*{Redefining the Relationship between Government and Business: New Partnerships in the Making? [http://www.weforum.org/site/knowledgenavigator.nsf/Content/Redefining%20the%20Relationship%20between%20Government%20and%20Business%3A%20New%20Partnerships%20in%20the%20Making%3F?open&topic_id=300250000&theme_id=300]

            04.02.2002

            Annual Meeting 2002}

            *partie=titre The Government and Business Relationship -- Friends or Foes? *partie=nil

            As globalization progresses, companies and the governments that regulate them must continue to search for the correct balance of regulation that allows for growth and expansion, and at the same time properly protect consumers, shareholders and the integrity of the international trading system. "We all live in countries having economies mixed with government and business activities," said Jeffrey E. Garten, Dean, Yale School of Management, Yale University, USA. But today, the challenges to define this mix are even greater given the emphasis on security as well as increased scrutiny on corporate governance.

            Historically, the government-business relationship has been difficult to define, according to Bradford Delong, Professor of Economics, University of California, Berkeley, USA. Early businessmen in France who coined the term "laissez faire," didn’t really mean "leave us alone," but instead were requesting a "night watchman" model. This system encouraged the government to watch over what businesses were doing with capital, as well as monitor the status of workers, wages, consumers and quality. Later in the 20th century, the concept of general price regulation was expanded in certain industries to make production and planning more predictable for both producers and consumers. 

            Garten challenged the group to consider the relationship from a number of perspectives, beginning with financial. "On a global basis," explained Francisco Gil Díaz, Secretary of Finance of Mexico, "markets are organized around the issuance of debt, not around banking." He used the example of Enron to highlight that if the failure involved concentrated bank lending, a larger problem might exist than the one we have today. Additionally, governments need to re-evaluate how they regulate national financial systems given the number of recent failures by countries using fixed exchange rates. The concept of the traditional bail out will have to change given the "moral hazard" argument of rescue packages.

            From the perspective of trade and competition policy, Mario Monti, Commissioner, Competition, European Commission, Brussels, insisted that regulation is moving in a better and more efficient direction for business. This includes less direct intervention, less regulation, more reliance on market forces and greater "self assessment" in looking at merger compliance. He also cited the recent decision of the US antitrust authorities to launch the International Competition Network (ICN) as a very positive step in making cross-border mergers easier. However, he stressed the importance of being realistic about the scope and ultimate authority of the ICN. "It is more realistic to expect convergence between the different authorities," he said.

            Corporate governance is also an area where government can play an important and positive role. "There is a clear need for government involvement in determining corporate governance standards," said Samuel A. DiPiazza Jr, Global Chief Executive Officer, PricewaterhouseCoopers, USA. "However, it is important that government do not destroy the system." Garten agreed, and said that at a minimum, government should shine a bright light on the system. Transparency is key to helping the public understand.

            Perhaps the part of the relationship that has traditionally functioned the best is in the context of security. Eric Schmidt, Chief Executive Officer, Google, USA, discussed the fact that government and private industry have been working together successfully for many years in the area of the government research labs. 

            While the future of the government-business relationship is still not clear, Tarun Das, Director-General, Confederation of Indian Industry (CII), India, believes that there is likely to be a greater level of government regulation on the horizon. "There has been a loss of public trust. When that happens, it becomes political, and politicians need to show that they are putting safeguards in place," he said. The problem is ensuring that the safeguards are not simply excess layers of regulation, but in fact effective protections. 

            Perhaps Garten’s loose poll at the session’s end said it best. When put to a vote, no one, not even the regulators, voted for more regulation.
                        *{Contributors:       Das Tarun
                  Delong Bradford
                  DiPiazza Samuel A.
                  Flanagan Maurice
                  Garten Jeffrey E.
                  Georgetti Kenneth V.
                  Gil Díaz Francisco
                  Gupta Rajat
                  Haji-Ioannou Stelios
                  Kaletsky Anatole
                  Monti Mario
                  Schmidt Eric}