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National Differences in Political Economy
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National Differences in Political Economy
McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved.
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India
McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved.
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Focus
The term Political Economy is used to stress that the political, economic, and legal systems of a country are dependent on each other.
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Focus
We will review these systems and explore how differences in political economy influence the benefits, costs, and risks associated with doing business in different countries.
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Focus
We need to analyze different systems according to their emphasis on:•Collectivism vs. Individualism•Democracy vs. Totalitarianism
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Political Systems
“The system of government in a nation.”
Collectivism:A political system that stresses the
primacy of ‘collective goals’ over ‘individual goals’;
‘the good of the society’; ‘the common good.’
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Political Systems
“The system of government in a nation.”
Collectivism:A political system that stresses the primacy of collective goals over individual
goals.Advocated by Plato in the “Republic”.
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Political Systems
“The system of government in a nation.”
Collectivism:A political system that stresses the primacy of collective goals over individual
goals.Advocated by Plato in the “Republic”.In modern times, the Socialists advocate Collectivism.
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Political Systems
“The system of government in a nation.”
Socialism:Trace intellectual roots to Karl Marx.
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Political Systems
“The system of government in a nation.”
Socialism:Trace intellectual roots to Karl Marx.Argued that the pay of workers does not reflect the full value of their labor.
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Political Systems
“The system of government in a nation.”
Socialism:Trace intellectual roots to Karl Marx.Argued that the pay of workers does not reflect the full value of their labor.Advocated collective ownership of production, distribution, and exchange (businesses), thereby ensuring that workers were fully compensated for their labor.
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Communists:Socialism is achieved through violent revolution..
Two Approaches
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Social Democrats:Socialism is achieved through democratic means.
Two Approaches
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Political Systems
Individualism: Opposite of Collectivism.
“The system of government in a nation.”
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Political Systems
Individualism: Opposite of Collectivism. Individual should have freedom in political and economic pursuits.
“The system of government in a nation.”
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Political Systems
Individualism: Opposite of Collectivism. Individual should have freedom in political and economic pursuits. Advocated by Aristotle.
“The system of government in a nation.”
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Political Systems
Individualism: Opposite of Collectivism. Individual should have freedom in political and economic pursuits.Advocated by Aristotle.Private property is more highly productive than communal property and will thus stimulate progress.
“The system of government in a nation.”
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Political Systems
Individualism: Opposite of Collectivism. Individual should have freedom in political and economic pursuits.Advocated by Aristotle.Private property is more highly productive than communal property and will thus stimulate progress. Revived during the 16th century in England and the Netherlands.
Hume (1711-1776) Adam Smith (1723-1790) John Stuart Mill (1806-1873)
“The system of government in a nation.”
McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved.
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Political Systems
Individualism: Opposite of Collectivism. Individual should have freedom in political and economic pursuits.Advocated by Aristotle.Private property is more highly productive than communal property and will thus stimulate progress. Revived during the 16th century in England and the Netherlands.
Hume (1711-1776) Adam Smith (1723-1790) John Stuart Mill (1806-1873)
Embodied in the U.S. Declaration of Independence.
“The system of government in a nation.”
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Two tenets of individual capitalism:An emphasis on the importance of guaranteeing
individual freedom and self-expression.
And the idea that the welfare of society is best served by letting people pursue their own economic self-interest, as opposed to some collective body (government) dictating what is in society’s best interest.
Therefore, Individualism advocates: Democratic political systems. Free market economics.
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Democracy and Totalitarianism
DemocracyGovernment by the people, exercised either directly or through elected representatives.
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Democracy and Totalitarianism
TotalitarianismGovernment in which one person or political party exercises absolute control over all spheres of human life and opposing political parties are prohibited.
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Democracy
Safeguards to protect a democracy:Right to freedom of expression, opinion, and organization.
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Democracy
Safeguards to protect a democracy:Right to freedom of expression, opinion, and organization.
A free media.
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Democracy
Safeguards to protect a democracy:Right to freedom of expression, opinion, and organization.A free media.
Regular elections in which all eligible citizens are allowed to vote.
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Democracy
Safeguards to protect a democracy:Right to freedom of expression, opinion, and organization.A free media.Regular elections in which all eligible citizens are allowed to vote.
Universal adult suffrage.
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Democracy
Safeguards to protect a democracy:Right to freedom of expression, opinion, and organization.A free media.Regular elections in which all eligible citizens are allowed to vote.Universal adult suffrage.
Limited terms for elected representatives.
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Democracy
Safeguards to protect a democracy:Right to freedom of expression, opinion, and organization.A free media.Regular elections in which all eligible citizens are allowed to vote.Universal adult suffrage.Limited terms for elected representatives.
A fair court system independent of the political system.
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Democracy
Safeguards to protect a democracy:Right to freedom of expression, opinion, and organization.A free media.Regular elections in which all eligible citizens are allowed to vote.Universal adult suffrage.Limited terms for elected representatives.A fair court system independent of the political system.
A nonpolitical state bureaucracy.
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Democracy
Safeguards to protect a democracy:Right to freedom of expression, opinion, and organization.A free media.Regular elections in which all eligible citizens are allowed to vote.Universal adult suffrage.Limited terms for elected representatives.A fair court system independent of the political system.
A nonpolitical state bureaucracy.
A nonpolitical police force and armed service.
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Democracy
Safeguards to protect a democracy:Right to freedom of expression, opinion, and organization.A free media.Regular elections in which all eligible citizens are allowed to vote.Universal adult suffrage.Limited terms for elected representatives.A fair court system independent of the political system.A nonpolitical state bureaucracy.A nonpolitical police force and armed service.
Relatively free access to state information.
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Totalitarianism
4 major forms:Communism
Collectivism is achieved through total dictatorship.
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Totalitarianism
4 major forms:Communism
Collectivism is achieved through total dictatorship.
Theocratic
Political power is influenced by religious principles.
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Totalitarianism
4 major forms:Communism
Collectivism is achieved through total dictatorship.Theocratic
Political power is influenced by religious principles.
Tribal
A political party representing the interests of a particular tribe monopolizes power.
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Totalitarianism
4 major forms:Communism
Collectivism is achieved through total dictatorship.Theocratic
Political power is influenced by religious principles.Tribal
A political party representing the interests of a particular tribe monopolizes power.
Right-wingGenerally permits individual economic freedom, but restricts political freedom to prevent the rise of communism.
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Economic Systems
Market Economy:All productive activities are privately owned.
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Economic Systems
Market Economy:All productive activities are privately owned.
Command Economy:Goods and services produced, their quantity, and prices are determined by the government.
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Economic Systems
Market Economy:All productive activities are privately owned.
Command Economy:
Goods and services produced, their quantity, and prices are determined by the government.
Mixed Economy:Parts of the economy are left to private ownership and free market mechanisms while other sectors are state-owned and have government planning.
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Economic Systems
Market Economy:All productive activities are privately owned.
Command Economy:Goods and services produced, their quantity, and prices are determined by the government.
Mixed Economy:Parts of the economy are left to private ownership and free market mechanisms while other sectors are state-owned and have government planning.
State-Directed Economy:The state plays a significant role through its “industrial policy” and setting national goals.
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Legal Systems
Rules, or laws, that regulate behavior and the processes by which laws are enforced
and grievances redressed.
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Legal Systems
Property Rights: the legal rights over the use of a resource and the income derived from it.
Rules, or laws, that regulate behavior and the processes by which laws are enforced
and grievances redressed.
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Legal Systems
Property Rights: the legal rights over the use of a resource and the income derived from it.
Private Action:Theft, piracy, blackmail and the like by private individuals and groups.
Rules, or laws, that regulate behavior and the processes by which laws are enforced
and grievances redressed.
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Legal Systems
Property Rights: the legal rights over the use of a resource and the income derived from it.
Private Action:Theft, piracy, blackmail and the like by private individuals and groups.
Public Action and Corruption:Violation of property rights by public officials, such as politicians and government officials, by extorting income or resources (taxes, licenses or permits, outright confiscation) from property holders.
Rules, or laws, that regulate behavior and the processes by which laws are enforced
and grievances redressed.
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Country Corruption Rankings 2000
0
2
4
6
8
10Fin
land
Sin
gapo
re
Sw
itze
rlan
d
U.S
.A.
Jap
an
Chi
na
Indo
nesi
a
Ranking
Canada
U.K
.
Aust
ralia
France
Gre
ece
Russ
ia
Nig
eri
a
10=Highly clean 0=Totally corrupt
Figure 2.1
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Protection of Intellectual Property
Property that is the product of intellectual activity.
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Protection of Intellectual Property
Property that is the product of intellectual activity. It is protected by:
Patent: through exclusive use rights, it protects the inventor of a product for a certain period of time.
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Protection of Intellectual Property
Property that is the product of intellectual activity. It is protected by:
Patent: through exclusive use rights, it protects the inventor of a product for a certain period of time.
Copyright: Gives exclusive rights to authors, composers, playwrights and artists to publish and dispense their work.
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Protection of Intellectual Property
Property that is the product of intellectual activity. It is protected by:
Patent: through exclusive use rights, it protects the inventor of a product for a certain period of time.Copyright: Gives exclusive rights to authors, composers, playwrights and artists to publish and dispense their work.
Trademark: Officially registered designs and names that protect owners product designations.
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Protection of Intellectual Property
Property that is the product of intellectual activity. It is protected by:
Patent: Copyright: Trademark:
However, Piracy remains a significant problem in international business.
