Lecture 2 - Lecture 2 National Differences in Political...

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Lecture 2 National Differences in Political Economy
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    2 Outline A. National Differences in Political Economy B. Economic Systems C. Legal Systems D. Determinants of Economic Development E. States in Transition F. Implications for International Business
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    3 A. National Differences in Political Economy How does a country’s political, economic & legal systems: differ among countries? affect economic progress? change with times? What are the ethical issues that arise from doing business internationally?
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    4 B. Economic Systems 3 broad types of economic systems Market economy Mixed economy Command economy
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    5 B. Economic Systems Market Economy by: the price system No restrictions on either supply or demand No monopolistic sellers or buyers
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    6 B. Economic Systems Market Economy Features Consistent with individualism ideology Consumers are sovereign Consumers’ purchasing patterns as signaled to producers through the price mechanism Vigorous competition among private producers Private ownership motivates entrepreneurs to have the right to gain the profits generated by their efforts Examples: US, Switzerland, Hong Kong and Taiwan
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    7 B. Economic Systems Command Economy Government plans : the production of goods & services price at which they are sold Resources are allocated “for the good of society” Government owns most, if not all, businesses
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    8 B. Economic Systems Command Economy Features: Examples: Found in communist countries where collectivist goals were given priority over individual goals Consistent with collectivist ideology Lack of dynamism State-owned enterprises cannot go out of business Characterized by economic stagnation Lack of motivation for improvement
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    9 B. Economic Systems Mixed Economy 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 take into state ownership troubled firms whose continued operation is thought to be vital to national interest Example: French automobile company Renault (Global Business Today: P.50)
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    10 B. Economic Systems Mixed Economy Positive example: Canada Most businesses are privately owned & operated under market principles Health care, electrical power & liquor distribution are run by the state-owned enterprises in many provinces Negative example: France Many business enterprises are operated inefficiently More efficient private firms from other EU countries invade French markets
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This note was uploaded on 11/02/2009 for the course FB AF2602 taught by Professor Aliceshiu during the Winter '08 term at Polytechnic University of Puerto Rico.

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Lecture 2 - Lecture 2 National Differences in Political...

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