What is the Financial Implication of Politics on Business and Economy - A look at USA and China

What are the financial implications of politics?

Much have been spoken about the implications of American election result of business and economy in India and Mr. Barrack Obama is back once more in White House for another 4-year term. While the vanguard of free markets and capitalism America was preparing for a pitched battle for democracy, China which represents the other spectrum of economic and political set-up (the communist) was having a change of guard too. Two of the world's largest economies were having major political changes and much was at stake for the world economy. This brings us to the questions : Why is politics so important to economy? What does politics or the lack of it adds to the economy?

We shall answer them in two context - First, USA which provides us the role of government and political system in a capitalistic economy.

1. Providing stable legislation and business environment - Entrepreneurs and businessmen are like children and they grow better when there is stability of environment in the economy. Provide them healthy legislation and stable environment and you shall watch them grow in leaps and bounds. This stability comes along only with the government.
2. Defining tax laws - Taxes is what interests the government and businesses too! But for dissimilar reasons ofcourse. The role of government in preparing the tax laws of the country  decides and defines the level of economic activity in the country. 
3. Boosting public spending and investment without blotting up the numbers of deficit financing - A country on the verge of depression with a huge debt-pile around its noose? We are not just speaking about USA, there's Greece, Italy, Spain and many more to join this infamous list of under-performing economies of the developed world. In all such countries which are incidentally capitalist economies, require huge spending by government to boost investments as the private sector is not adequately resourceful to do so. But it cannot spend infinitely as the debt-pile has reached astronomical and unsustainable figures already! These economies are therefore, looking at their political leadership for answers that can raise these economies out of the abyss they have found themselves into. 

So, who says the capitalist  economies do not require any government support? It is a free private market out there? America is looking to Barrack Obama for answers that Bill Gates and his likes perhaps are presently incapable of providing. That speaks volumes about the impact of politics of economies and business.

The second context of impact of politics of business and economy can be analyzed with help of China ( communist economy). Though the Chinese economy cannot be termed as a textbook communist economy yet, the state-controls on the economy are immense. Let's have look on the impact of politics on business in China as a new leadership is set to control the communist nation.

1. The economy of China is slowing and slowing down very dramatically - It had entered into the habit of scoring 10 pointers and above but the Red-dragon has been humbled to more human standards. A huge support and guidance is sought from the government to boost the domestic economy.
2. Government's role in reducing income inequality - Income inequality has been a cause of lot of concern as China moves up the ladder of progress. Presence of two parallel and tangential economies, one which is highly progressive, rich and industrialized and other that remains hungry and poor,  has fuelled social unrest and discontent. The country is in dire need of government intervention if it has to stop major social-frictions to break-out in China.

Dr. Manmahon Singh, Indian Prime Minister, has company in the shape of Barrack Obama when he would complain that he has a lot of things to worry about on his plate.