Government And Business Regulations

By Author: Anthony W Bills
Total Articles: 158
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Government and Business Regulations
The behavior of people is to a large extent determined and controlled by the market forces on one hand and the government on the other. In the production industry, the industrialist aims at minimizing expenditure in order to maximize profit. If left free, the industrialist would end up exploiting the workers by paying low wages and failing to ensure their safety. However, the government steps in and sets up regulations that require the industrialist to install adequate safety measures to protect the laborer and recommends the minimum wages to be paid to laborers. The relation between the business world and the government is complex and important to researchers and policy makers as it controls the behaviors of people and the characteristics of political economy. In this paper, I am going to discuss the following three questions in order to bring an understanding why sometimes government and business work together in collaboration and other times fail to collaborate and work separately.
The reasons behind regulation of business of the private sector by the government include ensuring ...
... that the consumer gets the desired goods and services, protecting the rights and privacy of the consumer, ensuring that resources are conserved and ensuring that special groups like the disabled and children are catered for. Business regulation and government intervention can also be understood better by looking at the results of the Great Depression that affected North America, Europe and other industrialized nations in the decade preceding the Second World War. During the Great Depression of the 1930’s, many nations took steps to protect their economies. In the United States, the depression had resulted in massive unemployment, very low personal incomes and a general decline in production and revenue generation. To avert this situation and promote recovery, the government increased its regulation of private sector business. In a free market economy, trade is purely controlled by the forces of demand and supply, with no interference from the government. The prices are not controlled and are solely determined by the market. Some scholars argue that in a free market economy, more goods of better quality are produced for a larger proportion of the population, leading to a higher standard of living.
In a free market economy, the competition is free and nobody is protected. Survival of the fittest is the rule. According to the open competition proponents, good businesses will survive while poorly managed ones would close down, thereby bringing efficiency in the business world. As it has been evident is the recent few decades, well run multinationals have been taking monopoly and driving small businesses and poorly managed companies to close down. This is where the government comes in and lays down regulatory measures in order to protect the small businesses. In the U.S., the Small Business Association works together with the federal government to advance the views and interests of the small business firms to the Congress and other policy making bodies. Karl Marx’s theory of socialism suggests that in order to protect the people from exploitation, the government should take control of the economy and control the prices of goods. This, according to the theory would check the capitalist and ensure business equality. The government takes possession of the businesses and determines the prices and wages of the workers. Critics of the socialistic theory argue that this leads to inefficiency and poor quality of commodities, giving rise to and overall lower standard of living (Michalos A.C., 2009).
A purely open competition in a free market inevitably leads to monopoly and exploitation. This leads to an unstable society and inevitably undermines the free market system. On the other hand, a fully government controlled economy leads to inefficiency and poor standard of living. John Maynard Keynes suggested that the government should ensure that the business world operated in a socially desirable manner for the public good. He further suggested that the government should leave the business world to implement the policies independently, without government intervention. One way in which the government can direct the private sector is by controlling credit in the market by using monetary policies (Abraham, B., 2005).
The major types of government regulation of business include statutory regulation whereby legislature enacts laws to restrict and control private sector business operations. Sometimes businesses regulate themselves through business associations. The associations then lay down restrictions for the member firms thereby regulating their operations. Anti-trust laws are laws enacted with the sole the sole purpose of enhancing and protecting competition in the private sector. These laws play a big role in protecting small businesses which would otherwise not survive competition with the big multinational companies (Abramson, 2005).
Cost and benefit analysis of business regulation show that the regulation may have its advantages as well as disadvantages. Price control and regulation of market entry tend to tend to protect weak firms thereby hampering with production and economic growth and negatively affecting the standard of living. On the other hand, social regulations which ensure that the consumer gets the desired products and services may have an overall net advantage to the consumer in the long run ( Reder, 1982).
In conclusion, it can be said that a purely government controlled private sector or a purely free market economy does not augur well for the common good of the people. Most modern governments therefore allow the private sector as much freedom as possible but still ensure that they have control of the core policies of the business world, without compromising its freedom. This is an adaptation of the Keynesian theory to some degree which allows for some government intervention in the private sector business.
Bibliography
Abraham, K. G., (2005). Beyond the Market: Designing Non-market Accounts for the United States. Washington D.C. National Academies Press.
Abramson, B. (2005). Digital Phoenix. Cambridge M.I.T. Press.

Michalos A.C.(2009). Journal of Business Ethics. No. 10551. Springer, Netherlands.
Reder, M. (1982). Chicago Economics: Permanence and Change. Journal of Economic Literature. No. 1-38.

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