What Is Government and How Does It Affect Your Business?


Government is the means by which a people organize themselves to accomplish collective goals and provide benefits that they cannot meet on their own. Governments differ from one country to another in the way they are organized, but they all have common characteristics. They include a centralized authority, decision-making processes, rules and regulations, institutions, customs and laws that govern behavior.

The term “government” encompasses many different levels of government, from local community organizations to international federations. Governments may have a variety of functions, including providing law enforcement services, social programs, education, health care and roads. They also set rules that businesses must follow to operate legally. Governments can also provide tax incentives and impose taxes, which are paid by citizens to fund government activities.

In the United States, Congress enacts laws that establish how the federal government is structured and funded. Congress levies taxes and tariffs to fund government agencies, and if revenue doesn’t cover all costs, it authorizes borrowing. Congress also imposes mandated spending, which is spending on specific items that Congress specifically designates in legislation. These types of expenditures are often referred to as earmarks.

Governments are also charged with regulating access to natural resources like fish in the sea and public lands, as well as services such as postal service and fire protection that benefit all people. Governments are necessary to protect these resources from over-use by a few individuals, who may take all that’s available and leave others with nothing.

For small business owners, understanding which government regulations apply to their operations is a complex endeavor. Knowing which business taxes to pay and when to pay them is essential, and a business lawyer can help.

Government regulation is intended to ensure fair competition and safeguard consumer safety. But if it isn’t carefully administered, it can create barriers to entry and distort the market by giving advantages to certain companies. For example, pharmaceutical companies sometimes complain that the FDA is overly burdensome with its requirements for human trials and the cost of obtaining drug approvals. These costs can deter entrepreneurs who might otherwise enter the market. This is an example of regulatory capture, where agencies supposedly aimed at protecting consumers are actually working for the interests of industry.