During the 19th century and early 20th-century, the U.S government used to be lenient towards businesses and institutions management. The government lenience towards institution led to corruption and discrimination towards specific groups like the woman and the black community. Large corporations monopolized the market, poor working condition, and discrimination at the workplace was a common thing. The negative things resulting from lack of government regulation on businesses and management of institutions led to the rebellion from specific groups such as small businesses and civil rights groups. These groups were agitating for government control over businesses that were exploiting consumers and respect for human rights. They were calling for an end to discrimination in the workplace and equal rights for the women and the black community. The requirement for better and efficient business regulation was part of the reasons that led to the struggle for independence and establishment of a federal government.
Government regulations are divided into two categories that are social and economic regulation. Economic regulations try to control prices in the market. They are designed purposely to protect consumers and small businesses from powerful corporations. The regulations are justified because full competitive market conditions do not exist hence they cannot provide those protections in their own. The social regulation seeks to promote objectives which are not economic like better working conditions, better wages and salaries. Furthermore, the regulations seek to prohibit or discourage Businesses Corporation undesired behavior and encourage behavior that is deemed to be desirable.
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Towards the beginning of 20th century, the growth of the U.S multinational companies into powerful corporations prompted the government intervention to protect consumers and small businesses. It started with the Congress enacting Sherman antitrust act in 1890; the legislation was designed to bring back competition and free enterprise by dismantling monopolies. Harsh regulation laws then followed. In 1906, Upton Sinclair wrote a novel that exposed unhygienic practices of meatpacking by companies processing meat products. The cry from the public following the book revelation forced the government into developing and passing Food and Drug Act (1906). The law ensured that drugs and food are labelled correctly, and meat products were inspected before being released to the market.
The most significant changes in the government role took place during the New Deal time. That time President Franklin D. Roosevelt's was responding to the great depression that U.S went through. In 1930s U.S went through the worst depression that resulted in high unemployment and failing businesses. Congress and President Roosevelt's put in place legislation that gave government powers to intervene in economic matters. The regulations made federal government chief regulator of economic matters. The laws reformed securities industries and banking industry which were already on their knees. He tried to re-energize the economy through huge government employment programs; most of those programs were geared towards improving the country infrastructure.
Social movement’s activist forced child reforms, which was encouraged by the president and Congress. The first laws on child labor were passed between 1913 and 1921, but they were later on struck out by Supreme Court. The constitution was then amended to provide for the protection of child abuse on labor practices in 1924, the law was passed by Congress but failed to get state ratification. The federal government continued expanding in its regulation. 1970 became a transition period for federal regulation.at the beginning of that decade; three new federal regulatory bodies were put in place; Occupational Safety and Health Administration (OSHA), the Environmental Protection Agency (EPA), and the Consumer Protection Agency. That time government directly intervened deeply into the private sector with a series of price and wages control designed to control inflation that has been plaguing the country economy for a long period. Various elements in the U.S society have responded differently to the effects of regulation, some believe that they are good others are against claiming that regulation affects businesses. On cost benefit analysis, regulations benefits consumers and disadvantaged groups unlike when there are no regulations.
Social rights groups applaud regulations such as Fair Labor Standard Act of 1938 that regulated child labor and provided some protection for the workers. The environmental activist also praised the rules because they assist in protecting the environment. For example clean air act of 1963 and clean water act of 1972 help in controlled pollution. Consumers and small business also applauded regulations move since antitrust laws help break the monopoly and protect consumers against scrupulous businesses entities. In the banking sector, regulations played an important role in saving banks from collapsing in case of an economic recession. Banking regulations were mainly enacted in 1930s. One regulation that was important to the banking sector was deposit insurance regulations.
During the time of economic recession, the decline in the economy was accelerated when depositors start withdrawing cash money from the banks with a belief that their savings will fail, many depositors lined up at the same time to withdraw their deposit. Many banks collapsed because they ran short of cash and could not convert their assets to cash required by depositors. Deposit insurance regulations were aimed at preventing such runs on banks. According to the regulation the government will stand behind deposits of up to $100,000. If a bank appears to be in trouble depositors will no longer have a reason of rushing into withdrawing their money because the Federal Deposit Insurance Corporation will pay off depositors in case the bank collapsed. Those against control claim that the primary effect of regulations is to harm employment and economy. Large corporations are among groups opposing regulations. For example, they argue that regulations increase the cost of production hence increasing the cost of products in the market; this will then lead to a reduction in sales and employment. Critics of the new anti-monopoly laws claim that the regulation is not fully effective and it affects businesses of large corporation.
