Kevin Dong
Univ-112
11/11/14
Unit 2 Essay
The economy is based on an interdependent relationship between three entities.
The three entities are: the government, businesses, and consumers. The role of the
government is to regulate the market in which the businesses thrive. It can be evident by
the messages in the present day media that the people believe government regulations
damage businesses economically, myself included. I have been exposed to constant
reports from sources of media that the slow recovery of our economy is due to the
regulations placed by the government on the market. I initially assumed it was true until
my research showed me otherwise. It shocked me that what we all believed was false.
Government regulations did not hold much power over large firms at all. A deeper
problem is that the lack of government control over the economy and corporations is
creating massive issues because corporations are running freely on their own agenda and
the economy is becoming less stable.
Corporations and businesses are always portraying the government as the villain
in the market. There are always arguments that businesses should be allowed to do what
they want and the government is just getting in the way. However, this is an uneducated
assumption on the matter at hand. Government regulations do not actually have too
much control on large corporations at all. Brian Shaffer wrote an article explaining how
corporations deal with regulations. Shaffer writes about the methods and tactics used by
corporations such as adaptation, lobbying, and forming political action committees to
advance their corporate agenda (“Firm-Level Responses to Government: theoretical and
research approaches 495). Adaptation is defined in the article as a corporation’s ability to
effectively change its own structure and meet regulation requirements to continue its own
operations (Shaffer “Firm-Level Responses to Government Regulations: theoretical and
research approaches” 504). This means that corporation with enough resources can shrug
off government policies and continue to hone on their own objective. They can also use
their influence on legislation by lobbying and refining the policy for their own benefit.
How can the government control the market if each legislation made just helps
corporations. Corporations being able to continue their own private agendas freely could
cause major problems, so the government should pull stricter regulations on them to keep
them in check.
Economic regulations are rules and principles necessary to keep a market running
in the right direction. People believe that setting up regulations will have a detrimental
cost to our resources, however these assumptions are wrong. Regulations set up by the
government actually brings more benefits that can outweigh the costs. The article
“Government regulations: Do they help businesses” by Marc Davis talks about several
agencies such as the Food and Drug Administration (FDA) & Securities and Exchange
Commission create a safer, cleaner market for the public. If these agencies did not exist
the market would be in a much worst shape than it is now. In a studies made on an article
on EPI.org revealed from 2001-2010 that the annual benefits of regulations were around
136-651 billions of dollars while the annual costs was only around 44 billion (Irons and
Shapiro “Regulations, Employment, and the economy”). Deregulation was actually what
got us into this recent recession in the first place. The government thought that
corporations practicing self-regulations could still create a stable market. They were
wrong. The market grew and grew without any safety net and finally when it could grow
no more it collapsed like a house of cards because its infrastructure that it was built on
had no backing. History gives us evidence that the economy needs regulations and
stricter regulations to help keep the market stable with safety nets to cover it incase of
trouble.
The government cannot afford to neglect local businesses while trying to deal
with big corporations. The economy is in shambles and many small businesses cannot
operate because they have insufficient resources due to the regulations passed by the
government. There are government agencies that aid start-up companies, but no one
would even dare to attempt to start up a new business in today’s shaky market with tough
regulations. A newspaper column on USA Today explains that the government is too
busy trying to protect the environment that the regulations created to fulfill that role is
choking small businesses. Somebody has to pay for the cost of these regulations and that
somebody is small businesses (Donna Wiesner “Government Regulation Hinder
Economic Growth). The solution to his problem can be found by allowing self-regulatory
agencies to share the government’s burden in monitoring the market.
The Role of
Government in Corporate Governance is a book named after the same conference held to
discuss these problems of who regulates and how. Self-regulatory agencies have some
authority over corporations and closer proximity to them but lack complete power to
punish transgressions. If the government provided supervision and enforcement to these
agencies then a balanced regulatory system can be created. This allows the government to
free its hands from over regulating and spend some time helping local businesses regain
their strength so they can operate in the market.
Rules and laws are created to provide a balance in a community. They help in the
prevention of transgressions that would harm individuals or the community. Regulations
act in the same way except it protects the market and works on a larger scale. The market
needs regulations to keep the economy safe and stable. The period of time when
deregulation was a habit of the government cause large economic issues and allowed
corporations to gain an advantage in the economy. The government must now pass new
regulations to keep corporations in check and bring the economy to its feet again.
However, the government must remember to tailor to the needs of smaller businesses and
not to over regulate them because they do not own as much resources as corporations. If
this can be done then the market can be safe and stable once more.