Checks and balances in democracies - Business Environment

As will be evident from the analysis above democracy implies the existence of a system of checks and balances, arrangements which serve to curb government action and restrict its influence on the day-to-day lives of its citizens. These restraints on the actions of the state at national level can be divided into two main types: political and social/economic.
Political checks and balances emanate primarily from three main sources:
_ the separation of powers particularly the notion that the three arms of government are in separate hands and that decisions require the concurrence of all branches of government;
_ a bicameral legislature with legislation having to be accepted by both houses and subject to scrutiny and amendment by opposition parties;
_ the territorial division of powers whether under a federal arrangement or through the devolution of power to regional bodies and/or local authorities. Supranationalism is a further development.

The point is not that these arrangements necessarily exist in their most complete form in democratic states, but that however imperfect in practice their existence helps to provide time for reflection and delay in the decision-making process and to encourage consultation, negotiation and consensus building: the essence of the democratic approach to conflict resolution.

The notion of social and economic checks and balances refers to those countervailing pressures on the activities of the state and its agencies that derive from the existence of non-state structures and processes which affect the lives of individuals and which ultimately restrict the scope of government influence. These include private business organisations, professional associations, promotional bodies, churches and other groups which help to shape our economic, social and moral environment. As subsequent chapters will demonstrate, the bulk of economic decisions in democratic states are not taken by the government but by private individuals and organisations (i.e. firms) interacting through a market system. This acts as a kind of check and balance on the free activity of the public sector and is a fundamental characteristic of democratic government.

It is appropriate to conclude this examination of the political environment with a brief discussion of the process of governmental decision making in democratic systems. Here, the basic model of the organisation in its environment introduced inChapter serves as a useful analytical tool. Governments, like firms, are organisations which transform inputs into output and they do so in an environment largely the same as that which confronts other types of enterprise. Like other organisations, government is a user of resources, especially land, labour, capital, finance and expertise, but in addition all governments face political demands and supports when considering their policy options.

As indicated above, political demands including those directly or indirectly impinging on business activity become translated into action through a variety of mechanisms, including the electoral system, party activity, pressure group influence and political communication; hence a government is always keen to point out. The point out that electoral victory implies that it has a mandate for its policies. The supports of the political system are those customs, conventions, rules, assumptions and sentiments which provide a basis for the existence of the political community and its constituent parts and thus give legitimacy to the actions and existence of the incumbent government. In democratic systems, the belief in democratic principles,and the doctrines and practices emanating from that belief, are seen as central to the activities of government and its agencies.

The outputs of the political system vary considerably and range from public goods and services (e.g. healthcare) provided predominantly from money raised through taxation to rules and regulations (e.g. legislation, administrative procedures, directives) and transfer payments (i.e. where the government acts as a reallocator of resources, as in the case of the provision of state benefits). Taken together, the nature, range and extent of government output not only tend to make government the single biggest ‘business’ in a state, they also influence the environment in which other businesses operate and increasingly in which other governments make decisions.

As far as governmental decision making is concerned, this is clearly a highly complex process which in practice does not replicate the simple sequence of events suggested by the model. Certainly governments require ‘means’ (inputs) to achieve ‘ends’ (output), but the outputs of the political system normally only emerge after a complex, varied and ongoing process involving a wide range of individuals, groups and agencies. To add further confusion, those involved in the process tend to vary according to the decision under discussion as well as over time, making analysis fraught with difficulties. One possible solution may be to distinguish between the early development of a policy proposal (‘initiation’) and its subsequent ‘formulation’ and ‘implementation’, in the hope that a discernible ‘policy community’ can be identified at each stage. But even this approach involves a degree of guess work and arbitrary decision making, not least because of the difficulty of distinguishing precisely between the different stages of policy making and of discerning the influence of individuals and groups at each phase of the process.

Not withstanding these difficulties, it is important for students of business and for businesses them selves to have some understanding of the structure of decision making and of the underlying values and beliefs which tend to shape governmental action, if they are to appreciate (and possibly ‘influence’) the political environment in which they exist. In short, studies of political systems, institutions and processes help to provide insight into how and why government decisions are made, who is important in shaping those decisions and how influence can be brought to bear on the decision-making process. As an increasing number of individuals and groups recognize, knowledge of this kind can prove a valuable organisational resource that on occasions is of no less significance than the other inputs into the productive process.

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