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PA 315
Government Business Relations
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Definition
- Definitions of government-business relations vary by country, and vary considerably over time too!
- Major factors shaping the relationship:
- Mix of strategies used for implementation of public policy
- Monetary policy
- Fiscal policy
- Amount of government protection of society’s most vulnerable
- The amount of prohibition on government competition
- The amount of promotion of the business sector domestically and internationally
- The influence of the private sector on government policy making and administrative actions
Actual relationship in US currently…
- In the US, a working description of government-business relations by Roger Porter. In the US there is a preference for…
- Private ownership over public enterprise;
- Regulation rather than governmental ownership;
- Markets over central planning;
- Relatively aggressive antitrust policies and a highly differentiated business community;
- Openness, due process and judicial remedies over efficiency;
- Widely distributed power between levels of government;
- A stable two-party system in which power is genuinely shared; and
- Stability with respect to the economic, legal, and institutional framework.
Why government at all?
- Hobbes: Without government life would be “continual fear, and danger of violent death; and the life of man, solitary, poor, nasty, brutish, and short.”
- What government does, in the modern world is enormous and its contribution is indisputable. Can you imagine a world in which…
- All airplanes have “flyer beware signs” because there are no safety regulations, except there would be no one to enforce such signage!
- All roads would be private roads and most would be toll roads!
- You would need to pay for fire protection or the fire truck would not put out your fire (as it was in colonial times)! And so on.
Why government at all?
- The need for government, however, does not mean that government itself cannot
- Underperform
- Perform very badly
- One purpose of this class: provide tools for fair analysis of success and weakness of government in general, and, in particular, with its roles with business.
- Our assumptions:
- Business-government relations is an important skill set for modern business people, and an important mindset for public administrators.
- A duly established, social contract-based government contributes to the highest quality of life.
Debate about the Role and Size of Government
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Laissez-Faire versus Activist Government Approaches: An ongoing Debate
- Laissez-faire: “leave it alone” or less government is better
- Adam Smith
- Hayek Milton Friedman (Supply side economics)
- Best examples today: Anglo-countries, Switzerland, Singapore
- Mercantilism: more activist approach
- Alexander Hamilton (first Secretary of the Treasury)
- Keynes (Keynesian economics, e.g., countercyclical spending, social and physical infrastructure, etc.)
- Today seen somewhat in corporatist economies of East Asia (i.e., strong state involvement)
Question
- Who was the proponent of the “state” (the federal government) taking an active role in shaping the economic system in the early U.S.?
George Washington
Benjamin Franklin
Adam Smith
Alexander Hamilton
Relative size: employees (absolute numbers)
Relative size: expenditure (proportional)
| Proportional Growth of Government: Total Government Expenditures as Percentages of GDP: 1948–2012 | ||
| Fiscal Year | Total Government Expenditures | |
| 1950 | 22.7 | |
| 1960 | 26.2 | |
| 1970 | 29.5 | |
| 1980 | 31.3 | |
| 1990 | 32.5 | |
| 2000 | 28.8 | |
| 2007 | 30.6 | |
| 2009 | 37.0 | |
| 2010 | 35.8 | |
| 2015 | 31.8 |
Inclusive federal debt
Reasons for government growth
- Complex societies place greater demands on government
- Wars and other national calamities
- Many special interests are successful in finding a place in the public sphere over time.
Limits of government expansion
- The natural aversion to taxes is seemingly universal.
- As governments become larger and occupy more of the economy, the more they can become political targets if they are not successfully managed.
The most basic roles of government
- Defense
- Public safety
8 government-business roles
- Provider of monetary and fiscal structure
- Regulator
- Safeguard against risk
- Provider of infrastructure
- Purchaser
- Social architect
- Service provider
- Promoter of business
Debate to Analysis
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The good… (generally strengths)
- Providing a stable financial system
- Providing a social contract for a stable society
- Public welfare
- “The commons”: shared goods like roads
- International and domestic safety
- Reducing risk
- Shared social infrastructure, e.g., K-12 education
The bad… (generally weaknesses)
- When governments take over areas completely and become monopolies (or dictatorships)
- Collusion of powerful interests
- Government corruption
- When government takes on too much and gets over-extended
- Becoming excessively complex, e.g., tax code
- Dealing with special interests over time
- Inefficiency over time
The ugly… (important things that government does but either are not understood or appreciated)
- Taxes: necessary but hated (excessive taxes are bad but then we must decide what “excessive taxes” means)
- Foreign aid (example of necessary item that is hated)
- Government doing the unpleasant jobs, like prisons
Question:
- Which of these is defined by the lecture as a frequent weakness of government?
Running educational systems
Administering public safety
Providing military safety
Dealing with special interests over time
Rough comparison of sectoral functional emphases
|
GOVERNMENT |
PRIVATE |
|
National security (defense) and public safety (police, fire, etc.)
Regulation of society through shared laws
Quality of life via shared services and infrastructure
Public welfare, mass public education, and national heritage (e.g., parks) s
Promotion of business interests both domestically and internationally Marketing of business |
Financial values through the market and wealth creation
Quality of life through individual products and services, including private education
Marketing of business (self- promotion)
Supplemental security and risk reduction Marketing of business
Philanthropy and giving supported by tax deductions Marketing of business |
Reform of the Private and Public Sectors
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Types of reform: Society at-large
- Much reform of society occurs through unlegislated social and economic evolution
- Government (legislatively) is mechanism to re-form society in a multitude of policy areas:
- Reform of individuals (e.g., civil, criminal law)
- Reform of businesses and organizations (e.g. financial regulation, pollution, employment, etc.)
- Reform of international trade relations
Types of reform: government itself
- Government re-form of itself
- Via law and budget authorization (e.g., cutting budgets), increasing market forces, scrutiny of low-performing agencies
- Types of government reform focus (other than shrinking). To:
- Increase efficiency: Reorganization Act (1939)
- Reduce waste: Inspector General Act (1978)
- Ensure fairness: Administrative Procedure Act (1946)
- Encourage high performance: Government Performance and Results Act (1993)
Note: some reforms include multiple types of reform and those reform efforts may have conflicting purposes
American Government Institutions
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# of governments in US
Federal Spending
State spending
Local government spending
Discussion and Conclusion
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The importance of government for business students
- The roles of government affect business, both directly and indirectly
- Many of those roles are in direct support of business
- To be able to use/deal with/manage government, you need to understand it
- There is great utility in providing “government-skills” for business and other majors
GOVERNMENT PRIVATE
National security (defense) and
public safety (police, fire, etc.)
Regulation of society through
shared laws
Quality of life via shared services
and infrastructure
Public welfare, mass public
education, and national heritage
(e.g., parks)
Promotion of business interests both
domestically and internationally
Financial values through the
market and wealth creation
Quality of life through individual
products and services, including
private education
Marketing of business (self -
promotion)
Supplemental security and risk
reduction
Philanthropy and giving supported by
tax deductions
s