Chapter

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 * 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
7-3

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 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
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Life Expectancy Population Real GDP Tot. Expenditures 7-4 at Birth (in yrs., (in millions, (per capita, on Health (% of 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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Three types of regulation

7-5

Figure 7-3

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Figure 7-4

Spending on federal regulatory activity

7-6

Billions of 1996 dollars

20 18 16 14 12 10 8 6 4 2 0
20 200 01 0 (e st .) 60 70 80 90 19 19 19 19 19 99

Economic regulation Social regulation

Years

Source: Center for the Study of American Business

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Figure 7-5

Staffing of federal regulatory agencies (full-time equivalent personnel)

140,000 120,000 100,000 80,000 60,000 40,000 20,000 0
70 90 99 19 19 19 (e st .)

7-7

Economic regulation Social regulation

20
Source: Center for the Study of American Business

Years

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01

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 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
Agree to common rules governing use of common resources (e.g., oceans, earths atmosphere) or to impose sanctions on Country D which fails to comply with international standards (e.g., apartheid, genocide).
7-9

Country A Country B Country C

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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.
communications industries.
In 2000, the FCC announced that it would auction off 422 licenses in 195 geographic markets across the United States.
7-10

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

Californias 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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