The economic system is a concept that can be interpreted by researchers when viewed in a variety of contexts. What scientific approaches can be involved in the analysis of its main functions? What is the role of the state as the carrier of the institutions that are necessary for the functioning of the economic system?
What functions does the economic system perform?
For starters, we will study the nuances of terminology regarding this topic. The concept of “economic function” can be considered, as we noted above, in different contexts. In particular, as corresponding to the characteristic of the state economy as a whole. What does this mean?
First of all, it will be about the functions of the economic system, the appearance of which is natural in it for the reason that it is an independent social institution. What exactly are the functions of the economic system that modern experts single out? Among those:
- reproductive;
- regulatory;
- technological;
- investment;
- protectionist.
Consider their specifics in more detail.
Reproduction function of the economic system
The first economic function at the level of the state economic management system is reproduction. Its essence is to ensure the regular updating of various economic resources, the presence of which is necessary for the socio-economic development of the state, as well as the work of the mechanisms through which citizens issue, distribute, exchange, and also consume various goods and services.
The reproductive economic function of the state affects what types of activities are involved in certain categories of citizens, which sectors of the economy will be most developed in the country and which, accordingly, types of professions will be most popular. The formation of the function in question depends on the level of socio-economic development of the state, the specifics of its interaction with other countries at the level of foreign economic and political communications, on the system of values and characteristics of the culture of citizens.
The regulatory function of the economic system
Key economic functions also include regulatory. Its essence is in the development of standards that determine how in society should be produced, distributed, exchanged, and also consumed certain goods and services. Corresponding norms are also formed taking into account the socio-economic development of society, its traditions, culture, foreign economic and political factors. However, this process takes into account the objective laws characterizing the work of the national economy. It is quite possible that the norms established by the economic function in question may conflict with established traditions and priorities of society.
The state can, if this is facilitated by the difficult situation at the level of the economy as a whole or in foreign policy, initiate the introduction of legislative provisions that require economic entities to act in a certain way, even if this contradicts their traditional principles - since failure to adopt the relevant norms can lead to serious social problems. The task of the state is to implement these standards in such a way as to balance the interests of various social groups and organizations.
The technological function of the economic system
The main economic functions include technological - that which involves the creation, first of all, of infrastructural conditions for the implementation of economic activities of citizens and organizations. In this case, it is fair to talk about the distribution of this function among the areas of responsibility of the state and various private entities. If we consider those tasks in terms of the implementation of the technological function that the state decides, then it is legitimate to include:
- assistance in building transport infrastructure - first of all, in the form of roads, pipelines, which usually cannot be built by private companies;
- the provision of resources for the implementation of communications - in particular, satellite, which are based on technologies formed, as a rule, in the framework of state space programs;
- facilitating the transfer of technology from abroad, as well as the implementation of the import of necessary resources.
Thus, the function under consideration is among those to which the leading role belongs to the state. At the same time, in this case, one can observe the economic functions of society - represented by commercial enterprises, other specialized organizations, and private individuals. Among those:
- development of new technologies, management methods, decision making, economic models;
- Formation of feedback channels between interested individuals and government bodies;
- agency function related to the implementation of various government initiatives in the framework of the considered direction of the activities of political structures in the country.
Investment function
Another major function of the economic system is investment. What is its essence?
In this case, it is observed, first of all, the economic function of finances issued by the state, attracted from abroad or formed from domestic resources. The national economy for its reproduction and development requires capital. The state is probably the key player that influences the formation of capital resources by various business entities. The main tools of the country's authorities regarding the implementation of the function in question:
- the implementation of various budget allocations;
- creating a legal framework for credit relations;
- direct lending.
The first tool can be applied at various levels.
So, the functions of economic development and, consequently, the authority in terms of the distribution of capital can be obtained by institutions directly reporting to the authorities of the country. In this case, capital is transferred to them mainly at no cost, but subject to strictly programmatic investment in certain costs. At the expense of the budget, various funds, research organizations that solve certain problems within the framework of the economic development strategy defined by the state can function.
Creating a legal framework for credit relations is one of the areas of lawmaking of the country's authorities. Various regulations are adopted and put into circulation, according to which a certain carrier of capital - for example, the same state or a private investor, can provide cash loans to interested business entities. For example, loans for business.
The central bank of the state, as the main financial regulator, sets the key rate for the economy. In accordance with it, private financial organizations are credited, which, in turn, issue loans to individuals. By managing the key rate, the state affects the intensity of credit relations and contributes to the performance of the functions of the economic system under consideration.
Protectionist function of the economic system
The next function of the economic system is protectionist. Its essence lies in providing competent state and, in some cases, private structures, protecting the interests of economic entities in the framework of their foreign economic activity. Firms and entrepreneurs, working in foreign markets, may face dumping, various tariff restrictions. The state, performing its socio-economic functions, should be interested in the fact that the enterprises that represent it in foreign markets can conduct business in an environment of equal partnership. If necessary, authorities can implement some protectionist measures aimed at ensuring the protection of national companies.
The interest of the state in solving such problems may be due to various factors. Apart from a reasonable priority related to the protection of the interests of an economic entity, which, in principle, is part of the country, circumstances such as:
- the need to maintain stability in the company, for which the foreign market is the main one, and which is a major employer in Russia;
- the need to maintain the competitiveness of the economy on the world market if the presence of national enterprises in a particular business segment is significant.
In some cases, the state contributes to the implementation of protectionist measures in order to protect the economic entities of friendly countries that are partners in one or another economic and political associations.
Economic functions as a resource for the development of the national economy
There is another interpretation of the concept of “economic function”, which involves its consideration in the context of the state’s implementation of the economic development policy as a whole - as a resource for the development of the country. This area of activity may be diverse. In this case, the economic essence of the function in question is traced, its implementation at the level of existing state institutions.
A corresponding understanding of the term in question is reflected in the views of researchers representing different economic schools. It will be useful to study how the evaluation of the corresponding function can be carried out among researchers, in more detail.
The implementation of the economic function of the state: the nuances
Among researchers, 2 rather dissimilar points of view regarding the state's implementation of its economic function have spread. So, according to one version, the country's authorities should have minimal impact on economic processes: it is assumed that their participation will be limited to the publication of fundamental sources of law, in which basic macroeconomic indicators will be established. Such as, for example, the key rate at which loans should be issued. This position is close to experts representing the liberal school, who argue this point of view by the fact that in a market economy, relations between business entities should be built as freely as possible. Significant government intervention can thus lead to inequality between them, monopolization of markets.
Another point of view is that the key economic functions of an economy - albeit a market one, should first of all be assigned to the state. Representatives of the Keynesian school hold similar views. The main argument here is the lack of efficiency in the distribution of capital between various sectors of the economy in a free market. In addition, in the event that legal relations between business entities are built without proper supervision by the state, this can also lead to monopolization of the market - with the participation of cartels, as part of mergers and acquisitions, as a result of which certain business entities may gain a preferential position On the market.
In practice, the points of view considered by us can be supplemented by other views of economists - for example, formed on the basis of the results of economic management of national governments in a given period of time. The subject and functions of economic science in different countries of the world can, therefore, differ significantly on the basis of different experience in the introduction by the state of various mechanisms for managing the national economy.
At the same time, not only concepts can differ, but also institutions within which the achievements of researchers are implemented. In one state, in terms of managing the national economy, the economic block of the government performs key functions, in others, parliamentary structures play the leading role. Thus, the transfer of experience in introducing various mechanisms of managing the national economy from one country to another should be carried out taking into account the characteristics of political institutions of states.
Let us consider what advantages and disadvantages each of the noted approaches to managing economic processes can have.
Liberal model of state participation in economic management: nuances
So, this model involves minimal interference by the country's authorities in economic processes. The main advantages of this approach:
- freedom of entrepreneurship, building market relations;
- relative ease of access to capital;
- investment attractiveness of the economy.
Cons of the liberal model of state participation in economic management:
- sensitivity of the national economy to crises;
- the potential for monopolizing markets through mergers and acquisitions;
- decrease in the level of protection of the interests of companies by the state in the framework of foreign economic activity.
Thus, the approach under consideration, in which the functions of the state’s economic activity is minimized, works mainly in ideal conditions for economic development - when there is no particular reason to talk about the crisis, market saturation is not large enough for frequent mergers and acquisitions, and foreign trade conditions so comfortable that businesses have no need to seek help from the state, counting on its protectionism. Which, however, can still be realized due to the need to maintain the competitiveness of the national economy.
Keynesian model of economic management
The opposite of the liberal approach to economic management - based on the principles of Keynesianism, implies, in turn, significant government intervention in the processes at the level of interaction of economic entities within the national market. The main advantages of this approach:
- a guarantee of the implementation of timely protectionist measures against businesses conducting foreign trade;
- control over market monopolization in terms of mergers and acquisitions;
- protection of enterprises in a crisis.
However, the model of economic management under consideration has its drawbacks:
- the investment attractiveness of the economy in many cases is not high enough due to the presence of possible bureaucratic barriers to investing in business, transactions, and withdrawing profits;
- the slow development of many industries that could develop faster without government intervention, for example, due to the prompt introduction of new technologies;
- possible difficulties in access to capital by interested business entities - for example, due to emission restrictions by the Central Bank.
In addition, as we noted above, the emergence of administrative monopolies is possible due to the acquisition by certain economic entities of a preferential position in the market with the participation of interested state structures. Obviously, the functions of economic management should be performed by the state, taking into account the current situation on the market. Liberalization, or, conversely, excessive interference, may be required based on objective conditions prevailing in the medium of communication between business entities. Thus, it is fair to speak not so much of the authorities' commitment to a particular model, but of the ability of the country's government to apply the practical methods provided for by each of them, depending on specific factors affecting the development of the economy.