2004GIR Government-Business Relations

Workshop 7 – GBR in the US and EU

1. WHAT ARE SOME OF THE DISTINGUISHING CHARACTERISTICS OF GBR IN THE USA?

- Adversarial or regulatory.
- Relations between governments and business (and labour) are combative and competitive.
- Strong separation between government and business.
- Government sets the legal framework through regulation.
- Small government – Shaped by ‘ideas of right’
- Business has economic power not political.
- Regan adopted neo-liberal policies.
- Lowered taxes – Laissez-faire approach.
- ‘Trickle down’ economies to benefit the poor.
- Industry deregulation.
- Government regulation minimal.

2. HOW MUCH DID THE US MODEL OF GBR CONTRIBUTE TO THE GLOBAL FINANCIAL
CRISIS?
- The US model was very regulatory, laid the basic legal framework, but heavily adopted neo-
liberal policies.
- Lack regulation (laissez-faire) was the key problem.
- GFC – started in banking and financial sector.
- Bad loans basically and playing with peoples’ money.
- The GFC could have possibly been prevented or least the effects lessened had the
government intervened and regulated more the financial sector.
- In the late 1990’s there was an action towards regulation with the Glass Steagall Act, which
was to separate commercial banking from investment banking and provided safeguards
against too much leverage and excessive risk taking.
- However, the act was repealed, and Wall Street Banks quickly adopted the “Too Big to Fail”
phenomenon.

3. WILL THE US MODEL BE AFFECTED NOW THAT THE GLOBAL FINANCIAL CRISIS HAS
PASSED?
- The US might decide to become more developmental to regulate the financial sector more.
- The State might play a more proactive role.
- They might decide to work more closely with business.

4. HOW HAVE POLITICS AND BUSINESS BEEN CONDUCTED IN EUROPE HISTORICALLY?

- Cooperative model would apply best to Europe.
- Where there is a goof relationship between government, business and labour
- Consultation and compromise between government and business.
- Free enterprise but that state assist business in coordinating activities.
- Labour and Business negotiate
- Full employment due to active labour market policy.
- Extensive social welfare safety net.
- Similar other European countries, Sweden is a prime example.
- Due to the challenges Sweden has faced in relation to the small size of the country,
government and business cooperated to produce internationally tradeable goods. E.g. Volvo,
Absolut Vodka.
- They have high taxes, generous welfare and workfare polices (child-care, family benefits, free
education)
- Full employment strategy.
5. HOW HAVE THE CHANGING ECONOMIC DEMANDS IMPACTED ON THE EUROPEAN
MODEL OF GBR?
Strong link between style of GBR & history, culture, political ideas, scale and economic structure
Cooperative/consensual approach to GBR has historically facilitated
- Strong economic growth and development
- High levels of social equality

Economic challenges (declining performance/ globalisation) has resulted in increasing adoption of

more neo-liberal policies

Overarching framework of model (if hollowed) retains popular support