Mad policy ruined tact (9)
I believe the answer is:
diplomacy
'tact' is the definition.
(diplomacy is a kind of tact)
'mad policy ruined' is the wordplay.
'ruined' indicates an anagram.
'mad'+'policy'='madpolicy'
'madpolicy' anagrammed gives 'DIPLOMACY'.
(Other definitions for diplomacy that I've seen before include "Art of negotiation" , "Skilful handling" , "Tactful dealing" , "International negotiations" , "Savoir-faire" .)