The Changing Relationship Between Government - Essay Example

GOVERNMENT RELATIONSHIP WITH INTERNATIONAL BUSINESS Introduction For a long time now there has been a changing relationship between the government and the business world. This relationship has been defined by many factors that operate in the market. The government has the overall control of the market but the embracing of capitalist economies has seen less and less control of the market by the government. Capitalist economies have seen the liberalization of the market and removal of government controls in the all government sector. (Deresky 1997, p. 98) The model of the economy that is used by different countries is ultimately the one which determines the kind of relationship between any government and the business. There is some form of market which gives the government too much power in the market and therefore it is the form that is used by different countries that is ultimately the one which determines the kind of relationship between any government and the business. There is some form of market which gives the government too much power in the market and therefore it exerts a lot of control when dealing with business. This as the characteristic of most emerging markets immediately after the Second World War. But the capitalist economies have proved that closed markets which are controlled by the government are no better than open market where the theories of demand and supply are used. In closed market, there is a lot of control on the price of commodities in the market as well as the process of the business. The government sets the prices which are in the effort of preventing the businesses from exploiting the consumers. But this model of the market gives less market incentives for the business and it also encourages monopoly. There is also a lot of political control of the business. Therefore liberalized market has been seen as an appropriate market model that can be used by government in the market. Many countries have in the recent past adopted a liberalized market and have recorded massive growth in their economies. For example china has been having a socialist closed economy until 1989 when it opened up the market. Since then there has been massive growth of the economy which has performed well compared to the earlier times. China has been able to raise to one of the strongest world economy by liberalization its market. (Ricky and Michael 2006, p. 71) Like other developed nations, the UK government has a liberalized market model. In this case it has been able to open up its market and therefore there are a number of international companies which are operating in the country. The government has been upholding policies which have encouraged an open economy in the market and therefore opened up the participation of the international companies in the in economy. (BERR, 2008) The relationships between the government and the international business operating in the UK have been depending on the changes in policies that have been put in place from time to time. In this case the government has been striving to ensure that there is a participation of all the business which is willing to invest in the country in the market. One of the key factor that have been driving the UK government policy on the market has been the need to ensure that there is a conducive environment in which anyone willing to invest in the country can operate. (Rhinesmith 2006, p. 71) The political and legal environment is some the most important factors that helps a business to operate. In this case the legal and political environment determines the operating framework which a business uses to compared to the viability of its operation in one country as compared to another country. Therefore any government will try to come up with an acceptable legal and political environment that every business will feel free to operate. The legal and political environment in country is also a great determinant of the relationship between the government and international businesses that operates in a country. In this case the political environment can be favoring business from one area and at the same time it can be putting unnecessary restriction for business from other areas. Therefore the political environment may be the first consideration that any business will look at before deciding to invest in the country. The legal framework on the other hand defines the rigidity or the legal procedure that affect the operation of a business in the country. The reliability of the law of a country is an important factor that is a business will look at in order to determine whether their operations are secure or not in country. Relationship between the government and the international business According to the market theories, the relationship between the government and the business sector is supposed to be a cordial since they both rely on each other for their operation. In his regard the government will rely on the business to sustain the growth of the economy while at the same time the business will rely on the business for some of the basic needs of its survival. Therefore this is not an exploitative relationship but it is a dependant one where each one needs the other. The government rely on the business especially the multinationals in order to build the economy. Under the current economic conditions in the world, the role played by international business has become more crucial in making and sustaining the economy. The inflow of Foreign Direct Investment (FDI) has been considered as one of the most important economic activity of the modern economies. Every nation has been working to come up with proper policies that will increase the rate of FDIs in their country. Therefore the government has a responsibility of working towards ensuring that there is flow of investors in the country since it will rely on their contribution in the economy. Foreign investors in a country are useful to the government in many ways. (Cantrell 2000, p. 74) First they are help to provide employment opportunity for the citizens of a nation. With the changing market models, the government has been reading its level of workforce in order to enhance more control and efficiency in the workforce. This has been through privatization of most of its firms which is aimed at decreasing the burden that the government has to deal with in terms of management of the workforce and other areas. Therefore foreign investors are important since they provide job opportunity to the rest of het workforce which the government cannot employ. All over the world it has become difficult for the government to provide employment to its entire workforce due to the complication that is associated with the management of the work and how government workers carry out their duties. (Schneider and Jean-Louis 1997, p. 43) For along time now there has been an increasing trend of preference to the private sector in consideration of its efficiency in delivery of services. The private sector is more efficient in delivering services compared to the government sector. This is because there is a high level of responsibility in the sector compared to the government sector. Therefore one of the factors that have been contributing to increased lay off of government workers has been the need to reduce the workforce in order to enhance management. Most of the workforce that is retrenched from the government workforce is absorbed in the private sector of which the foreign investor makes a large percentage of the workforce. Therefore eth private sector helps the government to create employment to the people. This is one of the most important reason why the any government will strive to ensure that there is a cordial atmosphere that will attract more and more investors in the country. International businesses help the government to raise the living standard of the population since the government would not be able to provide employment for the entire workforce. The government also gets a lot of revenue from the international business. There are taxes that are charged to international business which operate in country which is an important source of government revenue. In relegating the control of some of the most important sector, the government aims at enhancing the efficiency of these important sectors and therefore but it does not aim at loosing the revenues that it used to correct from it operation in these sector. Therefore it has become increasingly important for the international businesses that operate in areas to make contribution to the government in order to help it to finance its budget. Therefore the other reason why any government will encourage FDIs in the country is in consideration of the amount of revenues that it is going to collect from these operators. The international business on the other hand needs the help of the business in order to operate in a country. First foreign investors understand that the world is not an open space which can be termed as a no mans land and therefore it has to recognize that there is an authority in a country that need to be respected. Therefore they understand that there are rules that have to be obeyed in the course of operation of these businesses. The international business has to respect the rules of the country and seek the permission of the business in order to operate in the country. The government can grant or deny an international business the right to operate in its country. Therefore it will have to look at particular way in which it will have to please or prove its worth tot eh government in order to help it to operate. The private investor has a motive for making profit from its operation in a country. On the other had the government has a motive to attracting the investors to the country. But there must be rules and regulation that will government than operation of the two sides in order to safeguard their interest. The international business will rely on the government in order to be provided with security. In this case the private sector will have to pay the government in order to be given security. Therefore it has to remit the taxes as charged by the government. Therefore we can say that the international business will also require the input of the government in order to be given security and the permission to operate in the country. As we have seen the two sides will depend on the other in order to operate. While the government will be working to attract foreign investors by creation of viable macro and micro economic policies, the international business will be on the other end be relying on the government to provide supportive document, security and other factors that are necessary in order to operate in a country. The nature of the relationship There has been an evolution in the nature of the relationship between the government and the international business. This relation has been dictated by various changes that have been taking place in the world especially due to the increased wave of globalization that has revolutionized all the sectors of the world. Traditionally the relationship between the business and the government was dictated by the terms of how competitive the business was to the government. By then there was government control of most sectors of the economy in all countries in the world. Most of het sector were controlled by the government and there was government control in every business. There were strict price controls even in the private sectors and most government subsidized goods and services. This was more so in socialists economies where the nature of the economy heaved the burden on the government to provide all goods and service to the population. Therefore the international business that was operating in any country by then had little independence and most of the policies that it had to follow were coming from the government. For example it has been shown that in china, there was little investment by the foreign companies because there were strict rules that gave the government control of price and the business process. But this changed rapidly with the evolution of the economy and opening up the market to foreign competition. Since then there has been increased flow of foreign investors in china who have helped to drive the economy forward to the third largest in the world. Therefore earlier the relationship between the governments was also constrained by the level of ingenuity expressed by most of the international operators who set up their operation in any country. There was massive fraud by many international companies and lack of this basic responsibility in their operation made it difficult for most government to trust them with key sectors. Therefore there has been increased control of government in some sector even today since it cannot trust the private sector with the operations of such department. For example, the education sector in some counters h as been liberalized just recently while the security sector is still in the hands of the government. Therefore we can say that the government and the international business have been having a constrained relationship earlier before the evolution of the modernity in the market. But this was mainly due to lack of trust between the two sides. The government therefore came up with strict laws that were aimed at restring the operation of most of these businesses. As such we can say that the government did not trust the private sector and the business sector did not practice the required operation standards in order to relate well with the government. There was also a lot of political interference from the government by then. There was a lot of political interference in the operation of the international business as they were required to come to the agreements with the local political interest. Some of theme had to make changes in the normal operation standards in order to accommodate political interest of the local politicians. This made it difficult for most of these businesses to operate in such an environment and therefore there was reduced investment of international business in countries where the political environment was oppressive. (Hodgetts and Fred 2004, p. 423) Towards a partnership relationship There has been a dramatic change in the nature of the relationship between government and the international business. This has been dictated by the changes that have been taking place in the market which has created a new relationship between the two sides. Globalization has come with new standards of relationship between the government and foreign investors who comprise the bulk of international businesses operation in a country. Though there are areas where there has been strained relationship between the government nod the international business in a country, the general trend has seen an improved relationship between the two sides. The relationship between the government and the private sector has been defined by the fact that there have been realizations that both the government and the private sector serve the same public. They all have a common aim of ensuring that citizens are able to access what they need. They are both involvement in providing the public with goods and services and therefore in away they play the same role though they may not be equal. While the government have a role of play in ensuring that there is a good operating atmosphere for the international business, the business have role to play in meeting their obligations towards the government and also towards the citizens. This means that each side recognizes what it is supposed to do and therefore performs it obligations as required. Therefore the new relationship between the government and the international business in an area has been changing to more of a partnership relationship. The private sector has been partnership with the government in order to ensure that the public is served well. The private sector has stopped from been seen as supplementing government efforts in working for the citizens and is seen as an equal player in the country as well. This is because it has to carry the same role as the government. For example, there has been liberalization of the health sector in many counties like the US. There has been participation of the government and the private sector in the health sector in providing health services to the public. There are governments owned hospitals and at the same time there are private hospitals that are run by international companies like AAR which provide same health services as the government. Therefore both sides can be said to be partnering in order to ensure that citizens have access to the required health services. On the same health note, the international companies operating in places like the US have been supplement the government efforts of creating a social security framework that meets the needs of the citizens. In this regard these companies have been making contribution to the social security system which is not deducted from the salary of the works. For example, Microsoft Corporation has been making a contribution the health care of its workers and especially the retirees which has been aimed at ensuring that it meets its obligation to the employees. (Boston 2000, p. 6) There have been different models of operation that have been designed by various governments in order to attract and streamline the operation of multinational firms in their country. For example the US model has feature which include the provision of a safe and healthy workplace for the workers, fair labor practices according to the domestic labor practices and laws, renspoblity toward the environment and safe environmental practices, comprise with the US laws on promotion of business practice like illicit payment and fair competition, maintenance of cooperate culture in line with free expressions and other business operating modes lint the country. (US Department of Commerce, 2008) Therefore the relationship between the government and the international business has therefore slowly changed to a more cooperative one. The government has been coming up with policies that are meant to attract more international business to the country while the international businesses have discovered that they have a role to play in their operation and have therefore been coming up with strategies that are aimed at ensuring that they perform according to the set rules and standards and to become more ethics in their work. For example the UK government department of Business Enterprise and Regulatory reform has been coming up with a framework that has been aimed at attracting more foreign investors in the country and ensuring that there is a enabling relationship between the government and the internal business in order to ensure that both become more responsive to the needs for the nation. The departments have come up with rules within which the international business has to operate in order to address the needs of the nation in general. This department was created by the government with an aim of addressing the needs of the foreign investors in the country. It also provides information to foreign investors on the requirements that they have to meet the operation framework that they have to work with. It was created with an aim of importing the relationship between international business and the government. The department also gives the international businesses as chance to post what changes they want to be made in the operation environment and in amendment of rules and regulation. Therefore it increases the interaction between the government and the international businesses. (UK Trade & Investment, 2008) The nature of relationship between the two sides has also been dictated by the new concept of Corporate Social Responsibly. This is a new concept that emerged in the market towards the end of the last two decade which shows that corporation must be more responsible to the needs of the people and the environment in general. Under this concept organization have realized that they have to be aware of the plight of all stakeholders including the shareholders, customers, employee, and the environment in general. Therefore corporation have been coming up with various activities that have been aimed at supplementing the effort of the government in making the life of its citizens better. For example, there are a number of companies that have invested in various areas like the education sector or the environment sector as a part of their corporate social responsibility. The TATA Company of India or the BP Company can be taken as good examples in this case. TATA Company has been carrying out various education programs where it has been offering scholarship to poor girls who are not able to meet their education requirement and therefore it has been supplementing the efforts of the government in ensuring that these children have access to education. It has been partnering with the governed to provide education service to the nation. The same initiatives have also been taken by Microsoft Corporation which has been carrying out various programs that are aimed at addressing the digital gap in the world. As a part of its CSR activities, the company has been providing software and hardware materials to areas which are seen as less privileged in computer technology. (Jal, 2005; Ariton, 2007) On the other hand BP has been carrying out various CSR activities which have been aimed at addressing various environmental needs of different counties. It has been carrying out various program some alone and some in collaboration with the governments to ensure that it mitigate environmental conditions in various countries in the world. This shows that the relationship between the two sides has been changing with times and it is become more of a partnership nature. In different parts o the world, there have been various efforts that have been aimed at privatizing government parastatals in order to enlace their efficiency especially in the developing nationals. This has been another are where the government has been working together with multinational companies which acquire those enterprises. In most case the government sells its majority in the company but retains a share in order to give the multinational companies a hand to run the enterprises professionally. Therefore both the government and the multinational works together in the board of directors for those companies. (Early and Miriam 1997, p. 90) Conclusion The relationship between the government and the international business has been changing with times. From tie initial era when there was strict government control of key sectors of the economy with a closed market to the recent times when the market has become more open with increased flow of foreign investors, the landscape of the relationship between the two players has been changing with time. The relationship between the government and the private sector has been dictated by the fact that both needs each other in order sever the public well. The government needs the international business in order to build the economy while the business needs the government in order to be granted permission to operate in these countries and also needs to be given security. These are some of the factors that have change the relationship between the two to be more focused on the need to serve the consumers in the country. 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