Chapter 8

Report
Chapter 8
Business-Government
Relations
McGraw-Hill/Irwin
Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
Ch. 8 Key Learning Objectives
 Understanding why sometimes governments and business
collaborate and other times work at arm’s length from each
other
 Defining public policy and the elements of the public policy
process
 Explaining the reasons for regulation
 Knowing the major types of government regulation of
business
 Identifying the purpose of antitrust laws and the remedies
that may be imposed
 Comparing the costs and benefits of regulation for
business and society
 Examining the conditions that affect business in a global
context
8-2
How Business and Government Interact
 Government cooperates with business for mutually
beneficial goals
 Influenced by nation’s values and customs, therefore differs by
county
 Government’s goals and business’s objectives are in
conflict
 Companies operating globally may find governments
whose legitimacy or right to be in power is questioned
 May be faced with dilemma of continuing to do business when
could be supporting the illegitimate power
 May choose to become politically active or refuse to conduct
business until legitimate government is in place
8-3
Government’s Public Policy Role
 Public policy –
A plan of action undertaken by government officials to
achieve some broad purpose affecting a substantial
segment of a nation’s citizens
 Public policy inputs shape a government’s policy decisions
and strategies to address problems
 Public policy goals can be broad and high-minded or narrow
and self-serving
 Governments use public policy tools involving combinations of
incentives and penalties to prompt citizens to act in ways that
achieve policy goals
 Public policy effects are the outcomes arising from government
regulation
8-4
Types of Economic Public Policies

Fiscal policy
 Refers to patterns of government taxing and
spending that are intended to stimulate or
support the economy

Monetary policy
 Refers to policies that affect the supply, demand,
and value of a nation’s currency
8-5
Types of Economic Public Policies
 Taxation policy
 Raising or lowering taxes on business or individuals
 Industrial policy
 Directing economic resources toward the development of
specific industries
 Trade policy
 Encouraging or discouraging trade with other countries
8-6
Types of Social Public Policies
 Advanced industrial nations have developed
elaborate systems of social services for their citizens
 Developing economies have improved key areas of
social assistance (health care, education)
 Social assistance policies that effect specific
stakeholder groups are discussed in subsequent
chapters
8-7
Government Regulation of Business
 Regulation
The action of government to establish rules of
conduct for citizens and organizations. It is a primary
way of accomplishing public policy.
 Reasons for regulation
 Market failure
 Negative externalalities
 Natural monopolies
 Ethical arguments
8-8
Types of Regulation: Economic
 Economic regulations
Aim to modify the normal operation of the free market
and the forces of supply and demand
 Includes regulations that





Control prices or wages
Allocate public resources
Establish service territories
Set the number of participants
Ration resources
8-9
Types of Regulation: Social
 Social regulations
Aimed at such important social goals as protecting
consumers and the environment and providing workers
with safe and healthy working conditions
 Includes regulations which apply to all businesses
 Pollution laws
 Safety and health laws
 Job discrimination laws
 And others that only apply to certain businesses
 Consumer protection laws for businesses producing and selling
consumer goods
8-10
Figure 8.1
Types of Regulation and
Regulatory Agencies
8-11
Figure 8.2
Spending on U.S. Regulatory Activities
8-12
Figure 8.3
Staffing of U.S. Regulatory Activities
8-13
Continuous Regulatory Reform
 Levels of regulatory activity tend to be cyclical and
dependent on politics
 Deregulation refers to the scaling down of regulatory
authority
 Reregulation is the return to increased regulatory activity
 Areas where deregulation has occurred in recent
years


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Commercial airlines
Interstate trucking companies
Railroads
Financial institutions
8-14
Regulation in a Global Context
 As patterns of international commerce grow more
complicated, governments recognize the need to
establish rules that protect the interests of their own
citizens
 International regulation in general occurs when there is a
growth of exiting, yet often conflicting, national
regulations of a product, or the product itself is global in
nature, thus requiring international oversight and control
 Sometimes national leaders resist the notion of
international regulation; yet at other times, international
regulation is welcomed or at least accepted as
necessary
8-15

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