Government Regulations and Business

Table of Contents

State regulation is one of the key factors determining the investment climate and macroeconomic indicators in general. As practice shows, for the normal functioning of a market economy with its inherent variety of forms of ownership, the system of state regulation of the financial sector as a whole, as well as its separate branches, is necessary.

Particular attention is paid to the business sector as this segment of the market brings a rather large income; however, the issue of the degree of state boards’ involvement in control over the business sphere has always caused ambiguities. A rational regulation of business requires both effective procedures and strong institutions that establish transparent and compulsory rules.

Position Regarding State Participation

The primary measures by which state regulation is perfected are licensing, notification procedure for carrying out entrepreneurial activities, accreditation, state control, and supervision. Due to the fact that some supervisory functions are transferred to different departments, the personal responsibility of many civil servants is relevant today.

A significant part of the money goes to the budget in the form of taxes from entrepreneurial activity; therefore, it is essential to monitor this area and control the compliance with legal requirements. Furthermore, we possibly should have even more regulation than today since no financial frauds will be realized, and the state will receive a stable profit. A certain freedom should exist, but people need protection from the government.

Pros of Regulation

During the process of regulating the sphere of business and strengthening control by the governing boards, instruments for protecting the rights of entrepreneurs are regularly introduced in cooperation with inspection agencies.

As a rule, the legal foundations of the institution of self-regulation are formed, which makes it possible to significantly reduce the degree of state interference in enterprises’ activities and create conditions for the development of standards and rules that meet both professional and public interests. Due to the government’s interest in this area, fewer fraudulent schemes and criminality can be observed, which is also can be called an advantage.

Cons of Regulation

The governments spend quite much money to ensure control over business activities, and a significant amount of money is wasted on work that is not always effective. Also, too tight control that can be observed in some countries significantly hinders the development of business and does not allow entrepreneurs to develop certain areas.

Moreover, if inspection agencies are ready to break the law, for example, to take a bribe from a dishonest businessperson, the system will certainly be ineffective. The success of control depends on how the whole process of monitoring such activities is organized, and if violations in the chain are observed, all the procedures will be useless.


Thus, if there are strong inspection institutions that follow compulsory rules when monitoring entrepreneurs, the sphere of business will normally develop, and people will be protected. There are both pros and cons of constant control. Infringements in the chain of control inevitably result in inefficiency of monitoring.

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