Business,

Government, and
Society
10-1
 Unit Two Objectives
• Discuss the government’s role in its relationship with
business
• Explore the interactions among business,
government, and the public
• Examine government’s nonregulatory influences
• List major reasons for regulation, the types, and
issues arising out of regulation

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 Introduction to Unit 2

This Unit examines the relationship between

business and government and in particular
the government’s role in influencing business
decision making.

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 Interaction of Business,
Government, and the Public

• Government/business relationship
• Public/government relationship
• Business/public relationship

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 Interaction of Business,
Government, and the Public
Lobbying

Regulations
Business and Government
Other Forms
of Political Process
Persuasion Voting
Advertising Interest Groups
Public Relations Contributions

Public

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 Government - Definition
• The structures and processes through which
public policies, programmes, and rules are
authoritatively made for society (Steiner)
• The term government refers to the way in
which a group of political officials conduct
the affairs of the country on behalf of the
citizens who elected them (L.C. Ruddock et
al).
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Structure of Jamaican Government
• Executive
• Legislature
• Judiciary

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10-8
Structure of Jamaican Government

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Regulatory Role of Government in
Business
• All business, regardless of type, must
– Comply with statutes (laws passed by legislative
bodies) and regulations (rules enacted by
regulatory agencies to carry out the purposes of
statutes)
• Enforcement agency has no obligation to
notify the business that it must comply with
the law.

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Government’s Role in Influencing
Business

1. Prescribes the rules of the game for

business.
2. Purchases business’ products and services.
3. Uses it contracting power to get business to
do things it wants.
4. Is a major promoter and subsidizer of
business.
5. Is the owner of vast quantities of productive
equipment and wealth.
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Government’s Role in Influencing
Business
6. Is an architect of economic growth.
7. Is a financier.
8. Is the protector of various interests in society
against business exploitation.
9. Is the repository of the social conscience and
redistributes resources to meet social
objectives
10. Monitors business activities

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 Clash of Ethical Systems

• Roles and ethical beliefs differ.

• There is a clash between the individualistic
ethic of business and the collective ethic
of government.
• Business typically view government
agencies as obstacle, constraints…and
impediments to economic progress
(Jacoby)

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 Clash of Ethical Systems
Business Beliefs
• Maximizes concession to
self-interest
• Minimizes the load of
obligations society imposes
on the individual (personal
freedom)
• Emphasizes inequalities of
individuals
Government Beliefs
• Subordinated individual goals
and self-interest to group goals
and group interests
• Maximized obligations
assumed by the individual and
discouraging self-interest
• Emphasized equality of
individuals
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 Government Regulations
• The act of governing, directing to the rule or
bringing under the control of law or
constituted authority

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 Underlying Reasons for Government
Regulation in the Private Sector

• Controls natural monopolies

• Guarantee minimum standards of consumer
protection, health, etc
• Provide framework for ethical behavior
• Protect small companies/ensure fair
competition
• Controls negative externalities

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© 2006 The McGraw-Hill Companies, Inc. All rights reserved.
 Underlying Reasons for Government
Regulation in the Private Sector cont’d

• To achieve/promote social goals

• Controls excess profits
• Controls excessive competition

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© 2006 The McGraw-Hill Companies, Inc. All rights reserved.
 Business Sometimes Seeks
Government Regulations
• Protection from unfair competition
• Controlling monopoly power
• Lowering interest rates
• Guaranteeing loans
• Subsidizing income

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 Benefits of Regulation
• Fair treatment of employees
• Safer working conditions
• Safer products
• Cleaner air and water

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 Role of Regulatory Agencies

• Decision-making authority
• Establish standards or guidelines conferring
benefits and imposing restrictions on
business conduct
• Focus on domestic business activity

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 Regulatory Agencies in Jamaica
• Bank of Jamaica – supervise the financial
sector (commercial banks and other financial
institutions, credit unions)
• Financial Services Commission (FSC) –
oversee the regulation of Jamaica’s insurance,
pension and securities industries

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 Regulatory Agencies in Jamaica
• Office of Utilities Regulations (OUR) -
telecommunications, transportation, water
and sewerage, and electricity
• Jamaica Stock Exchange – stock transactions
• National Environment and Planning Agency
(NEPA)

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Government Agencies that protect
Consumers
• Consumer Affairs Commission (CAC) – aids
consumers with redress
• Fair Trading Commission – investigates cases
of tied selling and misleading advertising
• Bureau of Standards – sets standards for
goods and services to be sold on the market
• Public Defender – investigates injustices
suffered by citizens from dealing with a
government agency or official
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 Government’s Nonregulatory
Influence on Business
• Major employer
• Major lender
• Large purchaser
• Taxation
• Major influence
– Subsidies • Monetary policy
– Transfer payments • Moral suasion
• Major competitor

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 Reasons for Regulation

• Controls natural monopolies

• Controls negative externalities
• Achieves social goals
• Other reasons
– Controls excess profits
– Controls excessive competition

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 Types of Regulation
1. Economic regulation
– Examples – bauxite, petroleum,
telecommunications, electricity

2. Social regulation
– Example laws protecting workers

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 Benefits of Regulation
• Fair treatment of employees
• Safer working conditions
• Safer products
• Cleaner air and water
• Improved position for minorities
• Prevent corruption

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 Costs of Regulation

• Direct costs
• Indirect costs
– Cost of running agencies
– Impact on a company’s employment or
productivity
– Effects
• Reduced innovation
• Reduced investment in plant and equipment
• Increased pressure on small business
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 Concluding Observations
• The cost of government regulations is huge,
but the cost is offset in significant degree by
the many benefits of regulation to society as
a whole, individuals, companies, and
industries.

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 Tutorial Questions
• What should be the respective roles of business and
government in our socioeconomic system?

• Given all of the tasks that must be accomplished to

make our society work, which of these tasks should
be handled by the government and which should be
handled by business?

• How much autonomy are we willing to allow

business?

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