Government and Corporates

Holy and Unholy Partnership

 

Last year, the global anti-corruption organization Transparency International released its first-ever Corruption Perceptions Index, which ranks countries based on their levels of public sector corruption.

 

In 2021, Denmark ranked 1st, The United States ranked 27th, and India ranked 85 out of 180 countries.

 

It's no secret that business is becoming increasingly more complex and governments more accountable. Therefore, Governments and corporations must tread carefully.



There are several reasons why this is the case.

 

First, governments provide the legal and regulatory framework within which businesses operate. It includes setting environmental standards and ensuring that companies comply with taxation laws.

 Without this framework, businesses would find it much harder to operate effectively. In addition, corporations have powerful special interests that need to be controlled.

 




Secondly, governments also have a responsibility for promoting economic growth and development. It includes investing in infrastructure and providing incentives for businesses to invest. 


By working together, governments and companies can help create conditions conducive to creating jobs, spur innovation, and drive economic growth.

 

Finally, it should also be noted that businesses play an essential role in funding government services through the payment of taxes. Without tax revenue, it would be challenging for governments to provide services to the public.

 


WHY CONFLICT OF INTEREST

In a perfect world, governments would make decisions based on what was best for their citizens and corporations would always put their employees and customers first. 

However, the reality is that both governments and corporations are often driven by self-interest. It can lead to a conflict of interest between the two. 

As a result, each side tries to advance its agenda at the expense of the public.

 

Corporations want to maximize profits, while the government is supposed to promote the common good to stay in power. Therefore, corporations often exert a lot of influence over government decision-making.

 

This debate came to a head in the wake of the 2008 financial crisis when it was revealed that many government officials had close ties to the financial industry. 

Consequently, big banks were bailed out, while small businesses were left to fail during the 2008 financial crisis.

 

It is not uncommon for corporations to lobby governments to influence law-making. This can result in enacted laws that benefit the corporation at the expense of public money. 

In addition, government officials may be tempted to use their power to award contracts to friends or family members.

 


For example, when corporations lobby for lower taxes, they may ask for fewer regulations that could protect workers or the environment. 

For example, environmental regulations may be relaxed to boost corporate profits, even though this may negatively affect public health.

 

The US Chamber of Commerce lobbying group spends $2.6 billion a year to influence lawmakers, more than any other interest group. In the 2015-2016 election cycle, they donated $86 million to politicians.

 This isn't an accident; it's strategic. Big businesses realize they need to influence the government to get laws passed that are favourable to them.

 

In recent years, there has been increasing cronyism between governments and corporations. In the United States, for example, it has been estimated that nearly two-thirds of all government contracts are awarded to companies that have politically connected executives.

 

According to a report by the Center for Public Integrity, more than half of the state legislators in the United States have accepted gifts from lobbyists. 

The report also reveals that the number of lobbyist-sponsored trips has doubled since 1998. Even more worryingly, roughly a third of all state legislators now work as lobbyists.

 

The same method holds good in many other countries across the world.

 


One high-profile example of this is the oil industry.

In 2010, BP's (British Petroleum) Deepwater Horizon oil rig exploded, resulting in one of the worst environmental disasters in history. 

The spill caused widespread damage to marine life and affected the livelihoods of many coastal communities. The aftermath of the accident revealed that BP had lobbied extensively for weaker safety regulations.

 If BP had not been able to influence government policy, the Deepwater Horizon disaster might have been prevented.

 

In recent years, oil companies such as Shell and BP have been embroiled in controversy over their involvement in fracking. Critics argue that these companies are putting profits before people and that their actions are causing devastating environmental damage.

 

Fracking involves injecting water and chemicals into the ground at high pressure to fracture rock and release natural gas. Although fracking can provide a cheap and efficient energy source, it also poses serious environmental risks. 

For example, some of the chemicals used in fracking have been linked to cancer and groundwater contamination.

 

The defence industry is notoriously reliant on government contracts in the United States. This dependence gives that industry influence over government policy.

 As a result, the US government prioritizes the interests of defence contractors. The War industry is the natural outcome of this unholy relationship, and many believe wars are created to run this industry sector.

 

On the one hand, it is undeniable that specific industries, such as defence, are heavily reliant on government contracts. This can create a situation in which companies become too dependent on government support, leading to cronyism and corruption. 

But on the other hand, tight government regulations can sometimes stifle innovation and creativity.

 


There have also been cases where corporates have exerted undue influence on government policies. For example, in some countries, the tobacco lobby has prevented the government from taking strict action against smoking. 

As a result, thousands of people die yearly due to tobacco-related diseases.

 

Pharmaceutical companies play an important role in developing new medicines and medical treatments. Hence, there is no denying that the pharmaceutical industry wields great power.

 Not only are they one of the most profitable industries in the world, but they also have a significant influence on government policy.

 

In the United States, for instance, the top 10 pharmaceutical companies control nearly 60% of the market. This concentration of power can lead to higher prices and fewer choices for consumers. 

Consequently, this relationship leads to higher drug prices and a lack of transparency around drug safety and efficacy.

 

Regardless of the specifics, this close relationship between business and government often has severe implications for public health. 

For example, pharmaceutical companies have been known to push for the relaxed regulation of their products, including drugs that may be unsafe for public use.

 

In addition, they may also use their influence to discourage government funding for competitor industries, such as generic drug manufacturers. India is one such case.

 

There are examples of positive and negative relationships between governments and corporations worldwide.

 

For instance, many businesses in the United States rely on government contracts to survive. This can lead to inefficiency and waste, but it also provides a vital source of income for many businesses.

 

In Britain, the government has been accused of being too close to specific businesses, particularly in the financial sector. This has led to concerns about cronyism and a lack of transparency.

 

Australia and India are two other countries with different approaches to this relationship. In Australia, the government has taken a more hands-off approach, leaving businesses to fend for themselves to a large extent. 

It has had mixed results, with some companies struggling while others have thrived.

 

India, on the other hand, has a long history of close ties between business and government. Accusations of cronyism and corruption often get headlines, but it has also helped to spur economic development. 

Political funding is a serious cause of concern and has skewed democracy in the country.

 

Sweden is often cited as a country that has managed to avoid this issue. In Sweden, government officials are appointed based on merit rather than political affiliation.


 As a result, Sweden has consistently been ranked as one of the least corrupt countries in the world. This commitment to neutrality and transparency has helped Sweden maintain a high level of trust from its citizens, even as other countries have become increasingly polarised.

 

Government and corporate officials, including politicians, are sworn to uphold the public trust, but they often find themselves embroiled in conflicts of interest.

 

Politicians often rely on corporate donations to fund their campaigns and support their pet projects. For example, corporations may lobby governments for favourable laws or regulations or provide campaign donations to politicians who support their agenda. 

This symbiotic relationship is accused of cronyism from both sides.

 

Lawmakers and lobbyists have always enjoyed a close relationship, but in recent years that relationship has become alarmingly intimate.

 

In many developing countries, corrupt politicians often link up with corrupt businessmen to siphon public funds meant for development projects. As a result, the people suffer while the politicians and businessmen enjoy a luxurious lifestyle.

 

These conflicts can take many forms, from simple financial interests to complex family connections. In some cases, such as when an official owns stock in a company awarded a government contract, the conflict is mild, and the potential for harm is limited.

 

However, in other cases, such as when an official's spouse works for a lobbying firm pushing for favourable regulations, the conflict is much more severe.

 

Corporate executives in government is another controversial topic with pros and cons on both sides. Some examples of corporate executives who have taken government top jobs in the US include Goldman Sachs' Henry Paulson (Secretary of Treasury 2006-2009) and Robert Rubin (Secretary of Treasury 1995-1999).

 

In the UK, current prime minister Liz Truss was employed by Shell. Her policies related to the energy crisis are said to favour energy companies. No surprise, she has refused to impose a windfall tax on them.

 

Supporters of corporate executives in government argue that these individuals have the experience and expertise to make informed policy decisions. 

On the other hand, critics argue that these individuals are more likely to make decisions that benefit their corporation rather than the general public.

 

The result is the same: cronyism and favouritism replace merit-based decision-making, and the public trust stands eroded. Fortunately, some steps can be taken to lessen the impact of conflicts of interest.

 

Examples of this cronyism are everywhere, from how corporations get government contracts to how they are bailed out by taxpayers when they get into financial trouble. This cronyism is bad for business, and it's terrible for democracy.

 

SOLUTION

 

The obvious solution is to end this cronyism by instituting strict laws governing conflicts of interest. But so far, efforts to stop the revolving door between government and lobbying firms have been largely unsuccessful.

 

It is partly because the problem is deeply entrenched: corporate lobbyists have enormous money power and are not afraid to use it to defeat any legislative attempt to stop them.

 

 

There are a few ways to end this cronyism. One solution is for governments to create rules and regulations that make it difficult for corporations to influence them. Another solution is for shareholders to demand more accountability from corporate leaders.

 

For example, officials can be required to disclose their financial interests regularly.



But there is hope. In 2016, voters in Illinois overwhelmingly approved a ballot measure that created a solid conflict-of-interest law for state legislators.

 

And finally, citizens need to be more engaged in the democratic process to hold their elected representatives accountable. Only by working together can we end this cronyism and create a fairer, more just society.

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