Relationship between government and business organizations

government and business organizations

In any form of economy, the government and the corporate organizations must share a mutually successful relationship, to thrive and to help the economic progress. For example, in a pro-capitalist form of economy, the relationship between a business enterprise and the government is that of mutual understanding. It is essential for the progress of the economy for the private sector and the government to work together. To attract business houses to increase their investments, governments of capitalist nations offer various facilities to private firms. Facilities like tax holidays, corporate tax reductions, Special Economic Zones (SEZs), and many more such economic policies introduced by the government can help attract investment from the corporate sector.

Moreover, the business organization does not mean only the service sector. It is inclusive of manufacturing units, heavy engineering, software, and many more such industries. Sometimes governments have to develop economic policies catering to the specific requirements of the particular type of industry. Thus, economic policies have to be established by the government to help the private sector thrive and support the economy of the country's progress. Some of the basic features of the relationship between the government and business enterprises have been discussed below: 

Profit for both parties

The objective of both the government and business enterprises is to earn a profit. Say, for instance, the money collected as corporate tax is considered to be profitable for the government. This money is earned by the government as the fee is reinvested into the economy. The government uses this money to invest in the development of infrastructural facilities, which will help the industrial sectors to improve their productivity. Better roads, bridges, and transportation facilities mean ease of movements of goods and services. In the long run, this can prove to be highly beneficial for trade and commerce and, subsequently, the business organizations of a country. It has been observed that investments required in developing infrastructural facilities are always extensive. Hence the governments of respective nations need to take proactive measures to build these facilities. However, after developing these facilities, the commercial sector can reap the benefits of it as well.

Moreover, when the government of a nation develops various economic policies to benefit the commercial sector, it acts as an incentive for business enterprises. Companies become interested in investing in the economy of a particular nation. This is especially true in the case of foreign investment. If the government of a country wishes to attract international companies, then it must develop suitable economic policies that will attract foreign investors. Thus, the relationship between government and business organizations is one that is based on mutual profitability.

Policy of non-interference

Excessive interference by the government in the economy can prove to be harmful and detrimental to the growth and development of the economy of a nation. An example of this is the destruction of the Soviet Union. Developed on the grounds of the Communist form of Governance, the industry was not allowed to thrive on its own. The constant interference of the government led to the downfall of a once highly successful economy. Hence, given the modern scenario, most governments nowadays practice a policy of non-interference. The private sector firms are allowed to function as per their norms and regulations. The government will step in only if there is any gross injustice or on humanitarian grounds. The economy is allowed to thrive on its own. In other words, the rise or fall of the economy is decided by the free play of market forces, i.e., demand and supply. In such an economy, the consumer is considered to be the most important. However, even if the government follows a policy of non-interference, it is responsible for the protection of consumers' rights. If a business organization is found guilty of fraudulent activities and misrepresentation, then the government is within its rights in punishing the guilty party. In other words, business organizations remain answerable to the government. However, if they work within the law, and the companies do not indulge in any activity that can harm the employees or the consumers, then the government will not intervene.

Government contracts

Business organizations often need to foster professional relationships with various government bodies, especially if they have to work with these under government contracts. Say, for instance, a particular business organization has won a government contract for the maintenance and repair of a highway. Then the company has to work closely with government bodies like the traffic department, road and transport authorities and other similar government bodies to complete the work correctly. Such a contract means the executives, managers, technicians, and workers all in the employment of the business organization has to work in close association with government employees as well. Hence, government contracts constitute a direct relationship between private business organizations and the government of a country. While working on government contracts, private sector companies often face bureaucratic hurdles. These can be overcome with proper economic policies and developing an atmosphere that fosters economic growth. 

Hence, the private sector and the government of a country have a mutually dependent relationship. One is dependent on the other for survival. Similarly, one is dependent on the other to earn a profit. If the business organizations do not pay taxes, then the governments will not get the money required to develop adequate infrastructural facilities. Moreover, without proper infrastructural facilities, it will not be possible to help the companies thrive and economic progress. Infrastructural facilities are essential to attract foreign investment. Hence, the government should nurture the industry to earn a profit, and the sectors should look to the government for economic policies that will improve their profitability. Since only the government of a nation has the right to develop budgetary policies, there is a requirement for the private sector to establish a cordial relationship with the government of the nation. Thusgovernment and business organizations, both these sectors have to work together to ensure that the economy of a country progresses and becomes strong over time.

Reference URL


1010 Words


Jun 09, 2020


3 Pages

Looking for a professional

Order Now