Regulation can be defined as a set of rules, norms, and mechanisms for their enforcement (Birch et al. 115). When it is done by the state, the objective is typically to steer socially important activities in the direction that would make them comply with the law. The subset of state regulation, business regulation makes part of the complex system of political, legal, and organizational norms and sanctions. This essay elaborates on the role of the state in business and explains why there is a great deal of pushback from organizations to counter the state pressure.
Government regulation in the market economy is different from that in the planned economy. The role of the state in the former case can be compared to the role of a referee: while they do not dictate players’ actions, if someone violates the rules, they are quick to restore the order. The forms of regulation in the market economy are typically confined to inducements, compensation, and direct service provision. Inducements such as taxation or levies or businesses for individuals serve as a discouragement while subsidies seek to encourage certain activities (Birch et al. 115). For instance, the state might resort to higher taxes for corporations who refuse to recycle and subsidize those who do. Compensation is part of social welfare: it redistributes wealth and income to make government assistance possible (Birch et al. 116). Lastly, direct service provision means that the state takes responsibility for services and products that otherwise would not be supplied by the private sector.
The Dilemma of Government Regulation
Government regulation meets a lot of resistance because oftentimes, there is a fine line between enforcing the law and actively intervening with business. As Birch et al. reason, the opponents of government regulation in the economy fear that it will be counteractive to market efficiency. Market efficiency is a concept that operates on the premise that all the business costs are all absorbed, and benefits yielded through market exchange. The concept assumes that people are rational: they will always be able to access adequate information to inform their decisions. Lastly, the opponents of state intervention fear that the market will no longer be competitive if the government decides on its own whom to reward and whom to punish.
While these fears are not ungrounded, the myth of the liberalized market that functions just well without the government needs to be dispelled. Today, some corporations gain so much power that they become a full-fledged public threat. For instance, Srnicek describes how big tech companies such as Facebook and Amazon routinely ignore privacy concerns and expand data collection. Besides, since the industry, on the whole, becomes more concentrated, the leading corporations dictate wages and work conditions. This situation does not fit the idealistic picture of the free market.
Among important topics for public policy, probably one of the most controversial ones is that of the regulation of business. Business regulation is designed to prioritize the public interest: it makes sure that entrepreneurial and business practices are in line with social priorities. State regulation has found many opponents who claim that it hurts market competition and violates consumers’ freedom of choice. The current state of the economy has demonstrated that the free market that lets corporations grow exponentially and take charge has been the cause of many social ills. While it is not yet clear how the government can harness the new tendencies, it is clear that the situation cannot remain unattended.
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