ECONOMIC POLICY. — It represents perhaps the most important sector today, and the most coveted task of practical politics; its aim is to give a coordinated direction to the spontaneous rhythm of economic activity, so as to prevent and remedy the harm that may befall the less well-off classes, certain branches of industry, commerce, or the national economy in general. Today, these aims are fused and systematically summarized in total or partial, systematic or tendential planning.
To fulfill this task, political governments have at their disposal only anti-economic weapons, which essentially take the form of fiscal and customs regimes, commercial treaty policy with foreign countries, price controls, industrial financing, banking, production, exchange, and consumption, and finally the manipulation of certain special financial mechanisms: the discount rate, control of the money supply, and the like, reaching their most acute expressions in forced savings and capital confiscation. The sum of these expedients (for such they remain, even if sanctified by centuries of use) and the related complex maneuvers over time, across various sectors of the economy, and in international relations constitute economic policy, which many confuse, by affinity of subject matter or assonance of terms, with political economy as taught in schools as an economic science. In reality, whether because of the growing gravity and complexity of problems, the subjective ease of manipulation for those holding political power, or the relative speed of results and the ever-great and urgent financial needs of governments, economic policy is clearly overshadowing political economy, which is thereby diminished as a science and discredited as a hope for a rational economic order. Thus, economic policy has earned the rank and prestige of a science at the expense of political economy proper: it is toward this that the expectations and demands of individuals, classes, businesses, and peoples are directed, rather than toward scientific and moral progress. To the point of reproach, political economy itself concerns itself mainly 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 practically reduced to being recognized as an ordinary function of national politics: a development that clearly destroys the very concept of science.
This situation is fraught with dangers: first, because it diverts from the main path, preferring empiricism to rationality; second, because the various national economic policies, necessarily diverse and often conflicting, do not favor a rational organization of the economy, which is a worldwide and unitary phenomenon; third, because economics in the hands of politics—and of a democracy that may heed less wise counsel—becomes a dangerous instrument of domination and oppression, as well as of enmity among states; and it invites all manner of experiments on the part of governments skilled and daring in the manipulation of expedients, but increasingly unprepared and unwilling to govern according to the natural laws of economics.
The limits of sound economic policy are marked by the right and duty of the State to support, coordinate, and regulate individual economic activities, substituting for the self-government still lacking in the economy and containing errors and excesses; always with the aim not of correcting natural laws, but of ensuring free play, merely avoiding excessive clashes and taking due account of real situations. Only an advanced economic science, supported by a valid applied science, in a climate of improved morality and culture, will be able to keep economic policy within its proper bounds: valuing its precious role in economic activity as an expression of wisdom rather than as systematic violence against an economic truth whose clarity it does not serve.