Federalism and Business Essay Example | Topics and Well Written Essays - 1250 words

Federalism and Business - Essay Example A federal system is favourable than a unitary one because the state territories can be used as laboratories to try out business policy changes such as several fusions of laws, technological adjustments and tax policies. New policies are important to promote competitiveness as time goes by. It is easier for a federal government to perform experiments on policy changes since it can use a selected state as a ‘lab rat’. This experimentation phenomenon has been successfully used severally in the UK in health, education and economic policies (Martin & Sanderson, 1999, 249). If a policy leads to better business performance in the selected state, it can then be used throughout the regions. If disastrous, the federal government can correct or control the effects more economically unlike a central government. Centralized governments employ more of similar policies in the entire area of governance. They are therefore reluctant to try out new policies due to extensive risks likely t o affect the entire economy (Rich & William, 2002, 58). State governments have more information on their constituents’ needs than the central government. Presumably, decentralized governments are closer to their constituents and are more likely to have better knowledge of local cost conditions and preferences. If such information is publicized, businesses can be able to take advantage of the market niche that needs to be filled. Even though the central government can theoretically employ local agents, they will probably have less political incentive to put into account their constituents’ needs above those of local government agents. The states will therefore have a relative advantage over the central government in experimentation and creating variation.... The states will therefore have a relative advantage over the central government in experimentation and creating variation. Federalized governments are better supervisors of business and business related activities. This is as a result of reduction in complexities associated with bureaucracies in centralized governments. Federal governments can therefore be said to be more effective in performing their supervisory duties to the public. According to Lord Bryce in Zavodnyik, 2011 (p65 - 68), the growth in civil order in the United States has been as a result of state governments ability to closely monitor affairs of the citizens than congress was. As per Zavodnyik, this is one of the factors which drove USA to being one of the largest and most organized economies in the world. The US through its states system can better enforce business contracts in the states. It can also perform more effective control in the respective state markets due to ‘closeness’ of the government to the people. This reduces counterfeits and the number of transactions performed in the black market. Fabbrini 2009, in the book ‘Democracy and Federalism in the European Union and the United States: Exploring Post-National Governance’ seconds this pointing the US and UK as the countries with the lowest levels of counterfeit products in their territorial markets. Even though the governments may use the federal government to reduce illegal trades in order to maximize on the amount of taxes it collects, this promotes businesses whose markets are put at risk by counterfeits and illegal transactions which are expensive (European Center for Security Studies, 2010, 103). This creates a conducive breeding ground for businesses since it means less bureaucracy and red tape measures which