Organizations relationsip in economics - Research Paper Example

The government achieves this by creating the conditions necessary for economic growth, which includes creating laws that encourage smooth business transactions and foster communication among various institutions, acting as a mediator between antagonistic parties, as the government does in labor disputes among other areas, and unifying various institutions for a common cause, which is the advancement of a particular group, i.e. "Australia" or "The United States." Organizations and the government's under which they are structured often have an adversarial relationship.

According to Dowling and Schaefer, business and government are diametrically opposed, competing with each other for the same social capital. That is, they are the competing social structures upon which all modern societies are based.1 They write, The ideological essence of business is represented in the values of private property, societally diffuse decision making and market accountability; that of government, by contrast, is characterized by values of communal property, societally centralized decision making and political accountability.

Societies structured on either of these ideologies reflect these values and characteristics. The conflict between business and government can be seen as a competitive institutional struggle as to the role each is to play within society. What domain each should have is a question that has dominated both theories of political economy and much pragmatic political activity. Socialism versus private or free enterprise, nationalization versus privatization, regulation versus deregulation and the relationship of public to private sectors are examples of the struggle.

2 North writes in Institutions, Institutional Change and Economic Performance that the success of the Western economy is dependent upon cooperation, indeed, that it was the cooperation among institutions in the Western world that allowed it to become so dominant in the world economy.3 According to North, this wealth-maximizing behavior came about because the conditions were perfect for it. However, as social conditions change, institutions become less likely to cooperate with each other. He writes; We usually observe cooperative behavior when individuals repeatedly interact, when they have a great deal of information about each other, and when small numbers characterize the group.

But at the other extreme, realizing the economic potential of the gains from trade in a high technology world of enormous specialization and division of labor characterized by impersonal exchange is extremely rare, because one does not necessarily have repeated dealings, not know the other party, nor deal with a small number of other people. In fact, the essence of impersonal exchange is the antithesis of the condition for game theoretic cooperation.4North writes that solving this apparent paradox is the key to understanding how the Western economy fulfilled all of its potential.

Indeed, it is clear that despite an antagonistic relationship, business needs government to keep up institutional cooperation as much as government needs business to maintain a place at the forefront of world civilization and maintain power on the international political stage. Cooperative behavior among the various institutions is necessary for successful economic growth, and one of the ways in