Video Case Assignment – Business and Society

Name – Joshi Aditya Bhausaheb

Roll No – 18428

Government intervention can help serve the interest of the firms and industries of a nation
in a better way. In the following write up, an attempt has been made to explore the reasons
of government interventions of Germany and China. A comparative analysis of the policies
of both the governments is also presented.

Differences between the policies of the both the government

Chinese government is exercising the route of tariffs to protect its domestic industries.
Tariffs make the imported goods costly, thereby promoting more sales produced by the
domestic industries. Chinese government also implements the import barriers. Import
barriers boost the employment and production in the domestic companies, especially in the
labor intensive industries. Though Germany wanted the same outcomes for the domestic
industry – more jobs and production, it undertakes currency devaluation as a solution.
Currency devaluation makes exports cheaper. That gives a boost to the domestic production
and employment.

Similarity between the policies of the both the government

Both the countries seem really keen in developing the green technologies. Though the way
in which they are supporting the domestic companies are different, the broad level policy
has one thing in common – both the nations aim to acquire the green technology before
global competition. China has employed the route of joint ventures to acquire the cutting
edge technology. It also promotes these companies by providing fast-tract loans and local
government support. Germany, on the other hand, nurtures its solar industry via feed-in
tariffs.

Reasons for protecting the domestic industries

China –
China’s socialist market economy constitutes 1000s of state owned players which operate in
lucrative industries like oil, coal, cigarettes, real estate, etc. These state owned firms are a
major source of revenue of the government. Also, the communist party finds it easy to
promote and protect the political ideology of the government via domestic firms rather than
multinational corporations. These two are the major reasons behind the effort of Chinese
government in protecting the domestic firms.

Germany –
German ideology is characterized as social market economy. It means that the economy has
the financial strength and it also provides adequate safety net for its workers. Governments
interventions in trade are primarily driven by protecting the domestic industry and
preserving the economic and social philosophy of the country. The German economy is an
export driven economy – world’s 2nd largest exporter after USA. This indicates that
government relies heavily on the domestic economy for employment and foreign exchange.