The ‘two-pillar strategy’

Abstract

On the necessity for a rational economic policy In many countries, the shadow economy has reached a size that makes it an important economic factor and a challenge for every government. One objective of this book was to analyse the advantages and disadvantages of illicit work and to see what can be done to reduce it. A promising economic policy to deal with illicit work has to consider the causes. Higher fines or more intensive controls alone merely fight the symptoms and do not lead to the desired outcome. Yet, the interests of political decision-makers stand in the way of a rational economic policy. Nevertheless, we would like to make a few suggestions regarding a more efficient policy, which attains the desired goals. Such a policy will become necessary in the long run due to the increasing international competition of systems and increasing pressure resulting from the growing shadow economy. A reference model for the respective measures will then be needed. A rational economic policy can be ideally defined as follows: A policy is rational if it concentrates on the realisation of an extensive, well thought through and equalized system of objectives, reaching the highest degree of success possible under the given conditions. (Giersch 1961: 22.) It is important to detect the conflicts between different goals and the effects of some economic policy measures on other objectives. State interventions, which at first seem rational, can have devastating consequences on economic development in the long run.