FVC1 Chapter 6 Notes - CHAPTER 6 I Democracy vs...

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CHAPTER 6I. Democracy vs. TotalitarianismA. Democracy – Greek for “rule by the people”; form of government in which all citizenshave the right to vote1. Athenian Democracy – Developed around 500 BCE; A pure form of democracy, in which all adult citizens vote directly on matters affecting the community2. Representative Democracies – A form of government in which citizens vote to elect given individuals to serve as their representatives for a certain period of time3. Constitutional Democracies – Some countries with strong representative democracies, such as Great Britain, Japan, Spain, South Korea, and Norway, also have ceremonial monarchs (kings and queens) that serve as permanent heads of state but have no real political power. Monarchs of this kind help provide a degree of stability to the overall political system.B. Totalitarianism – System of government in which individuals govern without the support or consent of the citizenry; for example, a military dictatorshipII. National Economic IdeologiesA. Communism – An economic ideology whereby the government or state owns and controls all major factors of production and is philosophically an economically classless society1. China is currently the largest nation in the world with a communist economic ideologyB. Socialism – An economic ideology in which the government plays a strong role in the economy and may own stakes in certain businesses1. Sweden, Norway, and Denmark tend to be among the highest in the world. These countries also have traditionally had the highest per-capita net incomes in the world, and have been very hospitable places to conduct global business from a number of perspectives.C. Capitalism – An economic ideology where businesses are privately owned, strong individual incentives exist, and the government plays very little role in the economy1. Trouble Asset Relief Program (TARP) – The government has held major ownership stakes in a number of the country’s largest automobile manufacturers, insurance companies, and banksIII. Economic Risks, Political Risks, and CorruptionA. Economic Risks – The risks that economic problems or mismanagement in a given country will have a meaningful negative impact upon the conduct of business in that country1. Restrictions on the transfer or exchange of a given foreign country’s currency or the devaluation of that currency (Currency devaluation and conversion restrictions)2. Human resources and labor relations3. CorruptionB. Political Risks – The risks that political forces or problems in a given country will have a meaningful negative impact upon the conduct of business in that country
1. Micropolitical Risk – A political risk that only affects a certain industry or set of firms in a given country2. Macropolitical Risk – A political risk that essentially affects all businesses in a given country3. Terrorism – Involves unlawful arts or violence threatening the physical safety of othersa. Terrorism Risk Insurance Act of 2002 – A United States law that after a

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