Government Intervention in Business - Essay Example

Government Intervention in Business Advantages Government intervention when it acts as a regulative body posts a more beneficial effect on business functions rather than disadvantages. Government institutions set the rules of the game. It provides the rules and regulations on how organizations, people should relate with one another. Through obligations and contracts, relationships are formalized and professionalized. As a regulative body, government institutions provide procedures, standards that ensure the quality of business activities and outputs. It gives accreditation for processes, sanitation and safety- in which in this writer's opinion make business functions more efficient and economical. The government as well makes sure that the welfare of the people is put as priority at all times, (at least in theory). This becomes evident with Government Owned and Controlled Corporations, wherein some governments enter into the manufacturing or distribution of fast moving consumer goods to post a more competitive price range for its people rather than the good produced by multinational corporations- this is very evident in third world countries especially in the fields of pharmaceutical corporations and basic commodities such as rice and oil. The government also subsidizes some semi government owned companies, or agencies which delivers basic commodities to the people. Example of which are in the fields of energy, transportation, food (rice). This is done, in order to avoid the monopoly of certain markets and private corporations which usually dictate the market price of goods that sometimes are higher than what the lower class could afford. The government too, from the taxes it collected sometimes creates agencies and supports the education and development of different sectors in order to promote high priority business opportunities. Disadvantages Disadvantages of government intervention in business can be felt if the government no longer regulates but prevents business from doing its vital functions. Too much government control suffocates the economy. This can sometimes be evident through the different taxes, tariffs and trade regulations that governments post in order to protect, propagate or hinder a certain market. An example of which is that sometimes, As Stated the doctrine of laissez-faire, "workers are most productive and a nation's economy functions most efficiently when people can pursue their own economic interest freely". However, the economy of the United States is no where close to being a laissez-faire system. Based on studies, government spending and intervention in the economic sector has ballooned. The role of government has grown to a point where the benefits of government intervention are far outweighed by the negative effects on the economy as a whole(Ringer, 150). In the United States, one of the major areas in which the government intervenes is in the agricultural sector of the economy. The government has three ways it can intervene and help its producers. These ways include price policies, direct payments, and input policies. Price policies have the largest effect on producers. Tariffs, quotas, and taxes are just a few examples of price policies. While these policies bring revenue into the government, in the end they hurt consumers. Each of these policies raise the prices of both imported and native goods. They are designed to help stabilize prices and give the native producers a chance to compete with foreign goods. Under the doctrine of laissez-faire, the government would not interfere with prices and the native producers would be forced to lower their prices, giving the nation's citizens a better deal in the market. The use of taxes is one of the government's favorite ways to make its presence known in the economy. While this method seems blatantly obvious, many of the ways the government uses the money collected by taxation is not. Some of the money it takes is used to fund other programs designed to "protect" consumers and to "create" jobs. Because of the money taken away from the consumer through taxes, there is less money movement in the economy. This money movement is what creates jobs in the economy. The use of tariffs is another way that government intervenes in the business sector. They help inefficient domestic producers by forcing consumers to pay unnecessarily high prices for imported goods. The use of tariffs forces people to pay higher prices for certain goods and thus resulting in less money the consumer has to spend on other goods and services. This results in less employment in the industries that produce such goods and services. The hidden reality is that a job protected by a government tariff is at the expense of a worker in another industry(Ringer, 150). Subsidies and government loans are another method of intervention for the government. In this method, money is taken from efficient producers and workers to keep inefficient producers in business. Consumers pay for this method in the form of high prices. "As Henry Hazlitt has noted, it is important that antiquated, inefficient companies die out so that new, efficient companies can grow faster; i.e., so capital and labor will find their way into more modern industries" (Ringer, 151). A country cannot grow if modernization and technological advances cannot be made because of an immobile work-force. Small and big businesses are guilty of inviting government intervention in the free market. They continually ask the government to step in and "protect" them. Small businesses ask for less regulation on small business and more regulation on big business. Fair-pricing laws are a way both large and small businesses keep the government involved and hurt the consumer. These laws keep prices high and hurt efficient competitors. Globalization Has Made Governments Weaker and Business Stronger Indeed, globalization in the world economy has made businesses stronger. Somewhat it begins to dictate the functions of different governments. Businesses belonging to first world countries are considered as very coveted foreign direct investments by third world countries, which are oftentimes viewed as source of economic "light". These multinational companies are very much sought after because of the job opportunities it promises to give and the technological transfer it wishes to leave. In this regard, less stable governments, or those that are in the developing world begin to relax their policies and provide tax holidays in order to accommodate and attract these kinds of organizations. In worse case scenarios, some Multinational Corporations begin to intervene with local politics by posting bribes and "rewards" so that governments will favor them. According to Anup Shah (2007), "As the world starts to globalize, it is accompanied by criticism of the current forms of globalization, which are feared to be overly corporate-led. As corporations become larger and multinational, their influence and interests go further accordingly. Being able to influence and own most media companies, it is hard to be able to publicly debate the notions and ideals that corporations pursue. Some choices that corporations take to make profits can affect people all over the world. Sometimes fatally". Today we know that corporations, for good or bad, are major influences on our lives. For example, of the 100 largest economies in the world, 51 are corporations while only 49 are countries. In this era of globalization, marginalized people are becoming especially angry at the motives of multinational corporations, and corporate-led globalization is being met with increasing protest and resistance. These corporations made other governments weaker because technically they have more assets and money. Thus they have more share of the world economy. Usually too, developing countries become so afraid of the MNCs pulling out investments in their countries because it will leave a lot of people jobless- especially the skilled ones. To what extent, if at all, does business have a 'privileged' position relative to other interest groups and individuals Businesses are in a lot of sense more privileged rather than most interest groups and individuals. In most governments, corporations cannot be held liable to a certain crime, it can only be civilly held liable. These big businesses as well, provide the government with huge amount of taxes, taxes in politics is the lifeblood doctrine of the state. Which means, losing such corporation means loss of income and capacity of the state to deliver basic commodities and services to its people. Are business and environmental interests necessarily in conflict If business organizations will not learn to practice sustainable development, then they will always remain in conflict. All environment issues are political issues because politics govern the relationship between the government and its people. And it is the people who bring about the need to use or exploit physical resources which become the source of environmental issues. The theory on sustainable development which was stressed on Nick Middleton's Book, Global Casino(2008) is defined as pattern of resource use that aims to meet human needs while preserving the environment so that these needs can be met not only in the present, but in the indefinite future. Indeed, human society and businesses need the benefits of physical resources in order to live in standards that support technological growth and live a more comfortable and satisfactory life. However, this writer believes that the environmental issues are not inevitable, because such issues can be minimized, if not completely eradicated. The theory of inter generationality dictates that the current generation has the duty to preserve the environment and cultivate resources for the future generation. This can be done in so many ways. For example, for logging business, wherein twenty old trees have to be cut down out of fifty, then forty new trees must be planted, in order to support the theory of inter generationality. Environmental issues come up because different societies and businesses tend to live for themselves and no longer consider the welfare of other issues. One example of this is the ocean. The ocean is a universal property wherein different sea creatures reside. No matter how hard Australia protects migratory whales during seasons that such creatures are in their waters, it becomes useless if these mammals are not protected in the same scale once they go to the waters of South East Asia during summer time. In this sense, environmental issues could be minimized if the nations where migratory whales visit will enter into an agreement to equally protect these species. This also goes with the smoke that different factories emit. The physical resources of the world are somewhat made available for everybody. Thus the care and protection of which must be done on universal level. The ozone layer, the ocean, these are all not bound by territory, thus demands cooperation in terms of its protection. Multinational Corporations, which at this point are the most global in scale of influence, must begin practicing sustainable development that is borderless and non discriminating of the governments hosting it. However, there are environmental issues that strictly demand the action of local governments. Sometimes these governments relax their rules in order to accommodate and give way to certain corporations. It is a universally accepted rule that resources found to one country belong to that same country. And if such country will create laws that will support logging without any clause on inter generational duty, then the international society cannot do much about it. This also goes with multi national corporations that pollute the air, but continuously operates because of the protection given by their host country. Does business benefit from war I qualify. There are different businesses that benefit from war. Probably the business that benefits the most is a corporation in the field of ammunitions and security. Probably, war can be considered as a necessary evil. At some point it redefines boundaries and territories. If your country is the predator, and fortunately it wins, then it will render good effect to corporations based on the predator's country. Definitely, they will be a top priority, at the same time, the new territory becomes a new market in an instant. Many capitalists have, however, argued just the opposite: capitalism and free markets are the best guarantors of peace because war, while good for the defense industry, is so bad for just about every other industry. A number of studies have tended to refute the Marxist arguments, revealing that while economic factors can play a role in wars, other factors like political ideology, legal claims, and technological change play a larger role. References Ringer, Robert J. 1979. Restoring the American Dream. Harper & Row: New York. Robbins, Lord. 1976. Political Economy: Past and Present. Columbia University Press: New York. Dommen, Arthur & Carl Mabbs-Zeno. 1989. Subsidy Equivalents: Yardsticks of Government Intervention in Agriculture for the GATT. United States Department of Agriculture: Washington D.C. Federal Money Retriever. 1998. U.S. Federal Funding Numbers/ By Subject Terms. http://www.fedmoney.com/fs-subj2.html Shah, Anup, 2007, The Rise Of Corporations, GlobalIssues.org Bennett, R.J., Government SME policy since the 1990s: What have we learnt Proceedings of ISBE Conference, Cardiff,November, 2006 Chittenden F and Sloan B (2007) The Chancellor's Last Budget Statement: Politics or Economics British Chambers of Commerce (2007), The Burden of Regulation: who is watching out for us Richard Review on Small Business & Government, Interim Report, March 2007 Federation of Small Businesses (2006), FSB Survey, Lifting the Barriers to Growth Read More