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National Differences in Political Economy

McGraw-Hill/Irwin Global Business Today, 5e © 2008 The McGraw-Hill Companies, Inc., All Rights Reserved.

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Chapter 2: National Differences in Political Economy

INTRODUCTION

This chapter explores how the political, economic, and legal systems of countries differ.

Together these systems are known as the political economy of a country.

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Chapter 2: National Differences in Political Economy

POLITICAL SYSTEMS

•  A political system is the system of government in a nation

Political systems can be assessed according to:

•  the degree to which they emphasize collectivism as opposed to individualism •  the degree to which they are democratic or totalitarian

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Chapter 2: National Differences in Political Economy

• Collectivism and Individualism

• Democracy and Totalitarianism

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Chapter 2: National Differences in Political Economy

ECONOMIC SYSTEMS

•  A free market system is likely in countries where individual goals are given primacy over collective goals

•  State-owned enterprises and restricted markets are common in countries where collective goals are dominant

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Chapter 2: National Differences in Political Economy

•  Market Economy

•  Command Economy

•  Mixed Economy

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Chapter 2: National Differences in Political Economy

LEGAL SYSTEMS

The legal system of a country is the rules, or laws, that regulate behavior, along with the processes by which the laws of a country are enforced and through which redress for grievances is obtained.

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Chapter 2: National Differences in Political Economy

• Different Legal Systems

• Differences in Contract Law

• Property Rights and Corruption

• The Protection of Intellectual Property

• Product Safety and Product Liability

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Chapter 2: National Differences in Political Economy

THE DETERMINANTS OF ECONOMIC DEVELOPMENT

Differing political, economic, and legal systems can have a profound impact on the level of a country's economic development, and hence on the attractiveness of a country as a possible market and/or production location for a firm.

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Chapter 2: National Differences in Political Economy

• Differences in Economic Development

• Broader Conceptions of Development: Amartya Sen

• Political Economy and Economic Progress

• Geography, Education, and Economic Development

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Chapter 2: National Differences in Political Economy

STATES IN TRANSITION

•  Since the late 1980s, a wave of democratic revolutions has swept the world, and many of the previous totalitarian regimes collapsed

•  There has been a move away from centrally planned and mixed economies towards free markets

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Chapter 2: National Differences in Political Economy

STATES IN TRANSITION

• The Spread of Democracy • The New World Order and Global Terrorism • The Spread of Market-Based Systems • The Nature of Economic Transformation • Deregulation • Privatization • Legal Systems •  Implications of Changing Political Economy

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Chapter 2: National Differences in Political Economy

IMPLICATIONS FOR MANAGERS

•  Political, economic, and legal systems of a country raise important ethical issues that have implications for the practice of international business

•  The political, economic, and legal environment of a country clearly influences the attractiveness of that country as a market and/or investment site

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Chapter 2: National Differences in Political Economy

•  Benefits

•  Costs

•  Risks

•  Overall Attractiveness