The keystone of the economic system is free enterprise, and the government has attempted to promote the well-being of private industry by every means short of direct interference. The full-employment policy pursued by every postwar government has produced a high ratio of economically active population to total population. Not only is the population economically active, it is also highly skilled, a fact not overlooked by foreign companies seeking to invest. The government encourages the diversification of industry by tax concessions and other means. Luxembourg's successful economy continues to attract immigrants; the immigrant population comprises over one-third of the Grand Duchy's total.
Banking has become an important sector of the economy, compensating for a decline in the steel industry. Successive governments have taken steps to encourage foreign investment, and investment incentives cover taxes, construction, and plant equipment. Government priorities in 2002 included balancing the budget, keeping spending growth in line with GDP growth, and running a general government surplus. The government was enacting tax cuts in 2002, and increased spending in infrastructure, research and development, education, and pension benefits. Obstacles were removed to part-time employment, more flexible working time arrangements were made, and child care facilities were expanded.