Public policy is crucial for business creation, growth, and economic success. When public policy is at its best, it can help the entire state, expanding the success to national levels. But when poorly planned, public policy may end up crippling businesses, destroying jobs, and lessening a business’ chances of success.
Because of the significant impact it can have on businesses, business owners can benefit from taking a public policy course to further understand and conduct their daily operations better. Take a look at how public policy can affect small businesses for the better or worse.
1. Public Policy is a Market Catalyst
The government can implement policies that change social behavior in business environments. For instance, they can levy taxes on businesses using carbon-based fuels and grand subsidies for those using renewable energy. Or, they can underwrite the development of new technologies that provide necessary changes to everyone. Imposing more duties or taxes on a particular sector than necessary can cause investors to lose interest in it.
Moreover, tax and duty exemptions on sectors can trigger investment, thus generating growth. For instance, high tax rates on imported products can encourage local production of the same products. But if there is a high tax rate for raw materials, it can negatively affect local production.
2. Political Culture and Stability
Public policy depends on the current political culture. Policies created in politically stable countries are different compared to those formed in unstable countries. Stable political systems can make business-friendly decisions, thus attracting investors and promoting local businesses.
Unstable political systems would present issues that can hamper the government’s ability to maintain law and order, which negatively affects business environments.
3. Government Taxes and Spending
The government will receive money to spend from taxes, with increased spending requiring increases in borrowing and taxes. Tax increases would discourage investments, especially in entrepreneurs taking risks of starting and managing their own small businesses.
Increased spending can also eat into one’s limited pool of savings so they have less money to use for private investments. That reduction in investments will lessen the product or products and services, which can then lead to lower employment rates.
4. Setting Interest Rates
Public policy can also influence interest rates. A rise in interest rates will increase the cost of borrowing for businesses and decrease the rate of consumer spending. Lower interest rates will attract investment because businesses can increase the production of goods and services.
The government would also influence interest rates in the short-term when printing more money, which would lead to inflation. Businesses can’t thrive when inflation is high.
5. Regulations and Permits
The federal minimum wage, trade regulations, and requirements to obtain licenses and permits also have effects on businesses. They will need to spend time and money to comply with regulations that can sometimes be ineffective and unnecessary. However, fair and effective regulations can help with business growth.
Wrapping It Up
Take note of these ways public policy impacts small businesses and stay updated with related news to help create a roadmap for your operations.
