Social policy transformation and business environment improvement: a comparative analysis based on China and Russia

Firstly, in countries in transition, which need to take into account reforms, development, and stability, the government still leads the transformation of political systems, economic development, and social policy changes. A powerful, effective, and capable government is the most critical element in the triple transformation of politics, economy and society, whose institutions and systems and governance capabilities determine the improvement of the business environment (economic development) and social policy changes (social development). China and Russia are typical cases. However, it is worth noting for the government that social policies centered on the improvement of citizen's welfare is fairness-oriented, while the improvement of the business environment centered on the convenience of business operations is efficiency-oriented. In the government-market relationship, enterprises are recipients of the business environment, who receive investment protection, contract enforcement, provision of public facilities, and other “public goods” provided by the government. In the government-citizen relationship, citizens are recipients of social policies, who receive education, medical care, pension, and other “public goods” offered by the government. The relations between citizens and enterprises are established through the market system. Citizens and enterprises make two-way selection to achieve job matching (Fig. 2). However, in countries with systems in transition, the establishment and improvement of the market mechanism are inseparable from government governance and the business environment. For example, in China, the improvement of the business environment is the transformation of government functions as well as the improvement of the market-oriented economic system. Moreover, a well-functioning market system also contributes to the implementation of social policies. It provides financial support for social policies. Besides, some market-based services introduced in social policies help to improve the efficiency of implementation and effects of the policies (such as the market-based supply of nonessential medical, education, and pension services).

Secondly, the government, enterprises, and citizens interact with each other constantly. Social policy changes and improvements in the business environment are only the results of this interaction. The first is the effect of enterprises and markets on the government. Only with economic growth, can citizens' needs for high quality products be met. Moreover, enterprises and markets are the main source of financial funds for the government. Only when the government has its financial capacity secured, can it provide better public goods and services and maximize the positive function of social policies. Also, market players can participate in the production of public services and take some load off the government.

Fig. 2. Business Environment and Social Policies Led by the Government

A good operating system or mechanism can further reduce the shortcomings in the implementation of social policies and lessen the difficulty of government management. The second is the effect of the government on the market. The government improves the business environment, conducts macro-control, and maintains stable and healthy development of the economy. At the same time, it carries out market regulation and improves the system of social security policies to lower business costs and enhance citizen welfare. Thus, the interaction in these relationships is not static, parallel, or unidirectional, but dynamic, nesting with each other, and bidirectional or multidirectional.

Thirdly, the government shall perform the functions that have been prescribed by law while refrain from acting where the law has not authorized it to act. It shall improve the business environment to allow enterprises to create wealth more efficiently and optimize social policies to allow people to share social wealth more equitably, ultimately achieving a good situation of an effective market, a capable government, and a well-ordered society. A good business environment requires the government to do something by facilitating business operations and reducing institutional transaction costs, while not to do something -- not to interfere with the micro-operations of enterprises, allowing the market to play a decisive role in resource allocation. At the same time, the government must take the initiative in social policies. The market improves the efficiency of resource allocation, which, however, may lead to a widening disparity between the rich and the poor. The imbalance of distribution will ultimately affect the efficiency of economic development, which is not conducive to the smooth progress of social reproduction, even resulting in increased cyclical fluctuations in the economy. Therefore, in countries in transition, especially those with stable governance conditions, the government needs to improve citizens' welfare with appropriate social policies, promote the improvement of citizens' income and consumption capacity, avoid the periodic ups and downs in economic operation, and ensure the long-term stable development of the society and economy.

social policy business environment

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