© The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. McGraw-Hill/ Irwin 7-1 Business and Society POST, LAWRENCE, WEBER Business and Public Policy Chapter 7

© The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. McGraw-Hill/ Irwin 7-2 Figure 7-1a Public Policies Affecting Business National economic policy Economic effects Policies affecting the macro economy * Economic growth* Employment/unemployment, welfare assistance * Fiscal policy* Government spending, taxation * Monetary policy* Currency value, interest rates Policies affecting individual industries or sectors * Trade policy* Exports/imports (e.g., balance of trade) * Trade barriers (e.g., tariffs) * Industrial policy* Support of priority industries

© The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. McGraw-Hill/ Irwin 7-3 Figure 7-1b Public policies affecting business Social Welfare PolicyEconomic Effects Policies affecting the workplace * Child labor laws* Limited labor pool; labor costs * Minimum wages, maximum hours* Labor costs; safety costs * Safety & health standards* Equipment costs; maintenance * Right-to-know disclosure rules* Release of once-secret information Policies affecting the marketplace * Consumer protection safety* Costs of production * Government subsidies to poor,* Taxation disabled & needy Policies affecting profitability * Social security tax payments* Shared costs to employers and employee * Mandatory retirement benefits* Increased cost of labor, higher costs for older employees * Disability and unemployment * Labor costs; dissuades firing employees compensation rules * Health insurance coverage* Labor costs; incentive to use managed and benefits care plans

© The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. McGraw-Hill/ Irwin 7-4 Comparative Health Care Costs and Benefits Figure 7-2 Countries in Order of Life Expectancy Life Expectancy at Birth (in yrs., ) Population (in millions, 1998) Real GDP (per capita, 1998; U.S.$) Tot. Expenditures on Health (% of GDP, ) 1. Japan 2. Canada 3. Sweden 4. Australia 5. Greece 6. France 7. Spain 8. Netherlands 9. Israel 10. U. K. 11. Germany 12. United States 13. Ireland $32,350 19,170 25,580 20,690 11,740 24,900 14,100 24,780 16,180 21,410 26,570 29,240 18, % Sources: United Nations, Human Development Report, 2000 and

© The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. McGraw-Hill/ Irwin 7-5 Three types of regulation Figure 7-3

© The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. McGraw-Hill/ Irwin 7-6 Figure 7-4 Spending on federal regulatory activity Source: Center for the Study of American Business Years Billions of 1996 dollars

© The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. McGraw-Hill/ Irwin 7-7 Figure 7-5 Staffing of federal regulatory agencies (full-time equivalent personnel) Source: Center for the Study of American Business Years Number of personnel

© The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. McGraw-Hill/ Irwin 7-8 Forms of International Regulation Unilateral Regulation Bilateral Regulation Country A National Government Country B National Government Country A and Country B regulates All companies doing business in country A Country A companies doing business in any other nation All companies doing business in country B Country B companies doing business in any other nation Agree to mutually accepted rules of doing business in both nations (e.g., no government subsidies for certain agricultural products).

© The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. McGraw-Hill/ Irwin 7-9 Multilateral Regulation Country A Country B Country C Forms of international regulation(continued) Agree to common rules governing use of common resources (e.g., oceans, earth’s atmosphere) or to impose sanctions on Country D which fails to comply with international standards (e.g., apartheid, genocide).

© The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. McGraw-Hill/ Irwin 7-10 Exhibit 7-A Auctioning off the “most precious resource of the information age” The FCC is responsible for regulating and promoting the. communications industries. In 2000, the FCC announced that it would auction off 422 licenses in 195 geographic markets across the United States. The FCC commissioners decided that the public interest required that some of the licenses be reserved for small businesses, minority enterprises, and rural companies. Native American companies that were created by a special act of Congress in 1970, negotiated a deal with AT&T Wireless to help them win valuable airwaves in the auction, in return for access to restricted frequencies.

© The McGraw-Hill Companies, Inc., 2002 All Rights Reserved. McGraw-Hill/ Irwin 7-11 Exhibit 7-B California’s energy crisis: A deregulation failure The two largest utility providers petitioned the PUC to double rates. Failure to drastically raise rates would result in blackouts in California. More competition was allowed in the 1980s by the U.S. Department of Energy. Industry was deregulated in the 1990s. IPPs began producing and selling energy to large companies. California PUC refused to allow utilities to pass cost to customers. The result was a squeeze: rising costs, flat revenues, declining profits.