Inseparable twins

Politics can impact business in a number of ways, and significantly at that.

According to Harvard Business School professor Forest Reinhardt, the government has four basic functions: first, protecting citizens from external harm; second, protecting them from internal threats; third, protecting property rights; and third, creating means of resolving disputes.

How governments fulfill these responsibilities significantly impacts business. Political leaders often make decisions that impact labor laws, education, transportation and taxes, which in turn, influence business. And while politics can benefit businesses by creating value, Reinhardt pointed out that it can also interfere with value creation.

He noted that one of the primary challenges business organizations encounter is corruption. The ability to influence businesses can allow officials to take advantage of their power. And there are three primary forms of corruption in government, according to Reinhardt. These are: extortion where public officials use their power to obtain wealth through threats or force; theft which involves public officials appropriating government assets for personal gain; and capture, where firms pay government officials to influence political decision-making for profit.

Reinhardt explained that the primary form of corruption that influences businesses is capture. There are instances, he said, where corrupt companies influence political decisions for their benefit, giving them a clear competitive advantage. He advised that in mergers or acquisitions, it is important to examine a company’s history for signs of corruption. If it is found that a business’s success couldn’t have been achieved without corruption, then it is a sign for the acquiring company to steer clear.

Meanwhile, an article in The Economic Times emphasized that the business sector is heavily influenced by a plethora of variants of non-economic elements, with political influences being among the most important of them. It said that laws, rules, and policies are all crafted by governments, and they can have direct or indirect effects on enterprises. And the capacity of companies to function efficiently in a country can be