Some argue that government needs to increase its regulation of business for the good of society as a whole, while others believe that the marketplace is self-regulating and that government...

Some argue that government needs to increase its regulation of business for the good of society as a whole, while others believe that the marketplace is self-regulating and that government intervention through needless regulation places an unfair, costly burden on businesses in general and on small businesses in particular. What role do you believe government regulation should play to ensure ethical conduct by businesses? How do different political viewpoints potentially shape the answer to this question?

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Lorraine Caplan | College Teacher | (Level 1) Educator Emeritus

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When one considers what the goal of a business is, small or large, vis-a-vis the goals of government, there is an inevitable conflict that argues for at least some government regulation of commerce if each is to carry out its goals. The arguments for and against government regulation fall mostly along political lines, but even those who argue most strenuously against government regulation will usually concede that some regulation is necessary. 

The goal of a business is to maximize profit for its shareholders.  Everything from its mission statement to its most granular plans is meant to maximize profit. A business that is not acting accordingly is remiss in meeting its goal.  A business does not exist to protect anyone, to offer consumers safe products, to provide a safe workplace, to protect the environment, or to give back to the community.  To the degree that doing any of these will maximize profit, they may happen, but there is no question that none of these are a business's highest priority.  To the degree that the people who run a company might be ethical in their behavior, these may be taken into consideration, but as we know, ethical behavior is not the same as legal behavior. All that is required of business is compliance with the law.  Thus, every action taken by a company is meant to enhance its bottom line.

In contrast, the goals of government, at least in a Western democracy, are to provide some degree of health, safety, fairness, and opportunity to its citizenry, whether they be workers, consumers, or those otherwise affected by the actions of business. These are its purposes in regulating business.  

Clearly, there is a conflict between these goals, since government regulation does cut into profits for most businesses.  If a business must be environmentally responsible, for example, doing everything possible to not destroy the Gulf of Mexico with an oil spill, this cuts into its bottom line.  If a business is forced to pay a minimum wage to its workers, its profits may very well decrease.  If a business must provide a safe working environment for its employees, that costs money, money that takes away from its profit.  If a business must sell goods that are safe for the consumer, it is likely that will cut into its profits. 

The arguments against government regulations are mostly advanced by conservative Republicans and Libertarians.  One argument made is that another goal of government is to provide a business environment in which a country can compete in today's global economy.  Given that priority, to the degree that a government regulates business more than other countries do, regulated businesses are at a distinct disadvantage.  For example, in the United States, there are child labor laws that prevent children from working at all, while in other countries, children may work and be paid substantially less.  The health and safety of workers in other countries is not necessarily a priority, so businesses in the United States must make greater expenditures, competing against businesses that are not required to make those expenditures.  Another argument made is that smaller government is always better government, and to the degree that businesses are regulated, one is creating a larger government, since along with regulations must come inspection and enforcement mechanisms.  This is not so much an economic argument as much as it is a philosophical argument.  A third argument is that unfettered capitalism will sort all of this out on its own.  For instance, if a company does not provide a safe working environment, it will not find anyone to work there.  Or if a company sells an unsafe product, consumers will cease to buy that product.  If we allow companies to compete without any regulation at all, there will be winners and losers, and the winners will, advocates of this argument say, emerge to the benefit of all of us.

Liberal Democrats are mostly strongly pro-regulation.  They argue that in order for government to do its job, businesses must be regulated, since there is no motivation at all for businesses to provide for health, safety, fairness, or opportunity for anyone.  While regulation adherents concede that international competition is important, the argument is that Western democracies should adhere to their principles and goals and set an example for the rest of the world, which will hopefully come to see the importance of regulation of business. For example, while bribery is rampant and tolerated in some countries, American law prohibits this, not only in the United States, but also in foreign countries.  There is a strongly ethical component to this pro-regulatory position, as well as the notion that businesses are part of the community in a democracy, and thus have responsibilities to that democracy.  Being in a democracy is a privilege, and with the rights afforded a business come responsibilities.  Also argued is that the needs of the many should be more important than the needs of the few, in this case, the needs of the entire citizenry, as opposed to the needs of businesses.  Pro-regulation also has a great deal of history on its side.  For most of the history of the United States, there has been little regulation, allowing children to work in coal mines, adults to be maimed or die in industrial accidents, people to work seven days a week, in twelve to fifteen hour shifts, not making a living wage, the rivers to be polluted to the degree that fish eaten were toxic, and so on, ad nauseum.  These, the pro-regulatory adherents argue, are not desirable outcomes, and it is government that should be guarding against them. 

There are, to be sure, other arguments, both pro and con, to be made.  The pro-regulatory and anti-regulatory pendulum swings back and forth, sometimes with one side triumphing, sometimes the other.  There is not, in my opinion, ever going to be a complete triumph for either side, since these swings in the pendulum have undesirable consequences.  If there is too much regulation, profits fall and competition globally is harmed.  If there is too little regulation, people are not safe or healthy, and there is, at the very least, a perception of unfairness and lack of opportunity. And the election cycle ensures that every few years, the fallout from going too far one way or the other is going to elicit a response from the electorate.    

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