In today's rapidly changing economic landscape, I believe governmental regulatio

n is necessary to allow a free and fair market, and to allow small companies to
grow. With the advent of globalization, large multi-national corporations have c
ome up, and they may stifle the growth of smaller companies.
Large national or multi-national companies can easily monopolize a market, preve
nting smaller companies from establishing a consumer base. Without proper regula
tion to reduce the vast financial advantages of these large companies, small bus
inesses may close down, and entrepeneurs will hesitate to start a business deali
ng in that kind of commodity. To illustrate this, we may take the case against W
almart in India. Lobbies of small merchants are protesting the implementation of
Foreign Direct Investment (FDI) in India, as they believe that such an action w
ould open up the Indian markets to foreign retailers, who could easily provide l
ower prices than the merchants. This would lead to the financial ruin of a numbe
r of these middle-class businessmen, severely impacting both the economy and soc
iety.
Secondly, the lack of proper governmental regulation can lead to the promulgamat
ion of unethical business practices. Companies may resort to a vast variety of i
llegal or extra-legal techniques to reduce competition in the market. We may con
sider the case of New York in the 1950's, during the golden age of the American
Mafia. The Mafia was organized into groups, such that each group had total hegem
ony over businesses in a particular area of the city. All businesses in the area
would be forced to pay a tribute to the group controlling their area, as protec
tion money. It has been speculated that a number of powerful politicians also re
ceived a share of the profits from the Mafia groups, and this prevented any mean
ingful legislation against them, until the late 1970's.
Next, we may take the case of entrepeneurs aiming to start a business requiring
large amounts of initial capital investment. It would be difficult for such entr
epeneurs to raise the required funds on their own, however if the government is
willing to provide subsidies or other incentives, such as loans, to these compan
ies, then this would encourage the formation of new businesses. An example would
be the creation of Special Economic Zones (SEZ's), where companies can set up f
actories, with extremely low land costs, while the infrastructure is provided by
the government. A number of countries, including India and China have created S
pecial Economic Zones in different parts of the country to encourage small compa
nies.
Some people argue that high governmental regulation will restrict businesses and
hamper their growth. This argument rests on the assumption that all governmenta
l regulation will stifle economic freedom. However, this argument is fundamental
ly flawed, as most rules laid down by the government aim to help businesses grow
, thus improving economic growth.
In conclusion, we can clearly see the advantages of systematic governmental regu
lations in the economy. Although the haphazard implementation of such rules will
naturally limit economic growth, the successful implementation of these norms i
s a precondition for equitable economic growth. The competitiveness in the marke
t created because of these implementations will lead to new businesses forming,
boosting the local economy.