What Is Government and How Does It Affect Business?

Government is the set of rules that a society uses to accomplish collective goals and provide benefits for its members. A government is capable of performing these functions because it has the ability to tax, draw on resources from an entire nation, and compel citizen compliance. The goals of government vary widely, but typically include economic prosperity for the nation, secure national borders, and the safety and well-being of citizens. Governments also have the responsibility of protecting “common goods,” which are things that everyone can use but are limited in supply. These include fish in the sea and clean drinking water. Governments protect these items so that a few people don’t take all the available supplies and leave others with nothing.

At the state and local level, government provides services such as education, law enforcement, and public transportation. Governments are the only entities that can provide these important public goods, which are not economically feasible for private businesses to produce in large enough quantities or at low enough costs. Governments can also provide protection from foreign invasion and natural disasters through military forces, police departments, fire departments, and emergency response systems.

In the United States, federal and local governments also offer other valuable public goods such as social services, health care, parks, infrastructure, and research. Often, these services are financed by a combination of tax revenue, borrowing, and grants. Federal agencies can also assist employees with child and dependent care, health expenses, educational loans, and work-life balance issues through Employee Assistance Programs. These are free, confidential programs staffed by professional counselors and provided through the agency’s human resources department.

While businesses and their representatives frequently complain about government regulations, these rules can create a range of benefits for consumers. For example, the FDA has been criticized for delaying new drug approvals and for demanding costly or unnecessarily complex clinical trials. This can prevent smaller firms from entering the market, but it may also protect consumers from exploitation by more-established companies.

A government can be a friend or a foe to business, depending on how it is managed and what kinds of laws are created. Many American businesses have thrived despite a complicated tax code and numerous regulations. But, in other cases, the rules have made it difficult to grow and expand, and they have sometimes trapped companies into long-term decline by overregulation. Whether a government is collaborative or adversarial, it must continue to evolve and respond to changing demands. The key to success may be preserving the ability to act quickly and decisively in urgent circumstances while remaining a neutral referee in long-term disputes. This is the challenge for the 21st century.