Business, Government and Society - Essay Example

?Macroeconomic Policy Topic and Article Discussion The issue I would like to brief on is the use of macroeconomic policies by governments to regulatethe business environment. This issue is covered in chapter 13 of Goldsmith’s book, (Business, Government and Society: The Global Political Economy). This issue is the most significant issue among business people and country economies as a whole. I will use a recent article that I came across last week by Paula Dwyer dated 20 October 2011, on the issue of the World Bank ranking U.S Regulatory Burden on businesses very Low. The article mainly discussed how US regulatory bodies have put in place the most business friendly policies. The business environment views government policies in terms of the regulatory burden and property rights protection that affects them on their day-to-day activities. The article discusses how the US government still currently ranks among the top countries with regards business-friendly policies, despite the issuance of new regulations as counteractive measures to financial crisis. There had also been numerous deregulatory policies of previous governments, and thus the current government has undertaken to put in place business friendly measures. However, there have been complaints among congressmen, business people, and trade representatives that a significant percentage of unemployment has resulted from overregulation of the business environment by the government. The article shows that the World Bank ranking has also not included a number of critical factors such as skills of the workforce, the size of the market and macroeconomic conditions. Nevertheless, African countries have been reported to have the most unfriendly business environment characterized by numerous regulations.  Major Stake Holders and Their Interests Major stakeholders of macroeconomic policies include the governments’ political class, the society, and investors in the business environment. The political class has a duty to enact macroeconomic policies that take care of the societies, are friendly to the business people and the functions of the government. The government has the mandate to come up with rules and guidelines in which businesses operate under conditions that uphold development and the interests of the public. Concerning changes in governance, the political class alters these guidelines and rules thus affecting the day-to-day operations of businesses. The government plays key role in to the economy of a country as a whole and thus needs to put in place economic policies that would bring economic developments. The governments’ political class being a major stakeholder to macroeconomics, it has continuously interfered with operations of the economy through the construction of public corporations. However, public corporations have been privatized by many governments in a bid to stimulate economic developments through the sale of underpriced shares to private members of the society. Privatization program has been used by nations as an economic reform programs. Stimulation of economic developments has been possible in many economies by coming up with business environments that are more competitive through privatization of public corporations (Rajan & Asher 95). Macroeconomics Theory and Concepts Macroeconomic theory is not the only aspect used by the government to ensure the business environment is favorable for entrepreneurs and for economic growth. Sustained economic growth in most cases depend on structural performance such as government regulations, public sector privatization, favorable policies, liberalization of trade and efficiency of the banking sector. Economic growth that focuses on distributional and progressive improvement has a positive impact of both the interest of the society and the businesspersons. Macroeconomic theories can be complemented by government policies that seek to improve income distribution in the society. Such policies may include reforms with regards to land tenure, access to financial services at affordable rates and public expenditure. Governments have place both social and economic regulations on the business environment. Regulations with regards to the economic aspects of the business environment generally focus on prices control in the economy. Macroeconomic theory is designed to protect small enterprises and consumers from unfair practices of established companies that are more powerful. Government protection of consumers and small enterprises is justified on the basis that market participants are unable to protect themselves since there are no markets that are fully competitive. Under normal circumstances, interests of businesses are restricted to their own profitability and growth, while interests of the government focus on the whole economy, thus they enforce economic regulations to prevent enterprises from destructive competition practices among themselves. Government’s enforcement of social regulation seeks to protect the society as a whole through safety and environmental issues other than the business environment in particular. Macroeconomic policies promoting the welfare of the society aim at encouraging and enhancing corporate behavior that generally accepted by the society and discouraging behaviors that are harmful to the society. Corporate behavior regulated by government does include emissions of harmful smokes by manufacturers and unfavorable employee benefits. Government regulations have promoted the welfare of employees through regulations of the taxation system, child labor, health benefits, and retirement schemes by employers (Kaufman, Industrial Relations 198). The idea of government regulations in the business environment have been supported and opposed by economic theories and scholars in the school of thought. Economies have strived to achieve free business operation and favorable regulations, which have led to adoption of capitalist economic systems. The capitalist system advocates free business operations of the rein of private interests. The capitalist economy claims that a long as the business environment is competitive and free, the activities of individual businesses are motivated private interests of businesspersons. Private interests motivate individuals to work hard and collectively for profitability and growth of their business and wellbeing of the society in general. However, the capitalist also upholds particular forms of government regulations that aim at establishing rules for business operations. The capitalist system does not fully depend on private interest and free rein since the government still has the mandate of ensuring the practices of the business environment is kept under control. Macroeconomic policies still have the mandate of protecting local enterprises from international competition through cross border policies and trade restrictions (World Bank) Analysis of Stakeholder Interest Relationship The article outlines reports of the World Bank with regards to the US regulatory bodies putting in place macroeconomic policies that are friendly to the businesses environment. Many governments of have enacted policies that are unfriendly to the business environment thus discouraging investments and economic growth. Although regulations such as cross border businesses, environmental protection, tax payment and business permit acquisition are essential for an economy, governments should ensure more business friendly macroeconomic policies. Major stakeholders of macroeconomics include the society, governments and entrepreneurs. Governments have an interest in economic growth and development while the society focuses on environmental protection and its welfare in general. On the other hand, entrepreneurs have an interest in ensuring macroeconomic policies create a conducive and friendly environment for investment. The society and businesses have an interest in government spending policies and developmental structural development since more spending implies more income and business opportunities for entrepreneurs. More so, subsidization of economic activities by the government also goes a long way in promoting business activities. The government is controlled largely by the political class responsible for legislations through which macroeconomic stakeholders are able to influence formulation and amendment of desirable macroeconomic policies. The political class frequently changes political policies, which must consequently be replicated by variations in microeconomic policies regulating the business environment (Herring & Litan 43). Conclusion  In general, proper macroeconomic governance is tied to balanced structural economic relations such as balance of payment, gross domestic product, output, and government spending and revenue collection. However, these structural relationships must not be accurately in balance for the economy to be considered healthy. A number of imbalances like the budget deficit and surpluses may favorably exist in situation where the economy is stabile as long as they are financed in a sustainable manner. Instability and stability of economies with regards to macroeconomics does not put into consideration all structures in combination. Macroeconomics theory bases its claims of economic stability on a continuous and a strategic combination of key variables such as inflation, economic growth, budgetary deficits, cross border reserves and imbalance of payment indicate economic instability in a collective manner. Such key macroeconomic variables are often used to identify economies that are unstable with regards to macroeconomic. These situations may include extremely large government debts, budget deficits that have been financed by government’s short-term borrowing, declining gross domestic product and extra ordinary inflation rates.      Works Cited Wikipedia: Macroeconomic Policy http://en.wikipedia.org/wiki/Macroeconomic_policy_instruments Geoff, Riley. AS Macroeconomics / International Economy Government Macroeconomic Policy, September 2006 http://tutor2u.net/economics/revision-notes/as-macro-macroeconomic-policy.html Dwyer, Paula. World Bank Ranks U.S Regulatory Burden very Low: The Ticker. Bloomberg. 20 October 2011. http://www.bloomberg.com/news/2011-10-20/world-bank-ranks-u-s-regulatory-burden-very-low-the-ticker.html Herring, Richard & Litan, Robert. Financial Regulation in the Global Economy. NY: Brookings Institution Press. 1995.. Kaufman, Bruce. Industrial Relations Research Association. Government Regulations of the Employment Relationships. NY: Cornell University Press, 1997. Rajan, Ramkishen S. & Asher, Mukul G. The Macroeconomics of Financing Government Expenditure: A Survey of the Static Consequences. NY: NUS Press. 1997. World Bank. World Developments Indicators: 2004. Washington DC: World Bank Publications. 2004.   Read More