This fosters competition as new businesses can join the market easier (reduces barriers to entry)
- Lead to Increased efficiency as companies are motivated to to improve productivity and reduce costs to stay competitive
- Encourages innovation to stay competitive
- Example: US government deregulated the airline industry in 1978
What is introducing market relationships into the public sector
Application of market-oriented principles to the management and operation of public services.
- Emphasises competitive elements to drive efficiency and innovation
- Focuses on giving consumers options
- Aims to drive costs down through being efficient
- Introducing market relationships encourages entry of multiple private entities
- Example: Universities and hospitals
- Public sector to trade with each other, E.g. NHS foundation trust (2003)
What are public-private partnerships
Involves collaboration between a government and a private sector company
- Allows for increased efficiency and therefore lower costs
- Private company helps with the financial burden, therefore reducing cost for government and vice versa
- Long term partnership
- Can increase competition between private sector firms as there is a bidding process for the partnership, therefore private firms will increase their efficiency and innovation
- Example: Building companies for infrastructure, transportation infrastructure
What is free-trade and free capital movements
Free trade = Exchange of goods and services between countries without tariffs, quotas or other restrictions
Free capital movement = Unrestricted flow of capital across borders (assets, investments, funds)
- Encourages FDI as there will little restrictions, and investors can make long term investments in businesses in another country
- Businesses face competition domestically and abroad pressuring them to improve innovation, become more efficient and reduce prices
Example: Thatcher Government (October, 1979)
The 5 interventionist supply-side policies (Defined these in last lecture)
- Nationalisation (Most extreme form of intervention. Public ownership may result in higher investment)
- Direct provision (improvements in infrastructure like motorways)
- Funding R&D
- Training and education
- Advice, information and collaboration (Local enterprise partnerships, 2011)
What is Regional and urban policy
Policies to assist economic and social development of the less-favoured regions
Geographically immobile means ….
Where people move from one area (the immobile area) to another to find work
E.g. the mining industry in the North East
Policy approaches for regional and urban policy
- Subsidies and tax concessions in depressed regions
- Provision of facilities in depressed regions
- Siting of government offices in the depressed regions
What are subsidies and tax concessions
Subsidies = Financial assistance or support provided by the government to individuals, businesses or industries
Tax concessions = Reduction or exemption granted by the government on tax liability of individuals, businesses or specific economic activities
- Government uses these in the hope to influence behaviour, stimulate economic activity and achieve policy goals, more incentive to work
What’s the provision of facilities
Act of supplying or making available physical, social or economic infrastructure to meet the needs of individuals, communities or organisations.
- These facilities could be: Schools for education, parks, hospitals, housing, transportation (roads, bridges, airports), siting of government offices
What’s siting of government offices
Putting government offices where it optimises efficiency, accessibility and effective delivery of public services
- Good to put offices in areas where it’s accessible to the population they serve
- In regions where job creation is priority
- Government offices provide public services such as healthcare, education, social services and public safety
What is clustering
Clustering is the concentration of similar or related economic activities in a specific region/area.
- Businesses, industries, supporting entities are located near each other creating a network of organisations. This is driven by factors like access to skilled labour, knowledge spillover,
