The term social policy means the provisions made by the government for the social development in the country. The social policy is aimed at making provisions for social services and ensuring the welfare of the state. The social policy is framed by the government and economic and political forces also affect it. The social policy covers development of the society not only from the economic view point but also from the administration view point (Walsh, Stephens, and Moore, 2000). The administration of society covers the issues such as employment, social security, social health, and the criminal activities. The government of the state is responsible to frame the social policies keeping the economic and administrative aspects. There are various theories that lay foundation for the development of the social policies, among them the most prominent one are Keynesianism and neoliberalism (Walsh, Stephens, and Moore, 2000).
The Keynesianism and neoliberalism are the economic concepts that cover the government policies on various aspects such as demand and supply, economic output, liberalization, privatization, and government spending. In particular Keynesianism relates to theories of demand and supply and neoliberalism relates to the theories of government spending, fiscal policies, privatization, and liberalization. In the context of this an essay has been presented here that covers the analysis of Keynesianism and neoliberalism and contribution of these concepts to the development of social policies.
Role of Keynesianism in Framing Social Policy
Keynesianism is the approach in economics that provides various theories on assessing the impact to aggregate demand on the economic output. The proponents of the Keynesianism approach state that the changes in the demand in economy affect the economic output (GDP), inflation, and the employment (Jahan, Mahmud, and Papageorgiou, 2014). Further, the proponents argue that due to the demand being volatile it is difficult for the economy to achieve the efficiencies. The utilization of the economic resources in producing the output will not be effectively made until the volatility in the aggregate demand is resolved. This problem of demand volatility and the inefficient use of the economic resources can be sorted out by framing the responsive economic policies. The monetary and fiscal policies have to be changed actively by the government and the central bank respectively to mitigate the problems of under or over utilization of the resources (Jahan, Mahmud, and Papageorgiou, 2014).
The Keynesian approach of economics is more followed by the countries in war situations, recession, or depression situations. The Keynesian approach provides a strong basis for the country to recover from the economic and social disruption caused due to war or recession (Mkandawire, 2004). As per the Keynesian approach the economy hit by war or recession needs stimulation to get back on the track. This stimulation in the economy can be brought in through the use of monetary and fiscal policy. In respect of monetary policy, it is argued that a reduction in the interest rates is necessary to stimulate the economy after the war or recession crisis. Further, as part of the fiscal policies, the government needs to increase the spending and investment in the infrastructure to stimulate the economy (Mkandawire, 2004).
A reduction in the interest rates entails expansionary monetary policies while an increase in the government spending entails expansionary fiscal policies. Thus, the adoption of expansionary monetary and fiscal policies is necessary to stimulate the economy and recover from the war disruptions (Carson and Kerr, 2017). With the decrease in the interest rates, the borrowing becomes cheaper. Due to the borrowings being cheaper, the money for investment flow at a rapid pace and also the public have large amounts to spend. The increase in investment and public spending helps the economy to revive. Further, the increase in the government spending helps to increase the demand in the economy and raising the employment rate. The increase in demand helps to enhance the level of output (GDP) (Carson and Kerr, 2017).
Further, there are other economic concepts and theories being introduced by the Keynes such as the concept of wages and spending, excessive saving, and active fiscal policy. In the views of Keynes, the reduction in the wages rates would not help the economy to stimulate and recover from the recession. Further, the Keynes explained the concept of excessive savings (Carson and Kerr, 2017). In the views of Keynes, the excessive savings are dangerous for the economy as these either cause recession or depression in the economy. The excessive savings cause reduction in the investments and due to reduction in the investment, the output of the economy tends to decrease. Further, the excessive savings also cause reduction in the consumer spending resulting in adverse impact on the demand (Carson and Kerr, 2017).
Further, Keynesianism approach not only provided theories about the economy but it provided theories on the social development and welfare. The Keynes linked the economic development with the social welfare. Keynes stated that the social welfare policies are linked to the economic development which means that the economic policies would have an impact on the social policies (Holt and Pressman, 2001). The policies for the social welfare are framed by the government taking a view of the economic resources available. The budget of the government for public spending determines the level of social welfare. The higher the government budgets for the public spending more will be the provisions for social welfare in the social policy. The proponents of Keynes argue that the increase in the government spending is useful for the economic stimulation (Holt and Pressman, 2001).
Thus, Keynesianism approach sets the philosophy or idea in regards to economic and thereby social development. The approach provides the steps that the government of the state should take to stimulate the economy from the war or recession. Further, Keynesianism assists the government in framing the monetary and fiscal policies which are the two pillars of the economy (Holt and Pressman, 2001). As has earlier been stated that the economic development is linked with the social development, therefore, if economy of a country grows, the society will automatically be on the development path. Further, Keynesianism talks about having the active fiscal policy on hands to develop the economy faster. The active fiscal policy infers an economic policy that provides for budget for the government expenditure in excess of the tax revenues of government (Holt and Pressman, 2001).
However, the active fiscal policy is criticized by the conventional economists, but Keynesianism supports this policy. According to the Keynesianism approach of economics, the social development at the faster pace can be achieved only when the fiscal policies of the government are kept proactive. Thus, in this way Keynesianism helps the government to frame the economic and social development policies (Holt and Pressman, 2001).
Role of Neoliberalism in Framing Social Policy
Neoliberlism is the philosophy of economy that seeks to promote a liberalized economy. The idea to bring in privatization in the economy comes from this philosophy. The proponents of Neoliberlism argue that promotion of the privatization will help to boost up the business and trade (Hartmann, 2016). Further, apart from the privatization, the philosophy of Neoliberlism also seeks to promote deregulation in the business environment and free trade. The concepts of privatization and free trade brought in by the Neoliberlism emphasize on increasing the role of private capitalists in the social and economic development. On other hand, the role of government in the social and economic development is sought to be decreased by the Neoliberlism philosophy (Hartmann, 2016).
The Neoliberlism philosophy emerged due to failure of conventional economic philosophy that was focused on enhancing the role of government. The conventional economic philosophy advocated less privatization and a more government regulated trade and business (Strakosch, 2016). The conventional philosophy failed in growing the economy and it was considered to deregulate the business and trade and promote privatization by the proponents of Neoliberlism. Further, it was argued in favor of the Neoliberlism that the free market with reduced regulations is necessary for efficient and effective utilization of the economic resources. The efficient and effective use of the economic resources is essential to help the economy growth, particularly in the situations of low demand (Deeming and Smyth, 2014).
The proponents of Neoliberlism state that the economic development through liberalization would help in development of the society. The social policies based on the Neoliberlism philosophy creates new opportunities for the people to raise their living standard and help prevent them from shrinking into the hole of poverty (Harris and Seid, 2000). However, such social policies are not directed to completely eradicate the poverty but these policies certainly help the poverty from becoming further severe. On being analyzing the Neoliberal social policies critically, it is revealed that these policies focus on three core areas such as privatization, targeting, and decentralization (Harris and Seid, 2000).
The privatization of the social development programs involves enhancing the role of private capitalists and non government organizations in serving the society. The privatization of the social development is consistent with the main ideology of Neoliberlism. Further, the next area is targeting which involves identifying and marking down the urban and rural areas that are in dire need of social development (Harris and Seid, 2000). The critiques of the conventional social development policies give argument that the governmental interventions in the social development have been less effective which gives rise to the need to privatization. The administration of the private organizations in regards to development of the societies is considered to be more effective than the government organizations. Further, the third core area of Neoliberlism of social development programs is decentralization. The decentralization involves implementing the social development programs at the ground level. The main objective of decentralization is to provide benefits of the social development programs directly to the people who are supposed to be benefited (Harris and Seid, 2000).
Neoliberlism approach has been adopted in many countries from Latin America to Africa. The structural changes through the adoption of Neoliberlism were considered to be imperative to achieve the social and economic goals. Apart from the economic and social perspectives, the Neoliberlism theory also covers the changes in the politics. The theory advocates changes in the political environment that aligns with the adjustments to be made in the economic and social policies (Tschirgi, 2000). This implies that the political environment is required to be changed to implement the Neoliberlism economic and social policies. The critiques of the Neoliberlism have however challenged the effectiveness of the economic and social reforms purported to be carried out through adoption of Neoliberlism theory. The critiques argue that the reforms through adoption of Neoliberlism theory could further deteriorate the economic and social environment. The critiques of the theory argue that promoting the privatization could increase the social disparities. The goal of equal and overarching development of the society could not be achieved through privatization because the economic wealth would get accumulated in few private hands (Tschirgi, 2000).
The essay presented in this paper carries out a critical analysis of the two social and economical theories namely Keynesianism and Neoliberalism. The Keynesianism theory was developed to overcome the economics and social crisis caused by the war or recession kind of events. This theory stated that the governments of the states have to focus on developing the expansionary fiscal and monetary policies. The expansionary fiscal and monetary policies are targeted to boost up the economy and the boom in the economy is perceived to raise the standards of living and overall social development of the state. The articulation of the Keynesianism theory is that the rapid social development can be achieved by making proactive fiscal policies by the government. Further, the Neoliberalism theory provides for liberalization of the business and trade in the state. According to this theory, the economic and social development lies in reducing the governmental interventions in regulating the markets. Further, the theory states that privatizing the social development would lead to better efficiency and effectiveness. Further, it is also necessary to decentralize the social development so that the benefits of the development programs could reach to the ground level.
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