The impact of government regulation of business
The government is one of the critical determinants of how business in a given country. Government regulation of business is simply the rules and regulations put in place to govern the way in which business transactions take place in a country. The federal and local governments mandate rules to regulate both small and large scale businesses in different aspects. Some of the aspects under regulation by the government include employee practice, advertisement, and environmental prevention. Besides, government regulation affects how companies manage their companies intending to ensure the producers never exploit the consumers. The rules by the government have led to a negative impact on the side of companies with a majority of the recording very low income. most of the companies most affected are the small scale as they have not yet established. Therefore, the paper will discuss how government regulations affect the well-being of business companies.
High-interest rates
Government regulation is attributed to high-interest rates with the small and medium scale enterprises being on the receiving end of the though rules and regulations. As part of the normal taxation, the Canadian government, through its state machinery, ensures that all business companies pay taxes as a normal way of collecting government revenues. The move, however, has seen many companies closing down due to heavy taxes imposed by the government. Apart from the normal taxes imposed by the governed, the businesses are entitled to trading licenses of which they are subject to renewal of an annual basis leading to increased government levies.
It creates a huge government bureaucracy that hinders growth
Among the most common impacts of government, regulation is the creation of bureaucracies. The government may impose rules that may drag a company from proper growth of companies. For instance, the government dictates what products to be produced at a specified time period. Such regulations prevent businesses from attaining and achieving a number of objectives and targets. For instance, if a government bans the production of certain commodities, then the business companies producing the products will automatically fail to realize target profits. Also, the government implements rules which prevent the attainment of primary targets. Some regulations prevent companies from selling certain products to a specified group or population, therefore, leading to a drastic failure of the company performance.
Government regulation promotes monopoly in business
Business monopoly is one of the worst and detrimental effects of government regulation in business. A monopolistic business is one in which a single company is the ultimate producer and distributor of certain essential goods or services. The net effect of the monopolistic business is that the company has the ability to set prices of their wish, which in turn affects consumers by increasing the cost of goods and services. Unlike in an oligopoly business environment where the price of products and services are determined by more than a single company, a monopolistic market sets up its prices which in most cases are very high for the customers to bear. The exact reason for promotion of monopolistic markets is due to imposition of rules which make individual companies try quite the market due to overregulation.
For instance, if the state sets rules that directs companies to pay workers a certain minimum amount of money, small scale companies may find it difficult to comply and therefore, quite the market.
Government regulation squashes innovation
Innovation is the process through which new ideas are introduced into the market to help improve the basic ways of doing things. Innovation, in essence, is the process of enhancing better ways of doing things. For instance, the shift from manual production techniques to automated ways. For instance, the government has strict rules regarding some innovations. For instance, the use of robots in the production industry has faced great opposition by government agencies citing eminent effects of the robots to human society. Robots for a long time have proven to be one of the sure ways increasing productivity given the efficiency of robots as compared to human labour. For instance, the automobile industry is one of the major users of robots in the production process. However, government intervention has greatly affected innovation.
Loss of jobs
Part of the measures implemented by business companies to litigate to the ever-increasing government regulation is through reducing of employees. Employees are one of the major components of a business company. When the government imposes rules and regulations, sometimes the rules are too much and costly to for the company to bear and hence the only option of litigating the problem is through dismissal of part of the workers. The act of dismissal of workers from the employment companies translates to loss of jobs by employees. Therefore, besides affecting the individual industries and businesses, government regulation adversely affects the employees.
Decrease in new product development
The government regulations have been proven to be one of the most hindrances to the development of new products due to the numerous set rules under which a new product must undergo before entering into the market. For instance, once a new product has been designed, several processes and steps must be observed before it enters into the market. For instance, the product must undergo testing to ascertain suitability for use by humans. Besides the noble way of testing for safety of the product, some of the regulations by the government are quite unusual and are perceived by the production industries as expensive and therefore the companies keep off from developing new products.
Increase in financial cost of companies
Government regulation are characterized by an increase in the total cost of production. For instance, the government directs that the packaging and labelling of products should follow some order by which all commodities should be made so that they give the correct impression to the users of the commodities. Besides, some additional costs are incurred by individual companies when trying to adhere to the set rules and regulations. A good example is the process of environmental safety, which is the process through which the business companies comply with environmental safety regulations. Some of the safety regulations set by the government to enhance environmental safety include setting up facilities to detoxify industrial fumes and gases. Also, another costly regulation imposed on businesses is the security surveillance of the companies, which for the smallest scale companies, is a great expense.
Infringes on personal freedom
Some of the government involvement policies directly infringe on personal freedom. For instance, some regulations determine the kind of businesspeople should take part in while directing on what business to invest in. it is important to note that some government regulations are influential to an individual level; therefore infringing on the basic fundamental freedoms and right by directing the type of commodes to remain in the market.
Less choice
Government involvement limits the variety and number of choices in the market. For instance, the government puts restrictions on the sale and use of certain commodities making it impossible for consumer’s top chose on the commodes they like or feel are comfortable with them. The limit of the choice of products by the companies is one of the worst effects of government regulation because it greatly infringes on the basic rights and freedoms of expression. For instance, the some of the highly regulated products and are foods which the government feels are not safe for the people.
Lack of incentives
Incentives are handouts given tie people to enhance their work and improve production. Once the government imposes a lot of policies, there seems to be a financial burden imposed on the customers hence, making the workers to have low production because there are no incentives to motivate workers. Also, there is the withdrawal of support to local institutions such as football clubs and other associations in the name of increased pressure on the side of the government. The net effect is the mass failure of social organization and decline in their performance.
Conclusion
Government involvement in the business is one of the most prominent duties of the government in the aim of preventing consumer exploitation as well as unifying the business fraternity. Government involvement in the business has been on the rise for decades with the aim of maintaining sanity and preventing consumers from exploitation. However, despite a great deal of achievements by the government in its involvement in business matters, many corporations such as the small and medium-class enterprises suffer from the regulations citing mass exploitation by the government.
The involvement of the government in business has led to more harm than good. Some of the disadvantages of government involvement include a decrease in production, loss of jobs, high cost of production, and other detrimental effects of the government. The effects have affected a large number of people the majority being business owners and employees. Employees suffer in an indirect manner in that the decline of the industries leads to a decline of workforce and finally demotion of excess labor.