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Why is the government involved in the regulation of business activity ?

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BUSINESS STUDIES Why is the government involved in the regulation of business activity ? Governments everywhere is the world play an important part in the economy of their countries. How big the role actually is the government is playing is varying a lot from country to country. In North Korea, the state is the only entrepreneur, everything is dictated by the state/ communist party while people in the USA enjoy a lot more freedom to build up their own business. Which system is the best is a question of interpretation and personal political views, but it is still possible to analyse why governments get involved in business activity. First of all governments get involved for political motives. ...read more.


In former communist USSR for example, where everything was run by the state, the state had a lot of power and therefore the people were afraid of it. This does not occur in liberal countries with liberal economies as the power is hold by big companies and businesses. By privatising nationalised businesses, the power is lost again and the role of the government in the economy shrinks. Although political reasons are very important, there are some reasons which are purely economical. As governments are there to run the country efficiently and are there to improve the national standard of living, their major concern is employment. Employment is the source to national wealth and economic strengths. The more people are unemployment, the more people have to live of the social welfare system and so the more expenses the state has which will automatically lead to an increase in tax for the working population, employees and employers. ...read more.


Recently governments have got new tasks concerning businesses and industry. The task of the protection of the environment. As people got concerned about the effects of industry on the environment through pollution, governments passed new laws to set a guideline and limits mainly for the secondary sector. These guidelines and laws are there to protect the environment and have a big impact on certain businesses. As heavy polluting industries were unable to meet the guidelines set by the state, they too often moved out of that country into others where the law is not so strict about the environment, especially third world less developed ones. As it is made clear here, governments are greatly involved in the economy for many reason but their job is mainly keeping employment high without harming the environment concerned. ...read more.

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