Chapter 8

1. Chapter 8 Business-Government Relations

2. 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

3. The Government/Market Continuum Pure Economic Socialism Pure Free Market Economy What factors should go into a determination of where a country should be on this continuum?

4. 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 -- I have a problem with this statement • 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

5. Defining public policy and the elements of the public policy process

6. 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 policyinputs 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

7. 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. Types of Fiscal 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

9. Types of Fiscal 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

10. Explaining the reasons for regulation

11. 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

12. Knowing the major types of government regulation of business

13. 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

14. 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

15. Figure 8.1 Types of Regulation and Regulatory Agencies

16. Spending on U.S. Regulatory Activities Figure 8.2

17. Staffing of U.S. Regulatory Activities Figure 8.3

18. 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 • Commercial airlines • Interstate trucking companies • Railroads • Financial institutions

19. Examining the conditions that affect business in a global context

20. 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