The aim of this course is to introduce the measures used by modern governments in ‘market’ or ‘mixed’ economies to control the operations of producers of goods and services and the problems encountered by government in enforcing these measures. A background knowledge of such measures is important to top management in industry and commerce.
At the level of the individual company, this knowledge has to be very detailed if the company is to be able to determine what effect intervention will have on its policy objectives, in particular profitability. Tax obligations, eligibility for grants and loans from government, and statutory requirements with respect to safety and health are obvious examples.
It has been estimated that any large company in the UK has to be familiar with at least 100 pieces of general legislation before considering legislation specific to its own operations.
At the industry level, knowledge of both existing and proposed government intervention is important, if only because the government may find it expedient to consult representatives of the industry about the feasibility of particular methods of intervention. In any case, companies may find that costs of ‘bargaining’ with the government may be reduced if they combine their efforts to induce policy makers to develop industrial policies which take full account of their collective interests. Many industries therefore set up associations, one of whose main functions is to monitor the effects of government intervention on their members and to report on new and prospective developments.
The Confederation of British Industry is the principal mouthpiece for British Industry. It represents some 250 000 companies which are members of 106 employers' associations. It has 17 standing committees and 13 regional councils within the UK.
There are several other groups of decision-makers who have an interest in government controls over industry though they are not themselves directly involved in managing companies. Trade unions may sometimes have common cause with companies with whom they bargain over wage rates and working conditions, if government intervention places restriction on the growth and composition of output, e.g. by using anti- pollution legislation, or where companies are forced to conform to an incomes policy which interferes with wage bargaining.
On the other hand, trade unions may resist government measures which favour or appear to favour management in their negotiations over working conditions in any industry, e.g. dismissal procedures. Consumer organizations have an obvious interest in a whole range of government measures from control of monopoly and restrictive practices to legislation promoting the safety of individual products, e.g. product liability legislation concerning vehicles.
The Trades Union Congress of the UK, like similar organizations in other industrial countries, is an affiliation of 76 unions with a membership of almost 7m. The dispersion is membership wide. The largest union is UNISON, mainly public employees, with 1.3m members, in contrast with the Scottish Union of Power-Loom Overseers with 42 members.
The above description of the importance to different groups of government action to control industrial operations would be entirely familiar to those who have lived in centralized, planned economies as well as Western-type economies. However, there are two distinguishing features in Western-type economies which place important limitations on the actions of government in influencing industrial and commercial concerns. Both these features emanate from the interests and the power of two further sets of ‘actors’ on the economic stage.
Western-type economies are committed to a large degree to the free movement of goods and services and of the factors of production – capital, labour, ideas – across national borders. Exporters of goods may find it vitally important to know in detail how legislation in other countries affects their products and may seek to reduce the costs of its effects on them by lobbying their own governments to supply the necessary information and advice and even to bargain with foreign governments with a view to removing or mitigating any detrimental effects. Multinational firms pay particular attention to the present and prospective industrial policies of individual countries in planning where to site new plants or whether or not to expand, contract or even close existing plants. They, too, may expect help and support from the government of their country of origin in negotiating within the framework of industrial policy of governments having jurisdiction over their overseas operations.
The second group of ‘actors’ is the most important of all. Western industrial countries have elected governments. To remain in power, governments formed by the majority party or a coalition of parties must ‘sell’ policies for votes just as industrial companies, in the last analysis, remain in business by selling products and services that customers want. A large proportion of the voting population are employees in industrial and commercial concerns and there is a presumption that their voting preferences will be influenced by what happens at their place of work. Voters' influence on the details of industrial policy is unlikely to be significant but the broad direction of policy must rely on voter support. In this connection it must also be remembered that in important Western economies, such as the USA and Germany, there exists a federal system of government. The individual states within a federation may have the power to formulate policies of their own with respect to industry within their jurisdiction. Voters have therefore the opportunity to express preferences at two levels. Moreover, their range of choice of policies will be greater, given that they can ‘vote with their feet’ by moving from one state jurisdiction to another. Likewise, companies will base their location decisions on the tax and regulatory climate within states.
