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Chapter
7
Business and
Public Policy
7-1
Business
and
Society
POST, LAWRENCE, WEBER
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Figure 7-1a
Public Policies Affecting Business
National economic policy
Economic effects
7-2
•Policies affecting the macro economy
* Economic growth
* Fiscal policy
* Monetary policy
* Employment/unemployment, welfare assistance
* Government spending, taxation
* Currency value, interest rates
•Policies affecting individual industries or sectors
* Trade policy
* Industrial policy
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* Exports/imports (e.g., balance of trade)
* Trade barriers (e.g., tariffs)
* Support of priority industries
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Figure 7-1b
Public policies affecting business
Social Welfare Policy
Economic Effects
•
Policies affecting the workplace
* Child labor laws
* Limited labor pool; labor costs
* Minimum wages, maximum hours * Labor costs; safety costs
* Safety & health standards
* Equipment costs; maintenance
* Right-to-know disclosure rules
* Release of once-secret information
7-3
•
Policies affecting the marketplace
* Consumer protection safety
* Costs of production
* Government subsidies to poor,
* Taxation
disabled & needy
•
Policies affecting profitability
* Social security tax payments
* Shared costs to employers and employee
* Mandatory retirement benefits
* Increased cost of labor, higher costs
for older employees
* Disability and unemployment
* Labor costs; dissuades firing employees
compensation rules
* Health insurance coverage
* Labor costs; incentive to use managed
and benefits
care plans
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Figure 7-2
Comparative Health Care Costs
and Benefits
Countries in
Order of Life
Expectancy
1. Japan
2. Canada
3. Sweden
4. Australia
5. Greece
6. France
7. Spain
8. Netherlands
9. Israel
10. U. K.
11. Germany
12. United States
13. Ireland
Life Expectancy Population Real GDP
Tot. Expenditures
at Birth (in yrs., (in millions, (per capita, on Health (% of7-4
1998)
1995-2000)
1998; U.S.$) GDP, 1996-1998)
80.0
79.0
78.6
78.3
78.1
78.1
78.0
77.9
77.8
77.2
77.2
76.7
76.4
126.3
30.6
8.9
18.5
10.6
58.7
39.6
15.7
6.0
58.6
82.1
294.0
3.7
$32,350
19,170
25,580
20,690
11,740
24,900
14,100
24,780
16,180
21,410
26,570
29,240
18,910
5.9%
6.4
7.2
5.5
5.3
7.1
5.6
6.1
7.0
5.9
8.2
6.5
4.9
Sources: United Nations, Human Development Report, 2000 and www.undp.org
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Figure 7-3
Three types of regulation
7-5
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Figure 7-4
Spending on federal regulatory activity
7-6
Years
20 200
01 0
(e
st
.)
99
19
90
19
80
19
70
Economic
regulation
Social
regulation
19
19
60
Billions of 1996 dollars
20
18
16
14
12
10
8
6
4
2
0
Source: Center for the Study of American Business
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Figure 7-5
Staffing of federal regulatory agencies
(full-time equivalent personnel)
.)
st
99
01
20
Years
(e
19
90
Economic
regulation
Social
regulation
19
19
70
140,000
120,000
100,000
80,000
60,000
40,000
20,000
0
7-7
Source: Center for the Study of American Business
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Forms of International Regulation
Unilateral Regulation
Country A
National
Government
Country B
National
Government
regulates
• All companies doing business in country A
• Country A companies doing business in
any other nation
7-8
regulates • All companies doing business in country B
• Country B companies doing business
in any other nation
Bilateral Regulation
Country A
and Country B
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• Agree to mutually accepted rules of doing business
in both nations (e.g., no government subsidies for
certain agricultural products).
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Forms of international regulation(continued)
Multilateral Regulation
Country A
Country B
Country C
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7-9
• Agree to common rules governing use of common
resources (e.g., oceans, earth’s atmosphere) or to
impose sanctions on Country D which fails to
comply with international standards
(e.g., apartheid, genocide).
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Exhibit 7-A
Auctioning off the “most precious
resource of the information age”
• The FCC is responsible for regulating and promoting the.
7-10
communications industries.
• In 2000, the FCC announced that it would auction off 422 licenses
in 195 geographic markets across the United States.
• The FCC commissioners decided that the public interest required
that some of the licenses be reserved for small businesses, minority
enterprises, and rural companies.
• Native American companies that were created by a special act of
Congress in 1970, negotiated a deal with AT&T Wireless to help
them win valuable airwaves in the auction, in return for access to
restricted frequencies.
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Exhibit 7-B
California’s energy crisis:
A deregulation failure
7-11
• The two largest utility providers petitioned the PUC to double rates.
• Failure to drastically raise rates would result in blackouts in California.
• More competition was allowed in the 1980s by the
U.S. Department of Energy.
• Industry was deregulated in the 1990s.
• IPPs began producing and selling energy to large companies.
• California PUC refused to allow utilities to pass cost to customers.
• The result was a squeeze: rising costs, flat revenues, declining profits.
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