No need for topic Essay Example | Topics and Well Written Essays - 2500 words

No need for topic - Essay Example The Foreign Corrupt Practices Act of 1977, FCPA was enacted to reduce corruption in foreign markets. Therefore, the act was enacted to correct market failures. Corruption involves using money or other resources to influence the decisions of an individual in preferring one entity to the detriment of others. Companies that did not participate in corruption in foreign markets lost to those that did in awarding of government contracts and in venturing into new markets. This was a major problem that characterized market failure. Moreover market failure occurs in cases where there are weak laws to discipline and monitor institutions. Institutions will fail to protect their investors due to managerial misconducts. Consequently, both investors and customers lose huge amounts of investments.3 Examples of these include Enron, Global Crossing and WorldCom corporations that failed due to bad managerial decisions. Government failure on the other hand arises in cases where a government has created major inefficiencies by failing to intervene at the initiate stages of a problem when it could have been more appropriate to solve it more efficiently.4 Such intervention is of many benefits to the investors and consumers. Pareto optimization may be used to measure the extent of government failure in the same way it is used to measure the extent of market failure. Public choice theory explains government failure in a market. The theory stipulates that an individual will be more inclined to be motivated by self-interest, though some may base their actions on the concern for others.5 Government’s failure to prevent such selfish behavior among individuals at the expense of others is the main factor leading to government failure. Therefore, a government is responsible for putting in place checks and balances to ensure organization discipline in insuring investors against losses.6 i. Considering the two cases, market failure explains the policy behind Foreign Corrupt Practices Ac t of 1977, FCPA. Market failure involves unfair balance of resources that may lead to monopoly, lack of information, lower public good, among others. Most foreign corruption acts involved a company bribing foreign officials in foreign markets to have unrestrained access to resources, to block competitors from accessing resources or from enjoying government contracts, and blocking some companies from accessing the market. This resulted in creation of monopolies, and use of resources that did not accord to the public’s good. Therefore, the policy was as result of market failure. b. A negative externality that may result from market failure is damage to environment quality. When companies are allowed to harness resources in a country, most companies do not have regard to environmental degradation, and the effects it will have to the public. Companies will be more concerned on tapping resources for their production and not taking care of the environmental concern from people invo lved. When such companies have a monopoly over such resources, the general public may not benefit; the companies over exploit resources for profitability. An example is in the mining sector. Some companies are awarded rights to harvest certain minerals mostly in developing countries to contribute to the overall GDP of a country in exports. However, such companies leave large gaping holes of dilapidated land. Some do not take