Chapter 1: The Powers of Government and Business

The chairman of the board of Globally Diversified enterprises (GDE) has just summoned the board’s secretary (a bright, young MBA fresh from a tour of duty in Singapore with an international management consulting firm). The purpose of the meeting is to review the agenda for the upcoming meeting of the company’s board of directors.
Aside from the usual committee reports - audit, finance, executive compensation, and government - the GDE board meeting will focus on the chairman's quarterly review of operations. A longer-than-usual list of problems has arisen that the chairman wants to discuss with the board.

• The Industrial Machinery Division is behind schedule on its new factory.
• The consumer Products Division has been turned down again by U.S. government regulators on key new products it has developed.
• The government products division is pressing for a larger capital budget.
• The farm equipment division has reported an unexpected decline in sales, resulting from the loss of some overseas markets, especially in Asia.
• The treasurer has deferred the bond issue scheduled for this month in view of the unexplained gyrations in foreign exchange markets.
• The senior vice president for human resources has been spending most of her time in Washingtion, trying to settle a class action suit instituted by the equal employment opportunity commission.
• The vice chairman of the board has been meeting with representatives of the new york state employee's pension fund, a magior holder of the company's stock.
• The executive board of the national association of manufacturers has asked for a go ahead to nominate GDE's CEO as the next chairman of that broadbased business association.

International Comparisons

• History shows us that superior economic performance is not necessarily a question of natural resources, inherited wealth, culture, or geography.

The Policy Tools available to government

• Government payrolls (government as paymaster)
• Government purchases
• Transfer payments
• Government subsidies
• Government loans
• Government credit programs (government as underwriter)
• Government regulation
• Taxation
• Government as business partner
• Monetary policy (government as regulator of the economy)
• Moral suasion (government as leader)

 Let us try to summarize the highlights of the relationship between business and government in a modern society. Government exercises a variety of important powers in dealing with the individual private enterprise, ranging from taxation to regulation. Business, in turn, relies on constitutional protections and its substantial financial resources as well as on public support of its basic role in creating income, employment, and material standards of living. The business-government relationship in a dynamic society is constantly changing. The line between the public and private sectors frequently shifts.

In a global economy, that line is especially difficult to define. As we will see throughout this book, the strategies and issues discussed apply, with perhaps minor variations, to most governments and businesses around the world.

source: Business and Government in the Global marketplace (seventh edition, Murray L. Weidenbaum)