Supply Side Policies are one of the three government economic policies to achieve some of the six government economies objectives. They are set by the government to make the local domestic economy more efficient in comparison with economies of other countries. Supply side policies include: privatization, training and education for workers, deregulation (increasing competitiveness), adjusting domestic policy and foreign policy.
The importance for the government to set domestic policy and foreign policy
The government of any country will most likely formulate two different types of policies – domestic policy and foreign policy. First, a set of policies to regulate domestic market. And second, a set of policies to regulate international trade.
The political stability of a country provides the maximum benefits. It is because having the same government can assure continuity of both domestic and foreign policies. And companies prefer predictability over volatility in the long-term perspective.
The political environment of the country can provide both opportunities and threats for businesses.
Domestic policy
Domestic policy relates to the government’s attitude towards internal affairs of regulating the domestic market.
The government can provide assistance to domestic businesses to encourage the firms locate in underdeveloped parts of the country. In addition, the government can impose or cancel restrictions on building new factories and office buildings in an area of residential housing. Also, the government can ease or toughen planning regulations in areas of natural beauty near national parks.
Foreign policy
Foreign policy relates to the government’s attitude towards external affairs of regulating international trade.
The governments can provide assistance to exporters through government grants, subsidies, discounted rent, TAX rebates, etc. The government can also help newly established companies to become as competitive as exporters from other countries. In order to influence the international trade, the authorities can join or leave a trading block where the single currency and common laws are adopted.
To sum up, any changes in domestic policy and foreign policy will have major impact on companies and markets. These political changes can either introduce a completely new set of policies, or reverse any previous concessions given to businesses. Also, the government can decide to either become more involved in the economy, or less involved in the markets.
