ECONOMIC POLICY. — It represents perhaps the most important sector today, and the most coveted task of practical politics; its purpose is to give a coordinated direction to the spontaneous rhythm of economic activities, in order to prevent and remedy the harm that may result from them to the less affluent classes, to certain branches of industry, to commerce, or to the national economy in general. Today these aims are fused and organically summarized in plans, whether total or partial, systematic or tendential.
To fulfill this task, political governments have at their disposal only anti-economic weapons, which essentially take the form of fiscal and customs systems, the policy of commercial treaties with foreign countries, and the control of prices, industrial financing, banks, production, exchanges, and consumption; finally, they employ certain special financial mechanisms: the discount rate, the regulation of monetary circulation, and the like, reaching their most acute forms in forced saving and the confiscation of capital. The sum of these expedients (for that is what they ultimately are, even if sanctioned by centuries of use), together with the related complex operations over time, in the various sectors of the economy and in international relations, constitutes economic policy: it is confused by many, because of the affinity of subjects or similarity of terms, with political economy, which is taught in schools as economic science. In reality, whether because of the increasing gravity and complexity of the problems, the suggestive ease of maneuver available to those who hold political power, the relative promptness of the results, or the ever greater and more urgent financial needs of governments, economic policy is increasingly overwhelming political economy, which is thereby humiliated as a science and discredited as a hope for a rational economic order. Thus economic policy has acquired the rank and prestige of a science at the expense of economic science properly so called; and it is toward economic policy that the expectations and demands of individuals, classes, enterprises, and peoples are directed, rather than toward scientific and moral progress. Through a tacit involution, political economy deals predominantly with economic policy and advocates its further strengthening, suggesting that solutions to economic problems be sought from it (v. KEYNES). In this way, economics is on its way to being practically recognized as an ordinary function of national policies—which evidently destroys the concept of science.
This situation is fraught with dangers: first, because it leads away from the main path, placing empiricism before rationality; secondly, because the various national economic policies, necessarily different and often conflicting, do not favor a rational ordering of the economy, which is a worldwide and unified phenomenon; thirdly, because the economy in the hands of politics, and of a democracy that bends to less wise counsels, represents a dangerous instrument of domination and apprehension, as well as of enmity among States; and it invites governments formed by parties skilled and daring in the manipulation of expedients, but increasingly less prepared and willing to govern according to the natural laws of the economy, to undertake every kind of experiment.
The limits of a sound economic policy are marked by the right and duty of the State to support, coordinate, and discipline individual economic activities, taking the place of self-government, which is still distant from the economy, and containing errors and excesses; always with the purpose not of correcting the natural laws, but of ensuring their free play, avoiding only excessive collisions and taking real situations duly into account. Only a developed economic science, supported by a sound applied science, in a climate of improved morality and culture, will be able to keep economic policy within its proper limits: enhancing its valuable intervention in economic activities as an expression of wisdom and not as systematic violence against an economic truth in whose clarity it has no interest.