Government policy is a set of laws, regulations and courses of action promulgated by a political system. This process is referred to as the policy cycle, and it involves a complex, at times convoluted, interaction between numerous actors, such as politicians, interest groups, the media and public. The process begins with agenda setting, identifying which problems need government attention, which issues are crucial to society and the need for a solution. This is largely determined by dominant values and beliefs that reflect social ideology.
During the policy formulation phase, the government evaluates different solutions and their costs. This is a time when many policy instruments are considered, including direct government action on money issues such as levying taxes (Make) and subsidizing alternative behaviours (Subsidize). Other forms of indirect government actions include regulation (Oblige) and prohibition (Prohibit).
In the decision making and adoption stage, the government finally chooses one path to implement. This is often influenced by the current ruling party’s political ideologies, as well as the ability to get public support for a solution. It is also a time when the media can play an important role by drawing attention to issues.
Bad domestic policy has a significant impact on the lives of the poor, even beyond its immediate effects in a country or region. For example, bad economic policies enacted by one government can cause a ripple effect that hurts the poor in other countries, as has happened in the case of international Monetary Fund bailouts.