Federalism Creates Both Advantages and Disadvantages for Business - Coursework Example

Running Head: FEDERALISM AND BUSINESS Topic: Federalism creates both advantages and disadvantages for business [Name of the Student] [Name of the Professor] [Name of the University] [Date] Federalism Creates Advantages as well as Disadvantages for Business Federalism is very important for the development of business and the economy of the nation. A diminution in Federal State relations has an adverse effect on business, and reduces the latter’s productivity. In the past decade, the revenues of the government have increased in an unprecedented manner, and generated $87 billion in additional revenues. This beneficial development has served to reduce pressure to review inefficient policies, such as federal state duplication and the imposition of unwarranted regulations on businesses (Milliner, 2008). However, it is to be borne in mind that even a strong economy cannot hide inefficiencies for a long time. In Australia, the federal and state governments have not been able to work in a coordinated manner on issues of national importance. In the absence of proper federal state relations, businesses face a number of constraints, and find it difficult to invest in new projects, become innovative, procure qualified staff, compete and expand their businesses. Moreover, companies have to function under different state rules, and they have to adopt different planning strategies in different states. This hinders their expansion and growth. In addition, some companies have found it difficult to provide employment to eligible aspirants (Milliner, 2008). Moreover, audit regimes differ from state to state, and the larger companies have to undergo multiple audits for the same infrastructure project at different levels of government. This has resulted in deferred investments. The outcome of these constraints is that the people of Australia experience higher prices, less choice, fewer job opportunities and lower returns on investments (Milliner, 2008). The Business Council of Australia (BCA) has been conducting research in areas that are crucial to the economic and social prosperity of Australia. It has conducted research in areas like infrastructure, innovation, education, regulation and taxation (Milliner, 2008). Most of the leaders of business ignore federalism, and the additional cost resulting from different state and federal regimes is passed on to the consumer. In general, there is a diversity of laws between countries. However, in addition, Australia depicts diversity between the laws of the states (Roskam). The federal government assumed charge of industrial relations, and this was accepted willingly by the business community. The business community is justified in fearing centralised power. A powerful government denotes an ambitious government. If the Australian government were to be accorded greater power, it would exercise greater control over policy matters including those relating to business. It is acceptable for laws to vary between nations; however, there should be no variance of laws within a specific country (Grabosky & Braithwaite, 1993). A section of the present stock of corporate reform seekers may not be aware of the Ben Chifley regime of the past. Those who had heard of the excesses of that regime could even contend that in the globalised economy, no Australian government would dare to harm the business community (Craven, October 17, 2006, Pg. 12 ). The quality of education differs from state to state. Therefore, if the quality of education in some states deteriorates, education in the other states remains unaffected. However, if education is centralised, then the whole educational system could be at risk of failure (Craven, October 17, 2006, Pg. 12 ). This concept applies to all policy areas from transport to health. In Australia, any business that operates at the national level has to register with each state and comply with that state’s workers’ compensation schemes. This renders compliance a very complicated process. Each state has its own schedule of injuries for claims and its own structure of compensation. Furthermore, administrative policies and regulations, relating to business, differ from state to state; and there is no consistency in the claims administration, between the states. Moreover, tax regimes vary from state to state. In 2004, the Productivity Commission had pointed out these glaring disparities in its annual report (Phillips, April 14, 2006, Pg. 24 ). The state governments insist that these differences promote the smooth operation of federalism. It has also been argued that states with better worker compensation schemes attract business and investment. This is a specious contention, because self contained economies cannot survive in this globalised era. At the moment, even the small and medium sized businesses have to operate in the national and international economies. Companies that operate across the nation, require a uniform worker’s compensation scheme at the national level. However, this exercise was futile. The aims and objectives of national consistency should be secured through a tri-partite representative body, comprising of employers, employees and government officials (National Workers' Compensation And Occupational Health And Safety Frameworks, 2005). The Federal Government attempted to encourage competition between the states. This initiative helped large businesses, in the beginning, as they were in a position to meet costs. This move has wide implications, as the states will come under pressure from businesses and workers. The state schemes will have to modify their schemes and improve their administration. States avoid their liability in claims relating to injuries, by suing the client of the labour hire business. The amount is recovered against the client’s public liability insurance (Phillips, April 14, 2006, Pg. 24 ). The states avoid their insurance obligations by resorting to this legal circumvention. Large businesses, at the moment, have to resort to the Comcare scheme. The growth of Comcare is likely to create apprehension among the states that every business and worker would demand admittance to this scheme (Phillips, April 14, 2006, Pg. 24 ). Therefore, it can be concluded that the states’ labour schemes are deceptive. There are several other deceptive schemes, in respect of workers’ compensation. Therefore, a federal labour compensation scheme would create competition among the states. Such a federal scheme would compel the states to implement effective and efficient schemes. There has been considerable disagreement between the states and the Commonwealth. Furthermore, there have been differences between the states. The major disagreement surrounds fiscal federalism. The contention has been chiefly about the right of the states to generate revenue and the amount of money that is to be returned to them by the federal government (McLean, 2002). In addition, there have been a number of debates regarding the exercise of power and jurisdiction over issues like, industrial relations, health, education, law and order, mining, land development, and water. This situation caused governments, since the 1970s, to talk about New Federalism. The federal governments have subscribed to the view that this concept would resolve tensions between the federal government and the states. It was also believed by these federal governments that the New Federalism model would regenerate the strained relations between them and the states (Williams, August 21, 2007, Pg. 14). Businesses are complaining about the inconsistency of federalism. The major problems with the federalism include overlapping and duplication of several legislations, and inefficiencies in drafting and implementation of sound policies. Australia is losing nearly $40 billion a year due to these detrimental factors. This situation provides a stronger voice to the states to claim that the federal government is enjoying power at their expense. This power centralisation in the capital is termed centripetalism, or a process of power accumulation in the centre, which in this case is at Canberra the capital of Australia (Williams, August 21, 2007, Pg. 14) On account of this reason, the states are at loggerheads with the Commonwealth. The BCA has conducted extensive research into this dismal situation and concluded that it is essential to revise these relations, in their entirety. This is inevitable, if Australia’s economy is to flourish. Such reform would provide a strong basis for the economic growth and prosperity of Australia (Business Council of Australia) . Many of the problems and inefficiencies in the existing model of federal state relations hinder economic growth in Australia. The federal and state relations have to be improved, and it no longer restricted to factors of governance; but involves economic interests and fiscal federalism. The strained federal state relations entail huge losses to Australia. This political context represents centripetalism in Australia. The power has shifted to the centre, thereby limiting the power of the states. Thus, Canberra had accrued greater power, at the cost of the states (Diamond & Plattner, 2006. Pg. 30). Businesses in Australia are of the opinion that federalism would impose a system of check and balances on governmental power. According to the BCA, if there are multiple governments, then the exercise of power becomes challenging or disputable. This situation compels the state governments to defend their own decisions, which would result in moderately beneficial outcomes for businesses. Federalism provides a wide range of choices to the people. In addition, under federalism, power is dispersed to a greater extent and such power is more open to scrutiny. Moreover, it encourages competition amongst the states (Twomey & Withers, 2007). This dispensation permits the people to elect one particular political party to form government in the state and another at the centre. Different political parties in power at the state and federal levels, permit different approaches to the various policy issues and schemes. The populace receives several choices under federalism. For instance, they can elect a specific political party at the national level, on account of its approach to the national economy, defence and other issues. On the other hand, they could elect another party, because of its views on services like education, health and other relevant state issues, at the state level. This is not possible, if there is just one central government; wherein, the central government will integrate all the issues under one agenda and thereby leaving the people with a limited choice (Twomey & Withers, 2007). Federation has a number of advantages, and some of these were brought to the fore by Professor Walker. These are the citizen’s right to choose or exit; the option to experiment; taking into consideration regional preferences and diversity. In addition, there were equally important advantages, such as taking part in the government and opposing elitism; according greater protection to liberty; better scrutiny of the government; stability; fool proof design; efficiency and competition; and the resulting competitive advantage to the nation, as a whole (Flint, 2007). A few of these benefits were enumerated in the report on federalism that had emanated from the BCA. Furthermore, some eminent scholars had stressed their importance, in a report submitted to the Council for the Australian Federation. The latter brings about the amalgamation of the state and territory governments. It has been their considered opinion that concentrating to a major extent on the ills that plague the federal system, diverts attention from the benefits of federation. Some of these benefits are controlling mechanisms on power, choice and diversity, evolving policies that suit specific needs, competition, creativity and cooperation. List of References Business Council of Australia. (n.d.). A Charter for New Federalism. Retrieved October 4, 2009, from http://www.bca.com.au/DisplayFile.aspx?FileID=304 Craven, G. (October 17, 2006). Business gets its absolutes out of order. The Australian (Australia) . Diamond, L. J., & Plattner, M. F. (2006). Electoral systems and democracy. JHU Press. Flint, D. (2007, September 14). Fiscal balance must prevail. Retrieved October 4, 2009, from Online opinion: http://www.onlineopinion.com.au/view.asp?article=6366&page=2 Grabosky, P., & Braithwaite, J. (1993). Business Regulation and Australia's Future. Retrieved October 5, 2009, from Australian Institute of Criminology: http://www.aic.gov.au/documents/9/B/F/%7B9BF180DD-6CD2-4D62-9AA1-33BE5BE44BBF%7Dbusiness.pdf McLean, I. (2002, November 25). Fiscal Federalism in Australia. Retrieved October 5, 2009, from http://www.nuffield.ox.ac.uk/users/mclean/Fiscal%20Federalism%20in%20Australia.pdf Milliner, R. (2008, September 12). Making Federalism Work: The Economic Imperatives. Retrieved October 3, 2009, from http://www.bca.com.au/DisplayFile.aspx?FileID=471 National Workers' Compensation And Occupational Health And Safety Frameworks. (2005, March 15). Retrieved October 5, 2009, from Australian Council of Trade Unions: http://www.actu.asn.au/Campaigns/HealthSafety/Campaigns/WorkersCompensation/NationalWorkersCompensationAndOccupationalHealthAndSafetyFrameworks.aspx Phillips, K. (April 14, 2006). Federal scheme a monopoly buster. The Age (Melbourne, Australia) . Roskam, J. (n.d.). Federalism and the Liberal Party. Retrieved October 3, 2009, from http://www.samuelgriffith.org.au/papers/html/volume18/v18chap12.html Twomey, A., & Withers, G. (2007, April). Australia's Federal Future: Delivering Growth and Prosperity. Retrieved October 4, 2009, from http://www.caf.gov.au/Documents/AustraliasFederalFuture.pdf Williams, P. (August 21, 2007). Disputes abound in a complex and fragile relationship. The Courier Mail (Australia) . Read More