Chapter2

National Differences in Political, Economic, and Legal Systems

The border between Belgium and the Netherlands (in a café)

How The Rest of the World Lives

FILM - What are your thoughts …

Pros of this approach …Cons …

Systems - Interdependent

Interact and influence each other, and

Affect the level of economic well-being

Economic

Political

Legal

Political System Dimensions

Political System System of government in a nation

Assessed Across 2 Dimensions: Collectivism vs. Individualism Democratic vs. Totalitarian

CollectivismCollectivism collective goals over individual goals Today is equated with socialistsSocialistsState ownership of production, distribution,

and exchangemanaged to benefit society (not individuals)

Collectivism - Socialism Splits

In the early 20th century, socialism splitinto:CommunismSocialism can only be achieved through violent

revolution and totalitarian dictatorshipSocial democratsSocialism is achieved through democratic

means

Individualism

Individualism An individual should have freedom in his own

economic and political pursuits Traced to Greek philosopher, Aristotle (384-322 BC) individual diversity and private ownership are

desirable Economic and political freedoms Democratic political systems Free market economies

Individualism - DemocracyDemocracy Government is by the people, exercised either

directly or through elected representatives Associated with IndividualismPure democracy belief that citizens be directly involved in

decision makingRepresentative democracy Citizens periodically elect individuals to

represent them

Totalitarian

Totalitarianism One person or political party exercises absolute

control over all spheres of human life and prohibits opposing political parties

Associated with collectivism

TotalitarianThere are four major forms of totalitarianism:1. Communist totalitarianism – found in

states where the communist party monopolizes power (China)

2. Theocratic totalitarianism - found in states where political power is monopolized by a party, group, or individual that governs according to religious principle (Iran)

TotalitarianThere are four major forms of totalitarianism:3. Tribal totalitarianism - found in states

where a political party that represents the interests of a particular tribe monopolizes power (Africa)

4. Right-wing totalitarianism - permits some individual economic freedom, but restricts individual political freedom (Nazi)

Political SystemsWhile watching the film, write:1. Describe each of the 6 political systems

(anarchy, libertarianism, etc.)2. Which do you believe is the best?FILM (12 min)

Discuss in small groups – respectfully

Countries in TransitionThere may be several alternatives as change comes to a country’s political system

Economic Systems

Market Economy

Command Economy

Mixed Economy

• No country is PURE market economy

• Supply and Demand determines production

• Competition encouraged by government

• Most sectors are primarily privately owned

• U.S.

Economic Systems

Market Economy

Command Economy

Mixed Economy

• Government plans what is produced, quantities and prices

• State-owned businesses• Government allocates resources

“for the good of society”• No incentive to control costs• Tend to stagnate over time• e.g., North Korea

Economic Systems

Market Economy

Command Economy

Mixed Economy

• Certain sectors - private ownership and free market mechanisms

• Other sectors - significant state ownership and government planning

• Governments own firms considered important to national security – too big to fail

• France; (US temp. GM, AIG...)

Legal Systems – Three Types1. Common law - based on tradition,

precedent, and custom contracts are detailed with contingencies

covered2. Civic law - based on detailed set of laws

organized into codes contracts are shorter/ less specific because of

detailed laws3. Theocratic law - law is based on religious

teachings

Property Rights And CorruptionThe Foreign Corrupt Practices Act makes it illegal for U.S. companies to bribe foreign government officials to obtain or maintain business over which that foreign official has authorityThe Organisation for Economic Co-operation and Development (OECD) has also adopted a convention to make the bribery of foreign public officials a criminal offense

Subsidies given to companies (cronyism)Subsidies in the U.S.https://www.washingtonpost.com

Subsidies in Chinahttp://qz.com/72354/most-big-chinese-companies-get-some-kind-of-state-subsidies/

Many more around the world ….Which countries are the worst?http://www.economist.com/blogs/graphicdetail/2016/05/daily-chart-2

Corruption - Subsidies

PropertyRights&CorruptionareRelated

Property rights can be violated:1. Private action – theft, piracy 2. Public action -

A. legally - ex. excessive taxation (extorting income) or B. illegally - ex. bribes or blackmailing

High levels of corruption reduce foreign direct investment, the level of international trade, and the economic growth rate in a country

Country Corruption Rankings: 2016

Source: http://www.transparency.org/

WhichCountriesAreMostCorrupt?

Rankings of Corruption by Country 2014

Protect Intellectual Property Rights (IPR)Patents – exclusive rights for a defined

period to the manufacture, use, or sale of that invention

Copyrights – the exclusive legal rights of authors, composers, playwrights, artists, and publishers to publish and disperse their work as they see fit

Trademarks – design and names by which merchants or manufacturers designate and differentiate their products

HowCanIntellectualPropertyBeProtected?

Protection of intellectual property rights differs from country to country World Intellectual Property Organization Paris Convention for the Protection of Industrial

PropertyTo avoid piracy, firms can stay away from countries where intellectual property

laws are lax file lawsuits lobby governments for international property rights

agreements and enforcement

WhatIsProductSafetyAndLiability?

Product safety laws set certain standards to which a product must adhere

Product liability involves holding a firm and its officers responsible when a product causes injury, death, or damageliability laws tend to be less extensive in less

developed nations

Let’sGettoWork….You think you work hard???

US - Average workload is36 hours/week @ 50 weeks/year

Which do you think are the 10 Hardest Working Nations?FILM

#1:Mexico – averages over 46 hrs/week @ 50 wks/yr

Where to call home? If you could relocate to any country in the world, other than the U.S., to where would you move? Why?Is your answer the same as last time? Did our discussion peak your interest to visit a country? Where would you like to go?To make an informed choice (personal and business) we might like to look at:

• Political• Economic• Legal