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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.

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

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