U.S. Relations Between Government & Business

The United States ostensibly operates in a free capitalist market. The government does not make central decisions regarding who produces what, or how much of a given commodity should be produced. This is the type of control that characterizes centrally-planned economies such as that of the former Soviet Union. However, it is a mistake to believe that the United States has a truly independent economy that is free from government intervention. Instead, the government influences business through a variety of regulations and laws that place restrictions on business. At the same time, industry lobbies government officials in order to procure regulations and laws that are favorable to specific industries and even to specific companies. The result is an uneasy alliance between business and industry that is, at times, conciliatory but which can also be acrimonious.

Business seeks an environment which is largely free from government restriction (Dentzer, June 6, 1994, p. 61). Such an environment would enable companies to reap the maximum profit from their operations without having to be concerned with government regulations regarding how they conduct their business. The cost of doing business would be reduced, and stockholders would see larger returns on their investments. However, government has an interest in maintaining its regulations. There are several reasons for this, but one of the mos

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so been severely curtailed, with the result that businesses and localities which depended on defense and aerospace spending are now finding themselves facing significant problems as a result of cutbacks in these areas (Eiben & Wyatt, July 12, 1993, p. 83). Government does not only impose its will on business and industry, although it can sometimes appear that way. Business can wield considerable influence through lobbying efforts. Many large companies and some industries have lobbying groups that can bring a large amount of pressure to bear on elected officials in order to work toward providing an environment that is friendly to business. In addition to direct lobbying, political action committees (PACs) are ways in which business can fund campaigns of candidates they expect to be friendly to their interests. Government also affects business through its monetary and fiscal policy. Monetary policy refers to the interest rates, money supply and Treasury bill rates that the Federal Reserve sets in order to stimulate or slow down the economy. As interest rates increase, the cost of borrowing increases with the result that business activity slows down (since the cost of capital goes up). Fiscal policy refers to the attitude that
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Approximate Word count = 3754
Approximate Pages = 15 (250 words per page)

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