The Role of Public Policies in

Governing Business
Public policy is what government chooses to do
or not to do,
Definition: Public policy, while being different
from nation to nation, is basic set of goals, plans
& actions that each nation & government will
follow in achieving its objectives
Govt performs variety of functions- resolving
conflicts within society- distributing material
rewards to members of the society
To perform these- money through taxes, levies
etc- so public policies may be regulative,
distributive & government may engage all
these- achieve the objectives
It may deal with important areas as defense,
education, public health, employment, relief
measures etc
Government & Public Policy
No policy becomes public policy- unless it is
adopted, implemented & enforced by
government
Government gives public policy- 3 distinct
characteristics:
1. Lends legitimacy (authority) to policies: government
policies- legal obligations- easily observed by the
citizens
2. Involves universality- to all sections
3. Only government can bring consensus- imprisoning
violators of policy
Classification of Public Policy
Public policy can be organized along 5
classification:
1. Regulatory: regulation is one or more visible types
of public policy- enforced through criminal laws
2. Distributive: policies provides goods & services
such as welfare & health to specific segment of
the population. Eg: defense, category based
education, jobs etc
3. Redistributive: aims at rearranging one or more
basic schedules- such as tax away proportionately
more money from rich from poor- income is spent
on poor
4. Capitalization: basic alterations in productive
arrangements such as nationalising banks, public
ltd company, old age pensions etc
5. Recent several ethical & moral issues such as death
sentence, euthanasia, etc have come to force
Areas of public policy:
1. Economic management: great depression-
economic regulation. Emergence of stabilization
measures by govt- combat recession & depression-
state intervention- essential to regulate economic
activities
TO KNOW
FWW:1914:
Greatdepression:1929-britishrule-tradepolicy-beneficial
toUK-damagetoIndia.Exports&imports-fell-railways&
agri
Highprices-heavytaxes-commonman-saltsatyagraha-
1930impact
Germanylost-heavydebts-cudncopeupwithmanuf
goods-UKpaidGermany,borrowingfromUS-Eucountries
dependentonUS-crashinAmericanstockcompany-Oct
24,1929-psychologicaleffect-Americastoppedproviding
loans-leadtofinancialdisaster
Globaleconomicdepression-Americanstockmkt-post
war-inflation-hugestockspiledup-wartimeexpenditure-
hugedebt-states-butUS-lessaffected-sideofvictory
allies-creditorforEUcountries
Goldstandard:
UKadoptedgoldstd-from1790-golddeterminesvalueof
poundsterling-valueofpoundsterling-dependenton
amountofsterling-neededtopurchase-fixedamountof
gold
OnsetofFWW-goldpricelow-poundsterling-highprice-
butduringFWW-poundfell-risingwarexpense
Restorationofwar-restofthecountries-purchasedgold
fromUK-littleincreaseinfinancialreserves-UKlooked
Indiatocompensateforgold
Onsetofdepression:
Indiaforemostsupplierofrawmtrls-FWW-providedlarge
qtysofiron,steel&othermtrlsforthemanufofarms.
Manufunits-exported-Britishrule-industrialisationpolicy
Greatdepression-India-solemkt-importsofUK
Imperialisticeconomicpolicies:exploitationofnatives-
benefitsofhandful-eg:britishexploitationoverMughals
politicalweakness,Apartheid
ExploitedIndia-forBritishFavor-fallinpricesinIndia-
higherthanrestoftheworld-priceofcommoditiesmanuf
inindia-rose-comparedtoimportsfromUK
Farmers-cultivatingfoodcrops-movedtocashcrops-
meetthedemandsofUK-unabletosellcrops-dueto
highprice-UKstoppedimportsfromIndia-protective
policy
Limitedexports-accumulationofcommodities-limited
thecashflow-freedommovement-swadeshimovement-
restrictiononimports
Severeimpactonrails-declineinexports&imports
Homecharges:moneycollectedformcoloniesastax

Farmer-suffered-increaseinlandrent,valueofagri
production-selloffhisgold/silverpossession-
transportedtoUKthroughPortofBombay-revitalizing
Britisheconomy
IntensifyingstruggleinIndia-economicdemandsof
India-ReserveBankofIndiaAct-1934,centralBank-
existenceApril1,1935-SirOsborneSmithfirst
Governor-laterremoved-duetohistransparency&
openconfrontation
2. Labor management Relations: Industrial
revolution- exploitation of labor- labor policy
adopted by state to protect the rights of workers
unions
3. The Welfare state: Unemployment- root cause
poverty & distress- Governments welfare policy-
provide social security, education, Medicare
4. Shaping of public policies affecting corporate
sector: stakeholders expectations- unmet-
triggers public pressure- need to understand
public issues into public policy
Corporation
Political forces
Political relationships
Political procesess
Political stability
Efficacy of Rule of Law
Technological forces
New pdts & process
Innovation
Scientific discovery
Investments in R&D
Flow of technology
Economic forces
Unemployment
Interest rates, tax rates
Imports & exports
Income distribution
Market structure

Social forces
Demographic changes
Social values
Lifestyles & patterns of
living
Need for Public Policy in Business
Public policies- affects corporations shaped by: social
forces, economic forces, political forces, technological
forces
1. Social forces: size & composition of population- effect
on the demand of both demand & supply of goods &
services. Includes lifestyle & pattern of living- cater to
the needs of the consumers
2. Economic forces: to shape corporate & government
behavior- solve problems arising
3. Political forces: impact of government in shaping
policies

4. Technological forces: helps corp to upadte their
products & process & help to meet the competition
To create a competitive environment: public policies-
curb monopolies- through licensing or creating
competitive markets (FDI)- encourage to improve
betterment of pdts & services
To have a control on foreign investment: govt
interfering in regulations of foreign investment- govt
adopt protectionist policies for the following:
i. To protect growing local industries
ii. To regulate demand & supply- where resource are scarce
iii. To regulate prices in unhealthy competitive environment
iv. To protect environment & anti pollution measures

Different Levels of Public Policy

Different level/ layers of
public policy- depending on
intended geographic reach
& degree of authority
concerned:
1. National Level: public
policy- across the country-
for instance-Monopolies &
Restrictive Trade Practices
Act (MRTP), Sarva Shiksha
Abhiyan (RTE), national
programme for education of
girls at elementary level
2. State Level: policies
applicable particular state.
Eg: Gujarat, Tamilnadu
3. Regional Level: policies to
apply certain regions-
Common Agricultural
Policies (CAP). Eg: sharing
of river
4. International Level: global
level policies. Eg:
Intellectual Property Rights
(IPR), sharing info about
green house gas emissions
etc

Elements of Public Policy

Inputs
What factors
to consider?
MECHANISMS
How to do it?
GOALS
What to do?
Results
What happens?
Agenda
building
Policy
evaluation
Policy
implementation
Policy
Decision
Policy
formulation
Many factors or inputs, influence the
development of public policy- several factors
such as domestic, political pressure, technical,
reaction to natural calamities
Public policies are goal oriented. Narrow self
serving policy such as patenting rights, tax
legislations varies from country to country
Government use different mechanisms/
instruments- to realise their policy goals. Eg:
during budget negotiation- discussion on
alternative ways to raise revenue- tax tares for
individuals, biz, excise duties, sales tax on
selected items (luxury items, alcohol etc)
Public policies have effects- some are
intended some are non intended- regulations
may cause biz to improve safe environment for
the workers. Eg: Maternity leave for women,
free health check up & delivery facilities for
women etc
How to assess the public policy? Should answer
these 4 basic questions:
1. What inputs will affect the public policy?
2. What goals to be achieved?
3. What instruments are used to achieve the goals?
4. What will be the effects?
1. Agenda building: public policy agenda- consists of
major issues or problems- officials give major impact
or compelled to act. Eg: 33% for women, Delhi case,
BBMP waste disposal
2. Policy formulation: Policy formulation occurs when
interest groups- take position on public issues- try to
reach consensus
3. Policy decision: happens when some authorities- fails
to authorise the course of action
4. Policy implementation: action taken to enforce public
policy
5. Policy evaluation: occurs when impact of public policy
becomes evident
The Corporation & Public Policy
1. Limits to powers of democratic government:
policy implementation- government powers
are restricted under
1. Constitutional law: defines the limit of government
to act, powers in each level of govt & rights of the
citizen
2. Common law: regulated by the judiciary
2. Limits to powers of non democratic monarchy,
dictatorship, religious rulers, socialist state: no
limits on power of govt- except public. Eg:
Sadam Hussain, Idi Amin etc
Framing of Public Policy
Powers of government:
1. Constitutional government: the will of the people &
their desires get reflected in public policies.
Petitions through elected representatives, public
debate in election & campaign, promises given in
election manifestoes , media promotion etc- framing
public policy
2. Non democratic Governments: special interest
lobbying of leadership, illegal bribes & payments,
civil obedience plays a decisive role in shaping public
policies
Buisness & Politics Levels of Involvement
3 levels of biz involvement in political activities &
distribution of goods & services, income generation
& employment
1. Level 1: Financial involvement:
1. Formation of Political Action Committee (PAC):
democratic societies- direct contributions by
corporations to political candidates is forbidden- US
allows
2. Trade association support: techniques used by biz to
participate in governmental politics- lobby against is
proved effective
2. Level 2: Organisational Involvement:
Lobbying: involves direct contact with the government
official & influence the thinking or actions- person to
issue public policy. Done through face to face contact,
lengthy discussions & meetings. Eg: Reliance, Walmart
Employee grassroot involvement: grassroot
programmes are organized efforts to get constituents
to influence government officials to vote or act in a
favorable way
3. Level 3: Strategic public policy involvement:
involvement of industry working groups & task forces
etc
Biz, Government, Society & Media
relationship
Government
Society Media
Biz
Control, influence
& intrusion go
both ways
Govt represents the political
voice of the society. Civil
society & public interest
groups influence the govt,
Govt also influences both
Media rises issues as a player, in keeping/ placing issues in the
agenda & in contributing to their resolution
Government Regulation in Business
What is business regulation?
Government regulation of biz is a mechanism for
implementing social choices & helps in creating the
basic conditions that lead to economic prosperity
People rely govt to institute & maintain rules of conduct
for citizens & for the corporations
Ppl expect local govt- to regulate traffic, basic
necessities (water & transportation)
Central government- regulate trade & fiscal policies
Complex- companies hires lawyers & PRO to monitor &
manage- interaction with the govt
Justification of Government Regulation
Types of Government Regulation
Problems of Government Regulation