Business, Government, and Regulation
Chapter 11 Outline
The Roles of Government and Business
Interaction of Business, Government, and the
Public
Government’s Non-regulatory Influence on
Business
Government’s Regulatory Influences on Business
Government’s Role in
Influencing Business
1. Prescribes rules
2. Purchases business’ products and services 3. Uses its contracting power
4. Major promoter and subsidizer
5. Owner of vast quantities of productive equipment 6. Architect of economic growth
7. Financier
Roles of Government and Business
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
Clash of Ethical Systems
Individualistic ethic
Maximizes concession to
self-interest
Minimizes the load of
obligations society imposes on the individual (personal freedom)
Collectivistic ethic
Subordinates individual goals
and self-interest to group goals and group interests
Maximizes obligations
assumed by the individual and discouraging self-interest Emphasizes equality of
Social, Technological, and Value Changes
Major Changes
Major Changes
National society
National society
Communal society
Communal society
Entitlements
Entitlements
Quality of life
Quality of life
Societal Value Changes
Societal Value Changes
Youth movement
Youth movement
Consumer protection movement
Consumer protection movement
Ecology movement
Ecology movement
Civil rights movement
Civil rights movement
Women’s movement
Interaction Among Business,
Government, and the Public
Lobbying
Regulations and Other Forms of Persuasion
• Advertising
• Public Relations
• Political Process
• Voting
• Interest Groups
• Contributions
Business
Business GovernmentGovernment
• Interest groups
• Not buying products
• Protests
• Politicking
Government’s Nonregulatory
Influence on Business
Two Major Nonregulatory Issues
Industrial Policy
Industrial Policy
Industrial
Policy
Industrial Policy
Adjusters
Adjusters
Targeters
Targeters
Central planners
Central planners
Accelerationists
Accelerationists
Bankers
Bankers
Schools of
Schools of
Thought
Thought
Schools of
Schools of
Industrial Policy
1.
Accelerationist : selected industries to be
international competitors in world market
2.
Adjusters : adjustment for declining
industries
3.
Targeters : selected industries to be engine
for growth
4.
Central planners : comprehensive planning
for growth oriented macroeconomic policies
Industrial Policy
Decline of national
competitiveness
Use by other world
governments
Ad hoc industrial policy
Reduces market efficiency Promotes political decisions Foreign success variable
Various interventions create
an industrial policy by default
Privatization
Privatization
The process of “turning over to” the private sector some function that was previously handled
by government.
Privatization
Pro-producing a service: effective
Other Nonregulatory
Government Influences
Major employer
Standard setter
Largest purchaser
Use of Subsidies
Transfer payments
Major competitor
Loans and loan guarantees
Taxation
Monetary policy
Government’s Regulatory
Influence on Business
Fair treatment
Protection
Scope
Cost
Burden
A Federal Regulatory Agency…
1. Has decision-making authority
2. Establishes standards or guidelines conferring benefits and imposing restrictions on business conduct
3. Operates principally in the sphere of domestic business activity
4. Has its head and / or members appointed by the president (generally subject to Senate confirmation) 5. Has its legal procedures generally governed by
Reasons for Regulation
Controls negative externalities
Controls negative externalities
Achieves social goals
Achieves social goals
Controls excess profits
Controls excess profits
Controls natural monopolies
Comparison of Economic
and Social Regulation
Economic Regulations Social Regulations
Focus Market conditions;
economic variables
People in roles as
employees, consumers and citizens
Affected Industries
Selected (railroads, aeronautics,
communications)
Virtually all industries
Examples ICC, CAB
FCC EEOC, OSHA, CPSC, EPA
Current
Benefits of Regulation
Fair treatment of employees
Safer working conditions
Safer products
Costs of Regulation
Direct costs
Indirect costs
Induced costs
Effects
1. Innovation may be affected.
2. New investments in plant and equipment may be affected.
Deregulation
Purpose
Intended to increase competition with the expected benefits of greater efficiency, lower prices, and
enhanced innovation.
Dilemma
Industries Affected by Deregulation
Trucking
Telecommunications
Financial Services
Chapter 12 Outline
Corporate Political Participation
Lobbying
Coalition Building
Political Action Committees
Corporate Political Participation
The process of influencing public
officials to promote or secure passage or defeat of legislation
Instruments through which business uses financial resources to
influence government
Business and other groups joining forces to achieve common goals
The Purposes of Lobbying
Gain legislative support or institutional approval for
some objective
Obtain reinforcement of established policy or the
defeat of proposed policy shifts
Targets the election or defeat of national, state, and
Organizational Levels of Lobbying
Umbrella Organizations
Umbrella Organizations
• Chamber of Commerce • National Association of
Manufacturers
• Chamber of Commerce • National Association of
Manufacturers
• National Automobile Dealers Assn • National Association of Realtors
• National Automobile Dealers Assn • National Association of Realtors
• Local government • Law firms
• Public affairs specialists • PACs
• Local government • Law firms
• Public affairs specialists • PACs
Grassroots Lobbying
Grassroots
Lobbying
Mobilizing the “grassroots”— individual citizens who might be
most directly affected by legislative activity—to political action
Cyberadvocacy
Using the Internet to amass
Coalition Building
1.
Manage the sequence in which issues are
addressed
2.
Increase the visibility of certain issues
Political Action Committees
Political Action Committees (PACs) are groups
of like-minded businesses using financial
resources to influence government.
Golden Rule of Politics: “He who has the gold, rules.”
Golden Rule of Politics:
Political Action Committees
Political Action Committees (PACs) are groups
of like-minded businesses using financial
resources to influence government.
Golden Rule of Politics: “He who has the gold, rules.”
Golden Rule of Politics:
Political Action Committees
PACs expect something in return other than good government and this can lead to differing treatment for those who give and those who cannot, such as the poor. PACs are a reasonable
means that business may use to organize their
contributions to candidates for office.
Arguments For PACs
Political Action Committees
1. When the issue is less visible
2. During the early stages of the legislative process 3. When the issue is narrow, specialized, or
unopposed
4. When PAC’s are allied
5. When PAC’s adapt lobbying techniques to their
contribution strategies
Trade off: Industrialisasi, peluang kerja,
profit perusahaan
Tujuan UU minerba: menciptakan lapangan pekerjaan dan hilirisasi sektor pertambangan.
12 Januari 2014 :Pemerintah mulai memberlakukan UU No.4 tahun 2009 tentang
Pertambangan Mineral dan Batubara pada lalu melalui Peraturan Pemerintah No.1 tahun 2014
Ancaman PHK massal terhadap 15.000 hingga 21.000 pekerja dari total 31.000 orang pekerja di areal pertambangan PT Freeport Indonesia- demonstrasi pekerja
Ancaman gugatan jepang&UE kepada WTO
