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The Influence Of Political Environment Of Business Politics Essay

Paper Type: Free Essay Subject: Politics
Wordcount: 2040 words Published: 1st Jan 2015

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Two basic philosophies are in existence all over the world viz democracy and totalitarianism. In its pure sense,democracy refers to a poltical arrangement in which the supreme poer is vested in the people. Democracy may manifest itself in any of two fundamental manners. If each individual is given the right to rule and vote on every matter,the result is pure democracy which is not,however,workable in a complex society with a large constituency. Hence,the republican form of organization follows wherby the public in a democratic manner,elect their representatives who do the ruling.

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In totalitarianism also called authoritarianism,individual freedom is completely subordinated to the power of authority of the state and concentrated in the hands of one person or in small groups which is not constitutionally accountable to the people. Societies ruled by pressure clique-political,economic,military or by dicataor plus most oligarchies and monarchies belong to this category. The doctrine of fascism and erstwhile Russian communism are examples of this.

The political environment includes factors such as the characteristics and policies of the poltical party,the nature of the Constitution and government system and government encompassing the economic and business policies and regulations. these factors may vary considerably between different nations,provinces of the same nation and also over the time.


Despite his pragmatic views, dynamism and the dream of 21st century India, Prime minister Rajiv Gandhi could not introduce any far reaching changes even with the candid mandate that overwhelmed him in the election of 1984. But the Congress government under narsimha Rao did it in 1991 and the successive non congress government have carried further the economic liberalization. Why? The changing global scenario,particularly the developments in the communist countries provide the answer.

There was considerable differences between the Rajiv era and 1991. Rajiv Gandhi who assumed office in 1984 had given great hopes to the teeming millions of India. No wonder,the congress party led by the young prime minister who promised to mould India for the 21st century was given a thumping victory by the grief stricken electorate.

Rajiv who was well aware of the damages done by the unpragmatic regulations was eager to radically reform the economic regime. Hence,many in India and abroad naturally expected that he would introduce far reaching reforms. But alas,the great expectations were belied soon as he succumbed to what he thought or was made to believe was political prudence. The word socialism was still dominant on the political surface. The leftists were severly opposed to even minor economic liberalization and deregulations. To speak against socialism or public sector was regarded as sin. Many in the congress party who thought that socialism and public sector still had a magic spell thought it was still necessary to swear by these ideas which were in favour of deregulation and privatization could be more than those who opposed it,the latter was very vociferous and therefore a determinant force.

In short what was thought to be political expediency prevented even Rajiv from making any major departure from the old regime and therefore dogmatism continued to dominate pragmatism. And what started with the big bang ended with a whimper.

Of course, Rajiv carried further forward with a little more vigour,the policy of piece meal economic liberalization started since the early 1980s. These have had favourable effects. These measures were however quite insufficient to rejuvenate the economy.

The political system under democratic dispensation like ours comprises of legislatures,executive out government or judiciary.


Out of the three, legislatures is the most powerful political institution vested with such powers as policy making,law making,budget approving,executive control and acting as a mirror of public opinion.

The influence of legislature on business is considerable.it decides such vital aspects as the type of business activities the country should have, who should owe them, what should be their size of operations, what should happen to their earnings and other related factors.

Executive or government

Also caleed the “state”,the term government refers to “…the centre of political authority having the power to govern those it serves.” More or less a similar meaning is given by E.V.Schneider when he described government as “that institution by which men everwhere seek to order society,that is, to control the structure and functioning of society.”

The founder of our constitution proved for the federal set up with powers being divided between the national and the state government. The powers and functions of the central and state government are described in the constitution.


Judiciary determines the manner in which the work of the executive has been fulfilled. It sees to it that the exercise of executive authority conforms to the government rules laid down the legislature,it may declare that particular order issues as ultra vires. It also settles the relationship between private citizens and on other hand between citizens and the government.

The power of judiciary is of dual type:-

The authority of courts to settle legal disputes and,

Judicial review-the authority of the courts to rule on the constitutionality of legislation.

It is the power of judiciary to settle down the legal disputes that affects business considerably. Disputes between employer and employee, employee and employee and public and employer and government are often referred to courts for settlement and their verdicts are sought.

As far as second one is concerned the judiciary gets activated when the legislature passes laws which are repugnant to the constitution and when the executive implements the enactment approved by the legislature in a manner opposed to the requirements of the legislation. In other words courts of justice protects the citizens from unlawful acts passed by the legislature and arbitrary acts done by the executive.

Forms of government


capitalist government

Capitalism is an economic system which is based on private ownership. It produces goods with and services for profit motive. Other items central to capitalism includes competitive markets, wage labor and capital accumulation.There are numerous variants of capitalism, including laissez-faire, welfare capitalism and state capitalism. Capitalism is considered to have been applied in a variety of historical cases, varying in time, geography, politics, and culture. There is general agreement that capitalism became dominant in the Western world following the demise of feudalism.Competitive markets may also be found in market-based alternatives to capitalism such as market socialism and co-operative economics.

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Economists, political economists and historians have taken different perspectives on the analysis of capitalism. Economists usually emphasize the degree to which government does not have control over markets (laissez faire), as well as the importance of property rights. Most political economists emphasize private property as well, in addition to power relations, wage labor, class, and the uniqueness of capitalism as a historical formation. The extent to which different markets are free, as well as the rules defining private property, is a matter of politics and policy. Many states have what are termed mixed economies, referring to the varying degree of planned and market-driven elements in a state’s economic system. A number of political ideologies have emerged in support of various types of capitalism, the most prominent being economic liberalism.

Types of economies

There are many variants of capitalism in existence. They vary by country and region in their institutional makeup and by their economic policies. The common feature of all these forms of capitalism is that they are based on production for profit, market-based or mixed-market allocation of resources, and that they are structured upon capital accumulation. The dominant forms of capitalism are listed below:


Mercantilism is a nationalist form of early capitalism that came into existence approximately in the late 16th century. It is characterized by the intertwining of national business interests to state-interest and imperialism, and consequently, the state apparatus is utilized to advance national business interests abroad. An example of this is colonists living in America who were only allowed to trade with and purchase goods from their respective mother countries (Britain, France, etc.). Mercantilism holds that the wealth of a nation is increased through a positive balance of trade with other nations, and corresponds to the phase of capitalist development called the Primitive accumulation of capital.

Free-market capitalism

Free-market capitalism refers to an economic system where prices for goods and services are set freely by the forces of supply and demand and are allowed to reach their point of equilibrium without intervention by government policy. It typically entails support for highly-competitive markets, private ownership of productive enterprises. Laissez-faire is a more extensive form of free-market capitalism where the role of the state is limited to protecting property rights.

Social-market economy

A social-market economy is a nominally free-market system where government intervention in price formation is kept to a minimum but the state provides significant services in the area of social security, unemployment benefits and recognition of labor rights through national collective bargaining arrangements. This model is prominent in Western and Northern European countries, albeit in slightly different configurations. The vast majority of enterprises are privately-owned in this economic model.

State capitalism

State capitalism consists of state ownership of the means of production within a state. The debate between proponents of private versus state capitalism is centered around questions of managerial efficacy, productive efficiency, and fair distribution of wealth.

According to Aldo Musacchio, a professor at Harvard Business School, it is a system in which governments, whether democratic or autocratic, exercise a widespread influence on the economy, through either direct ownership or various subsidies. Musacchio also emphasises the difference between today’s state capitalism and its predecessors. Gone are the days when governments appointed bureaucrats to run companies. The world’s largest state-owned enterprises are traded on the public markets and kept in good health by large institutional investors.

Corporate capitalism

Corporate capitalism is a free or mixed-market economy characterized by the dominance of hierarchical, bureaucratic corporations, which are legally required to pursue profit. State-monopoly capitalism was originally a Marxist concept referring to a form of corporate capitalism in which state policy is utilized to benefit and promote the interests of dominant or established corporations by shielding them from competitive pressures or by providing them with subsidies.

Mixed economy

A mixed economy is a largely market-based economy consisting of both private and public ownership of the means of production and economic interventionism through macroeconomic policies intended to correct market failures, reduce unemployment and keep inflation low. The degree of intervention in markets varies among different countries. Some mixed economies, such as France under dirigisme, also featured a degree of indirect economic planning over a largely capitalist-based economy.

Most capitalist economies are defined as “mixed economies” to some degree.


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