Introduction
The success of any business around the world depends on a wide-range of factors, some of which may be from the internal or external business environment. For this reason, business owners and managers have no option but to try and understand the underlying factors, which are essential in defining the progress and future performance of the business.
From the manner in which a firm treats its customers, to its relationship with internal stakeholders, it is necessary to underscore how various factors are generally intertwined in any business market (Steurer 49).
The question we ought to ask is the need for establishing a relationship with the government when running a business. This essay discusses business-government relationship, with a major focus of different aspects on issues that have been witnessed in the changing business environment.
The analysis will give a synthesis of the discussion, covering the benefits and costs of having a business-government relationship. Importantly, the paper will cover the future trends, with regard to how governments and businesses relate in advancing their objectives in the society.
The information to be used in developing these ideas will be drawn from class notes, books, journals and other authentic publications, which cover the topic of discussion.
Business-Government relationship
The manner in which governments relate with the business world has remained debatable for several years, presenting two sides of a coin in which debaters view the advantages and demerits of enhancing such relationships in any setup.
This is based on the fact that governments have authority on individuals and organizations, with the mandate of instituting legal regulations in the country, when necessary (Steurer 49).
In other words, a business could be limited to implement certain strategies as a result of legal policies crafted by the government. As a result, it can be clearly seen that business and governments are never disjoint; they always connect in a host of ways, which will be covered in this essay.
In discussing government-business relations, it is worth noting that the topic has become more relevant across the global sphere, and a major factor in the drafting and implementation of business policies. This is attributed to the fast-changing business world, breeding new challenges and opportunities for governments, entrepreneurs, and prospective investors around the world (Jonson, Lindorff, and McGuire 259).
In this context, it is equally important to note that the need for the business world to develop relationships with different governments may vary from country to country, depending on development status. With developed economies, businesses get concerned during hard-economic seasons, like a financial crisis, where the government is expected to step-up intervention policies and strategies to salvage businesses.
Such efforts have been witnessed throughout history, with recent ones being bailouts and loans for the Euro Zone economy, which has had significant impact in almost every country around the world.
As a result, developed, developing and transition countries may view the need for government-business relationship from different perspectives, based on their varying levels of development. Most developed countries are generally interested in market trends worldwide, rather than what could be affecting individual firms.
This is to say that developed countries have a wider span of factors in focus, and therefore have a more complex approach, in linking the government and the market (Jonson, Lindorff, and McGuire 260).
While developing and transition countries may also be concerned with the global market, and the economic crisis, they strongly view government-business relationships from a development angle, since their economies are undergoing various advancement stages.
Similarly, they value sound government policies in encouraging international and local investments, through a system that presents more opportunities than risks and threats.
How the government protects business
With the ever-changing dynamics of the business world, the government has assumed a senior role in protecting businesses and influencing the economy in an array of ways. While this can be argued from different positions, it is clear that the protective role played by the government is crucial in various ways.
In order for the government to guard businesses from external and internal forces, which may be harmful, policies must be put place (Jonson, Lindorff, and McGuire 260). This is necessary in identifying the kind of protection that its citizens need as compared to businesses around the world.
For instance, it is the role of the government to ensure that there is enough security to encourage investors and eliminate social hostility, which continues to affect several countries and economies in the world today.
Equally, protection from international pressure and unsuitable political manipulation is paramount, especially in a country that embraces international trade through exports and imports. Through this approach, the involvement of the government becomes more necessary in implementing business policies.
In this context, it is important to note that the government is able to establish a peaceful and reliable business environment, to allow proper business performance and ultimate growth of the economy.
With regard to distribution, striking a distribution balance between social classes and income is essential in the formulation of social welfare in areas where people have limited sources of income as compared to those living in urban centers. While some may ask the reason behind this kind of government involvement and protection, it is imperative to note that having a stable economy is crucial, which promotes economic growth.
For the government to assure its people of their security with regard to the business world, it is crucial for it to adjust fiscal and monetary policies, for the sake of dealing with cases of inflation and unemployment (Herman 20).
It is doubtless unemployment breeds a social welfare burden, which becomes hard to bear, since there could be other needs affecting the nation, and have to be met. On the other hand, inflation discourages investors, especially from other countries, who may feel unsafe to invest in an environment with high prices, low income, and a stagnating economy.
As the legal body that formulates the laws, which govern the nation, it detects the kind of business environment to allow economic growth. However, some of these policies may not have a positive impact, depending on their viability and the implementation process.
Oftentimes, regulation frameworks crafted by the government are never fixed; they are bound to change, depending on current market trends and future expectations (Herman 21).
As a result, the business gets affected, since the adjustment carry an impact on the entire business environment and the country’s economy at large. Importantly, these changes may influence the competitive advantage of a firm, leading to other implications in future.
In most cases, the government relates with the business sector through market policies, which play a crucial role in establishing an environment deemed to be effective for the market regulator, citizens, and the consumers.
Some of the policies include monetary and physical policies, which have remained active in shaping market trends in the United States. In the 20th century, the United States witnessed a series of changes within the market, in which the government was actively involved in business interference (Herman 22).
One of the ways was through the establishment of state corporations, which were mainly funded and ran by the government. In such cases, the private sector may suffer from unfair competition pressure from state-run firms, which might not be concerned with making profit.
In other cases, the government may choose to adjust the prices within the market, without considering other factors like the source of goods sold by private investors and the implication of such a move on their business activities.
It can therefore be viewed that the government’s involvement in business is likely to affect the competitiveness of investors and other players in the market, depending on the kind of interference, positive or negative, in relation to market trends (Herman 24). Consequently, it is necessary for the government to evaluate the possible impact, before implementing such regulatory measures.
Government-Business also occurs through lobbying. As mentioned before, the government aims at promoting the welfare of its citizens and safeguarding the interests of investors, without losing sight of economic performance and stability. In this line of thought, it is worth noting that the government may also seek to woo the public through legal adjustments of influence-oriented approach (Schepers 477).
As the leading decision-maker, the government may use its machinery to inform the public before implementing certain market regulations, which may affect the business world either negatively or positively.
It can be argued that lobbying affects business depending on the intentions behind such a move by the government. Moreover, lobbying can also target private investors and other stakeholders to adopt a certain idea, as a way of championing a course that is promising economic growth.
Impact of Government-Business Relations
From the above segments of this essay, it is evident that the interplay between a given business and the government may have a wide scope of negative and positive effects. In this section of the analysis, some of the major ways in which the relationship affects the business environment have been discussed.
Advantages of Government-Business Relations
By the fact that no one would wish to have a situation where there is no involvement of the government in business, it implies that this interplay is likely to be beneficial. One of the merits of this type of relationship is globalization. For many years, countries around the world have embraced economic integration in order to have a link to the rest of the world (Wart 336).
Importantly, technology has also augmented these efforts, by breeding a global village, where information is shared instantly and one can transact business online without having to be physically present. All these efforts have narrowed down to business globalization, which allows the interconnection of economies through business activities.
From 1980s, the U.S. economy has undergone tremendous changes and achieved pinnacle economic performance as a result of globalization, which has become part of its culture. Many new connections have been created by the government, with the aim of opening the market for its finished products, through international business (Ritzer 599).
Consequently, the market has expanded internationally, though treaties and corporation with other countries around the world. In fact, there is no economy in the world that is self-reliant, thus there is the need of developing international partnerships within the global arena. This can only be done through the intervention of the government and its commitment towards the same course.
Besides individual country growth, the world economy has remarkably grown as a result of globalizations from 1960s. Even though the process has been faced with a series of challenges like the crises witnessed in Africa, Asia, Latin America, and Europe, the course towards global economic integration has not departed the leadership of most governments of the world.
As a result of globalization, the world economy significantly grew in the last half of the 20th century, leading to the doubling in the global merchandise exports, from $2 trillion in 1980 to $6 trillion in 2001 (Herman 22).
Importantly, these economic developments realized from globalization have been witnessed in developing and developed countries, implying that globalization does not discriminate any economy; it offers opportunities, which can be utilized by any kind of government.
The world GDP has also increased as a result of globalization, which has been brought about by the participation of governments in improving their economic positions (Wart 336). From the time globalization began driving world economies, there has been a significant increase in international trade and overall foreign direct investment.
Besides the participation in international trade, globalization has benefited different economies around the world. There has been an increase in competition among various countries, a trend that accelerated in early 1990s, leading to the opening of more world markets to promote economic interconnectivity among developing and developed nations (Wart 336).
According to the Organization for Economic Cooperation and Development, OECD, countries, which adopted international trade, have experienced enormous economic growth, doubling the value of those that were reluctant (Ritzer 599).
Most of the countries, which opened their market for international trade, have created countless business opportunities as opposed to those who remained on their domestic market for business activities, without the involvement of other countries.
In most cases, growth in Gross Domestic Product is largely associated with the export growth of a country. Additionally, a global economy that allows free movement of goods and services among countries usually registers higher investment ratios, attractive macro-economic balance, and better roles in economic development (Wart 337).
Protection
Another important benefit of government-business relationship is protection. Every player within the market needs protection from any form of exploitation, manipulation, or denial of rights. For this to happen, a mechanism is usually needed for the sake of checks and balances. Through various ways, the government is able to protect consumers, manufacturers, suppliers, and everybody else involved in the business activities (Wart 337).
In understanding the role of the government in business, it is important to note the fact that when the United States was born, nobody imagined that the government would get involved in business done by individuals or organizations (Wart 337).
As a result, business owners and operators were in a free market, doing what they perceived to be right or wrong, depending on their best interests, without government involvement. However, history has witnessed several changes, like the involvement of the government in protecting the rights of buyers, sellers, suppliers, and everybody else involved in business.
In most cases, the government’s role is to protect the property of its citizens against disasters like fire and theft. This is done in various ways, like the use of trademarks as a way of identifying certain products produced by a particular company.
Additionally, most government have remained determined in protecting its artistes by use of copyrights, especially in dealing with malpractices like music piracy, which has adversely affected the music industry for generations (Wart 337).
Moreover, patents are commonly used in cases of discovery and invention of a new idea by individuals or a group of people. Depending on the laws governing the country, patents allow the person behind the idea to explore it maximally, before the public can be allowed to use it for the expansion of the country’s economy.
Another role protective role of the government in business is the enforcement of business contracts between business owners and their customer, in order to make them legally binding.
For instance, the government requires both parties involved in a business transaction to adhere to the terms and conditions, i.e. the company should provide the services or goods, while the consumers should make necessary payments, upon receipt of the goods or services being offered (Wart 338).
In such situations the party, which breaks the agreement without a legal course can be taken to court and charged. This is connected to the government’s role of settling disputes between customers and business owners.
In cases where the two parties involved in the transaction have failed to agree, government courts are allowed to intervene and settle the matter amicably within the confines of law. As a result, the rights of the aggrieved parties are protected, without undermining anyone of them.
Besides protecting businesses, governments equally execute their mandates through determination and collection of taxes from manufacturers and consumers. The revenue, which is collected from such channels, is usually used to pay for the expenses incurred by the government in other departments of its economy.
The use of tariffs in America has been quite effective in promoting locally-made products and discouraging importation of finished goods and services from other countries (Steurer 52).
Additionally, the government controls business to safeguard the interests of the public, through public utility commissions, which deal with issues of monopoly and price monitoring, especially in cases where the company has monopoly in the market.
Workplace standards are also enforced by the government even though it is the responsibility of the company to ensure that the working conditions of its employees meet the minimum requirements set by the government. This action is paramount in cases where certain jobs may expose workers to health hazards like chemical fumes and dangerous equipment.
In such cases, the government is supposed to intervene to ensure that safety practices are observed, which would in turn guarantee the safety of workers in various companies around the country (Steurer 52). Apart from dangerous working conditions, governments also intervene in wage regulation, to ensure that workers are not exploited by companies through poor wages.
When this occurs, employees get paid according to certain standards recommended by the government to allow the parties involved to benefit from the profits made from the business. Other laws, which are common in working places, prohibit any form of discrimination to augment equal opportunities for employees, regardless of their gender and racial background (Schepers 479).
Disadvantages of Government-Business Relations
As seen from the above analysis, government intervention in business is significant in setting standards and ensuring that all the parties involved are protected against any form of discrimination. While this is case, it is worth noting that excessive intervention by the government may have negative influence on the economy, especially in cases where the interference affects the entire business environment.
Government intervention in business is considered harmful to the business when the business world is not allowed to make decisions, which are independent. If this persists, there is a likelihood of the business world to over-rely on the government for direction, even when the matter at hand does not require government involvement (Jonson, Lindorff, and McGuire 259).
This over-reliance also limits the ability of business owners to take risks through investment and initiation of new projects because of the fear of the government’s approach in regulating the economy. It would be unimaginable to have an economy, which discourages business investments because of the laws and regulation processes initiated by the government.
When the prevailing conditions do not allow investment and risk-taking by business owners, a collapse of the economy is bound to occur, emanating from unfavorable business conditions.
In other words, the government will be unable to meet its budget needs due to dwindling revenues from the corporate sector, there will be high rates of unemployment, high prices for goods and services and ultimate inflation (Jonson, Lindorff, and McGuire 261).
In fact, there is no economy that can thrive with a collapsed business system. This is to say that business plays a crucial role in protecting the government against bankruptcy, especially in cases where the control mechanisms do not aim at limiting the business opportunities for investors.
While government regulations may be important in some cases, economists have argued that poor regulation has led to various financial crises, which have been witnessed around the world. For instance, the 2007 financial crisis witnessed in the United States was largely attributed to the failure by the government to institute measures, capable of taming the subprime market (Schlomach 1).
Cases of subprime mortgages were rampant, as people were allowed to take loans without analyzing their credit history and their potential of paying back the loan. In mid 1990s, the government intervened by adjusting the highest amount of loan, which one would be allowed to take by the Community Reinvestment Act.
This meant that borrowers were allowed to acquire more money, regardless of their ability to pay back the loan as required by the lending institution. What the economy witnessed was definitely unpleasant and detestable; there was a surge in “bad debt” as most borrowers were unable to clear the mortgage arrears, limiting the ability of financial institutions to give out more money to borrowers.
Foreclosures were also high as lenders tried to recover their money from borrowers through repossession of property. While it is true that the U.S. economy suffered from this in various ways, millions of Americans lost their jobs as the economy remained in a recovery mood (Athavaley and Avila 1).
Although various strategies have been implemented to curb the problem of unemployment, it is evident that a lot is yet to be done to in creating more opportunities for millions of Americans who remain unemployed today.
Another risk of government intervention in business is that it may eliminate and undermine the role of the corporate sector in an economy. In cases where business is fully controlled by the government, there is usually a higher tendency of most businesses being owned by the state or being acquired by the ruling government in order to advance its course (Schlomach 1).
When the business sector is dominated by the government, most of the decisions would be made by the state, without considering the ideas of the private investor. In this case, the business world is likely to be turned into a government sector, thus losing the basic meaning of business independence.
A business environment that is ruled by the government is likely to discourage investors due to lack of freedom, a move that may adversely affect the industry and the country’s economy at large.
Beside the above disadvantages of government intervention, it is worth noting that involvement of the state in business may lead to increased business or production costs. For instance, cases of business certification require money, yet some of the expenses cannot directly be channeled to consumers (Jonson, Lindorff, and McGuire 261).
As a result, business owners are forced to incur money, which would have been used for the expansion of the business or investing in other projects. It can therefore be seen that excessive intervention by the government carries negative implications to the business world and may hamper economic growth.
Future trend on Business and Government relationship
Even as the world focuses on the future of government regulations, there are certain facts, which will remain essential in understanding the role of the state in the business world. For instance, the business environment is dynamic, and no approach is static; it changes to address the changing needs of customers.
Additionally, self-regulatory cannot exist, because of lack of trust in some companies and the need for standards, say tariffs and collection of taxes from business (Grosse 153). These will constantly prevail regardless of the level of advancement.
Since business companies cannot be trusted and regulation has to exist, there is a possibility that the government will consider having third parties, say groups known in management of standards, who will be mandated to ensure that certain regulations are observed. This would eliminate direct interference by the government, which has been negatively viewed by most business firms (Grosse 153).
In some cases, the world has also witnessed cases of government agencies advancing self-interests during the process of business regulation. The use of trusted third parties would eliminate such scenarios and create a fair business ground for the private and corporate world in advancing the economy of the world.
While some interventions may have negative impact to the business sector and economy at large, it is likely that intervention standards and regulations will increase. Most governments have embarked on tightening regulatory standards, more than before. For instance, issues of certification are becoming common with companies and organizations being required to meet ISO standards.
Additionally, companies will be required to give detailed reports on corporate responsibility, depending on the nature of goods or services being offered (Grosse 155). Such disclosures are likely to increase as a way of monitoring how the business world operates with regard to public interests, which have to be safeguarded by the government.
With the advancement in technology and massive use of the internet around the world, there is a likelihood of governments changing their intervention approaches. In other words, new monitoring mechanisms will be adopted to conform to the ever-changing business world (Grosse 155).
For instance, the government may decide to carry out an online survey on working conditions, wages or performance standards of a given company. In other words, the world is likely to witness changes in government interventions, in order to streamline the sector and improve the economy.
We are likely to see more friendly approaches, where the government involves the business community in handling economic problems like employment, as seen in President Obama’s move to prevent layoffs in the country (Athavaley and Avila 1).
Conclusion
In summary, government intervention in business is two-sided. In other words, it has negative and positive effects. Nevertheless, it is important to note that any form of intervention is viable and healthy to the economy if the overall impact is ascertained before implementing the regulations.
This would ensure that the interests of the parties involved are well-considered. For this reason, business owners ought to have some room in order to allow government intervention and participation in their activities. Additionally, lobbying should be embraced since it helps the government to know the needs of the business world.
It should therefore be viewed as a communication channel between the government and the business world. Above all, it is essential for the government to understand that its negative intervention can lead to total crumbling of the economy.
Works Cited
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Ritzer, George. The Blackwell Companion to Globalization. New Jersey: John Wiley & Sons, 2008. Print.
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