National Differences in Political Economy
A) Different countries have different political systems, economic systems, and legal systems.
practices can vary dramatically from country to country, as can the education and skill level of the
All of these differences have major implications for the practice of international business.
B) This chapter explores how the political, economic, and legal systems of countries differ.
these systems are known as the
of a country.
we mean the system of government in a nation.
Political systems can be
assessed according to two related dimensions.
The first is the degree to which they emphasize
collectivism as opposed to individualism.
The second dimension is the degree to which they are
democratic or totalitarian.
Collectivism and Individualism
refers to a system that stresses the primacy of collective goals over individual goals.
When collectivism is emphasized, the needs of the society as whole are generally viewed as being more
important than individual freedoms.
Advocacy of collectivism can be traced to Plato, in modern times
the collectivist mantle has been picked up by
, and their champion, Karl Marx.
generally believed that this could only be achieved though revolution and totalitarian
dictatorship, while s
worked to achieve the same goals by democratic means.
D) While state owned firms might have been intended to promote the public interest, experience
suggests that this isn't always the case.
In many countries the performance of state owned companies
has been poor.
Protected from significant competition by their monopoly position, and guaranteed
governmental financial assistance, many state owned enterprises became increasingly inefficient.
Consequently, a number of Western democracies voted social democratic parties out of office and
moved toward free market economies by selling state-owned enterprises to private investors, a process
a political philosophy that an individual should have freedom over his or her
economic and political pursuits.
In contrast to collectivism, individualism stresses that the interests of
the individual should take precedence over the interests of the state.
F) Individualism, while advocated by Aristotle, in modern days was encouraged by David Hume, Adam
Smith, John Stuart Mill, and most recently, Hayek and Milton Friedman.
Individualism focuses on i)
guaranteeing individual freedom and self-expression, and ii) letting people pursue their own self-interest
in order to achieve the best overall good for society.
The U.S. Declaration of Independence and the Bill
of Rights embody the spirit of individualism.