INTERNATIONAL

BUSINESS

STATE IN TRANSITION

HARDIK MODI
STATE IN TRANSITION
 The spread of democracy
 The spread of market-based systems
THE SPARED OF DEMOCRACY
One notable development of the last 15 years
has been the spread of democracy (and, by
extension, the decline of totalitarianism).

Extent of totalitarianism in the world as

determined by freedom house in to three
broad grouping
 Free
 Partly free
 Not free.
 Spread of
democracy

free Partly free Not free

Countries are The political

Citizens enjoys a
characterized by process is tightly
high degree of
some restrictions controlled and
political and civil
on political rights basic freedoms are
freedom
and civil liberties denied
 In its 2005 report, freedom houses classified
some 89 countries as free, accounting for
some 44 percent of the world‘s population.
These countries respect a broad rang of
political rights .
 another 54 countries accounting for 19
percent of the world’s population were
classified as partly free
 while 49 countries accounting representing
some 37 percent of the world’s population
were classified as not free.
 The main reasons account for the spread of
democracy

1. Many totalitarian regimes failed to deliver

economic progress to the vast bulk of their
population.
2. New information and communication
technologies.
3. In many countries the economic advances of
the past quarter century have led to the
emergence of increasingly prosperous middle
and working classes who have pushed for
democratic reforms.
THE SPREAD OF MARKET-BASED SYSTEMS
 The spread of democracy since 1980s has been
the transformation from centrally planned
command economics to market-based
economies.
 More then 30 countries that were in the former
the soviet union or the eastern European
communist bloc have changed their economic
systems.
 A complete list of countries where changed is
now occurring also would include Asian states
such as china, Vietnam, and African countries
such as Angola, Ethiopia and Mozambique.
 There has been a similar shift away from a
mixed economy. many states in Asia, Latin
America, and western Europe have sold
state-owned business to private investors and
deregulated their economies to promote
greater competition.

 In general, command and mixed economies

failed to deliver the kind of sustained
performance that was achieved by countries
adopting market based system, such as US,
Switzerland, Hong Kong and Taiwan.
 The heritage foundation’s index of economic
freedom is based on 10 indicators, such as
the extent to which the government
intervenes in the economy, trade policy, the
degree to which property rights are
protected, foreign invested regulation, and
taxation rules.
 A country can score between 1(most free)
and 5 (least free) on each of these
indicators.
 The lower a country’s average score across
all 10 indicators, the more closely its
economy represents the pure market model.
10 INDICATORS OF THE HERITAGE FOUNDATION’S INDEX OF
ECONOMIC FREEDOM
 Business Freedom
 Trade Freedom
 Monetary Freedom
 Government Size
 Fiscal Freedom
 Property Rights
 Investment Freedom
 Financial Freedom
 Freedom from Corruption
 Labor Freedom
 According to the 2005 index, the world’s
freest economies are Hong Kong, Singapore,
Luxemburg, Estonia, Ireland, new
Zealand, UK, Denmark, and Iceland.
 The US was ranked12 and India 112.and
Cuba, Laos, Iraq are to be found at the
bottom of the ranking.
 Economic freedom does not necessarily
equate with political freedom.
THANK Y0U