The Interrelationship of business and the economy

There is no question that there is an interrelationship between the business community and the economy. When businesses are prospering the economy is strong and unemployment is down.

The last couple of years have been tough and they will continue to be difficult unless changes are made in the way government operates. Actions need to be taken to create an environment favorable to business. This will not be easy as the decisions will be hard ones, but business and the economy need them to be made. Decisions have consequences and impact, and where we are today is a result of decisions made in the past. The future decisions to be made by this Congress involve how they respond to our current economic environment. The impact of those decisions will have a profound effect on the future of our country for years to come. The issues that need to be addressed affect all Americans and span all political spectrums.

Business and the economy are inextricably connected, and the present political and financial environment make it difficult for businesses to grow and succeed. The uncertainty with respect to congressional action or inaction affects decisions that companies want and need to make. Uncertainty will kill any commercial environment. Corporations must be able to know what their costs are going to be, and how they will affect the bottom line, in order to plan ahead and keep a positive balance sheet. The economic environment today is depressed, not only in our country, but around the world, and economic decisions must be addressed by each country for their own situation. Every nation must remember that the actions they take will affect the economy and employment of other countries in the world economy as it is today. Most industries today compete in a global economy where competition is fierce. In order to succeed, companies need a positive political and economic environment. This must become a major priority of our government in order for the U.S. to work its way out of the present recession.

To be successful, companies need clarity. When it is unclear as to what the next year will bring regarding such things as government regulations and taxes, corporations are leery of making future investments, opening new markets, or hiring additional workers. Extending the current tax structure/rates was essential for providing some certainty in what expenses will be for companies this next year. The U.S. government must now make some real and permanent changes in our tax structure to make it more business friendly. Additionally, our political leaders and governments around the world must look realistically at their expenses and their income to begin living within their means and to determine the courses of action to be taken for future development.

Taxes and regulations increase the cost of business. At the present time, there are too many regulations that put pressure on companies to maintain a full time staff to keep within the law. This adds costs that could be either eliminated or reduced if there were fewer regulations in place. Some regulations are necessary for safety in the work environment, for employee protection and to improve the air we breathe, however these need to be limited to the essentials. Each year there are new laws which must have regulations created to identify how they will be enforced. This causes staff to increase to some extent to enforce these regulations, and in effect creates more costs for corporations and the government. These increases impact the bottom line of business, trickle down to the price of goods, and affect us all.

In the global economy, another way governments can help business is by opening up markets in other countries through trade agreements which are not restrictive in nature. Today, there are tariffs imposed by our country and others on products being imported. These tariffs increase the price of products and make it more difficult for companies to compete. Some say trade agreements are not a good thing, but some of the benefits include gaining more exposure for our products to potential new customers. Countries today are developing around the world and with this, new markets are opening. Each time a market opens, the opportunity for sales and profits increase. There are always going to be some negatives to trade agreements, but if they are done right each country involved will see positive benefits. The new global economy demands effective trade agreements.

We now have a world market rather than a national one, and products that businesses produce are in demand throughout many countries of the world. As countries develop, they look to having new products that were missing from their choices. To succeed, companies must have quality products and treat their customers with respect, understanding the cultures of the countries with whom they do business.

Businesses today are finding that there are new competitors for their products and services in many instances. With the tight economy, we are finding that today businesses are producing more with the same amount of people they already have. Increasing the output of employees is a good thing, yet this is also limiting jobs across the board. Demand must be created by developing strategies to enter new markets, and many times governments can help in that respect. New markets will create more jobs as well, but without fair trade agreements, these cannot be developed.

One issue which seems to have a double edge sword involves companies locating divisions of their business in other countries. While it may hurt jobs in our country, it expands the profit and better secures the company for continued operation. The same thing occurs when foreign companies create jobs in our country. It expands their reach in our market and increases the job opportunities. The key to this scenario is opening up opportunities for companies worldwide. Incentives must be generated for companies to gain access to new markets and increase job opportunities. Another reason for companies to expand into other countries is for decreased labor costs. This is causing a loss of jobs in the U.S. If our government could reduce the cost of doing business for U.S. companies, this would minimize the move of manufacturing to foreign countries. While this may not totally eliminate expansion in foreign countries, it may lessen the burden of jobs being lost. Before moving manufacturing overseas, companies need to also be sure that the quality of the work will be the same. If it is not, the reputation of the company will suffer and they may lose customers to other competitors.

Creating an environment for companies to succeed will not be easy, but the issues presented in this article need to be addressed. Companies must feel secure in their future and in the future of the economy in which they are located. Uncertainty creates reluctance for businesses to expand, invest and hire additional workers. When economies are on the mend, businesses will have the potential of increased sales. Governments must send positive signals by their actions to address issues facing both large corporations and small businesses. It’s time to eliminate the uncertainty of government regulations and taxes so businesses can make decisions about their future actions and success.