Governments and businesses are interlinked in various ways, with the actions of either entity having consequences for the other. The government has a vested interest in keeping the economy going, and thus they must ensure that businesses thrive. Governments do this in various ways, some of which we will look at below.
Ensuring Favorable Interest Rates
Interest rates affect the ability of both businesses and individuals to borrow money. When businesses can borrow money at low interest rates, they can borrow more for their expansion, to hire more people, or to even develop new products that meet the needs of the larger population.
If individuals can borrow at these lower rates, they are more likely to spend more, leading to a robust business environment and economy.
Infrastructure is critical for business as it allows for the movement of goods, services, raw materials, and people. Physical infrastructure such as roads is especially critical for business, as they help support the aforementioned movement that facilitates businesses.
The importance of roads to business is so profound that we have documented differences between the economic growth of areas with good infrastructure compared to those that do not. Governments work with various private and public partners to ensure there is enough infrastructure for businesses and individuals.
They also use tools like traffic counts to determine the use of certain roads so they can see how regularly they need to maintain them, and the traffic flow, which can influence decisions on the number of lanes, intersections, and traffic control mechanisms and signals required. The Illinois Department of Transportation completed such a count recently with the help of Civil Design, Inc. You can click here to learn more about the aims and results of that project.
Giving Tax Incentives
Governments have always used taxes to encourage business growth and activity. For example, lowering corporate income tax through tax credits leaves businesses with more money to do business with.
Another less explored way governments use taxes to spur business growth is through tax incentives. These can encourage businesses to start certain types of profitable businesses and for individuals to buy from these businesses. A good example is in the electronic vehicle industry where governments have incentives for both consumers and businesses. This led to the introduction of more EVs in the market, with more people inclined to buy due to tax incentives.
Contracting Private Companies
Governments also often work with private businesses when they contract these businesses to help them complete certain projects. Doing so directly impacts businesses and the economy as the government contracts enable businesses to hire more people, invest in new areas, and keep expanding.
Funding Research and Development
The federal government provides grants that help fund research and development in addition to R&D tax credits to businesses that need them. They do this with the thinking that these businesses will want to share their innovations with other businesses, lifting the industries they are in as a whole.
The government has an incentive to keep the economy going and growing, and the best way is to support the businesses that make this possible. Governments do this in different ways and the result is a more robust business environment with numerous opportunities for growth, expansion, and hiring more people.