Professional Documents
Culture Documents
National Differences
in Political Economy
.
What Is A Political Economy?
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POLITICAL ECONOMY
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Collectivism
2-9
What Is Totalitarianism?
Totalitarianism is a form of government
in which one person or political party
exercises absolute control over all
spheres of human life and prohibits
opposing political parties
1. Communist totalitarianism – found in states
where the communist party monopolizes power
2. Theocratic totalitarianism - found in states
where political power is monopolized by a
party, group, or individual that governs
according to religious principles
3. Tribal totalitarianism - found in states where a
political party that represents the interests of a
particular tribe monopolizes power
4. Right-wing totalitarianism - permits some
individual 2-10
economic freedom, but restricts
individual political freedom
What Is An Economic
System?
There are three types of economic systems
1. Market economies - all productive activities are
privately owned and production is determined by the
interaction of supply and demand
government encourages free and fair competition
between private producers
2. Command economies - government plans the goods
and services that a country produces, the quantity that
is produced, and the prices as which they are sold
all businesses are state-owned, and governments
allocate resources for “the good of society”
because there is little incentive to control costs and
be efficient, command economies tend to stagnate
3. Mixed economies - certain sectors of the economy
are left to private ownership and free market
mechanisms while other sectors have significant state
ownership and government planning
governments tend to own firms that are considered
important to national security
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Legal Systems
2-12
How Are Contracts Enforced In
Different Legal Systems?
A contract is a document that specifies the
conditions under which an exchange is to occur and
details the rights and obligations of the parties
involved
Contract law is the body of law that governs
contract enforcement
Under a common law system, contracts tend to be
very detailed with all contingencies spelled out
Under a civil law system, contracts tend to be much
shorter and less specific because many issues are
already covered in the civil code
Many countries have ratified the United Nations
Convention on Contracts for the International
Sale of Goods (CIGS) which establishes a uniform
set of rules governing certain aspects of the making
and performance of everyday commercial contracts
between buyers and sellers who have their places
of business in different nations
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How Can Intellectual
Property Be Protected?
Protection of intellectual property
rights differs from country to country
World Intellectual Property
Organization
Paris Convention for the Protection
of Industrial Property
To avoid piracy, firms can
stay away from countries where
intellectual property laws are relax
file lawsuits
lobby governments for international
property rights agreements and
enforcement
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Determinants of Economic
Development?
Two ways to measure levels of
economic development are
1. Gross national income (GNI) per
person
2. Purchasing power parity (PPP)
involves adjusting GNI by
purchasing power
GNI figures can be misleading
because they do not take into
account the Cost of Living.
PPP allows for more direct
comparison of living standards
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What Determines A Country’s Level
Of Economic Development?
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GDP, GNI, GNP
Residents in
C+I+G+X C+I+G+X C+I+G+X
Country
Foreigners Out of
Excludes Excludes Excludes
Country
Examples
If a country has many multinationals who
repatriate income from local production,
then GNP will be lower than GDP.
For example, Luxembourg has a GDP of
$87,400 but a GNP of only $45,360.
A country like Ireland has received
significant foreign investment. Therefore for
Ireland, there is a net outflow of income
from the profits of these multinationals.
Therefore, Irish GNP is lower than GDP.
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How Does Political Economy
Influence Economic Progress?
Innovation and entrepreneurship are the
engines of long-run economic growth
Innovation and entrepreneurship require a
market economy and strong property rights
Pakistan ranks 122 out of 137 states on
Global Entrepreneurship Index (GEI)
Democratic regimes are probably more
conducive to long-term economic growth
than dictatorships, even the benevolent
kind
Subsequent economic growth leads to the
establishment of democratic regimes
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Innovation
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Chapter 3
Differences in Culture
What is Culture?
Successful international
managers need cross-cultural
literacy - an understanding of how
cultural differences across and
within nations can affect the way
in which business is practiced
A relationship may exist between
culture and the costs of doing
business in a country or region