Political Economy

-Prof. Uddeepan Chatterjee

Political System

The System of Government in a Nation

Political Systems
Political
Systems
Collectivitism/
Socialism

Individualism

Democratic

Collectivism
It refers to a political system that stresses
the primacy of collective goals over
individual goals.
Individual rights should be sacrificed for
the good of the society.
Collectivism has been picked by
Socialism.

Socialism
It promotes the state ownership of the
basic means of production,distribution &
exchange(Business).
The idea is to manage state owned
enterprise to benefit society as a
whole,rather than individual capitilist.

Socialism
Communists
They believe Socialism could be
achieved only through violent
revolution

Social Democrates
They believe in achieving
socialism by Democratic means

Socialist Camps

Individualism
It refers a political system where individual economic &
political freedoms are the ground rules on which a
society should be based.(USA)
Welfare of society is best served by letting people pursue
their own economic self interest.
The Pro-Business & Pro-Trade values of individualism
crete a favourable environment within which International
Business can grow.

Democratic System
It refers to a Political
System in which
Govt. is by the people
& for the people.
REPRESENTATIVE
DEMOCRACY-Here
citizens will
periodically elect
individuals to
represent them.

Economic Systems
Market Economy
Command Economy
Mixed Ecnomy
State Directed
Economy

Free Market Economy/Capitalist Economy

Freedom of Pvt. Enterprise is greatest.
The factors of production (Labour,Land,Capital)
are pvtly owned & production occurs at the
initiative of the pvt. Enterprise.
The free market economy is not
planned,controlled or regulated by the govt.
The Govt. does not compete with pvt. Firms .
Eg. USA,Canada

Command/Centrally Planned Economy

The State owns all the means of factors of
production.
The State determines the goals of
production.
Overall State controls the economy.
Eg.The Communists
China,Hungary,Poland

Mixed Economy System

Here, both the public & private sectors co
exist.
The extent of Govt. participation in
business varies widely.
In many mixed economies,the strategic &
other imp. Industries are fully
owned/dominated by the state.
Eg.India

State Directed Economy

In this economic system,the State plays a
significant role in directing the investment
activities of Pvt. Enterprises through
Industrial policy & in otherwise regulating
business activities in accordance to
national goals.
Eg.Japan.South Korea

Trends in Political & Economic

Philosophies
Importance of Private
sector has increased
globally.
LPG has progressed
at an amaging speed.
All the communists
nations are also
allowing FDI.

Economic Environment & International

Business
Structure & Nature of Economy

Economic Conditions

Economic Policies

Structure & Nature of Economy

Low Income Economy/Least Developed
Economy
Middle Income Economy/Developing
Economy
High Income Economy/Developed economy
The Growing power of Developing
Economies has an important role in IB.

Economic Policies

Industrial Policy
Trade Policy
Foreign Exchange Policy
Monetary Policy
Fiscal Policy

Economic Conditions
Boom-High level of output,employment &
rising demand
Recession- Opposite of above.
Economic conditions can be :
# Widespread-Eg.Worldwide recession
# Regional-Eg.South East Asia Economic
recession

Questions

Than
ks