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Chapter 2 National Differences in Political Economy
Chapter 2 National Differences in Political Economy
Chapter 2 National Differences in Political Economy
2
National Differences
in Political Economy
McGraw-Hill/Irwin
Global Business Today, 5e © 2008 The McGraw-Hill Companies, Inc., All Rights Reserved.
Chapter 2: National Differences
in Political Economy
INTRODUCTION
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Chapter 2: National Differences
in Political Economy
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Chapter 2: National Differences
in Political Economy
Classroom Performance System
a) Political systems
b) Economic systems
c) Legal systems
d) Political economy
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Chapter 2: National Differences
in Political Economy
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Chapter 2: National Differences
in Political Economy
1.1.1 Socialism
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Chapter 2: National Differences
in Political Economy
1.1.2 Individualism
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Chapter 2: National Differences
in Political Economy
Classroom Performance System
a) Social democrats
b) Communists
c) Individualists
d) Representative democrats
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Chapter 2: National Differences
in Political Economy
1.2 Democracy and Totalitarianism
1.2.1 Democracy
A political system in which government is by the people,
exercised either directly or through elected representatives
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Chapter 2: National Differences
in Political Economy
1.2.2 Totalitarianism
A form of government in which one person or political party exercises absolute control
over all spheres of human life, and opposing political parties are prohibited
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Chapter 2: National Differences
in Political Economy
Classroom Performance System
a) Individualism
b) Collectivism
c) Theocratic totalitarianism
d) Tribal totalitarianism
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Chapter 2: National Differences
in Political Economy
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Chapter 2: National Differences
in Political Economy
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Chapter 2: National Differences
in Political Economy
a) Market economy
b) Command economy
c) Mixed economy
d) Free economy
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Chapter 2: National Differences
in Political Economy
3.0 LEGAL SYSTEMS
The legal system of a country is the rules, or laws, that regulate behavior,
along with the processes by which the laws of a country are enforced and
through which redress for grievances is obtained.
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Chapter 2: National Differences
in Political Economy
3.1 Different Legal Systems
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Chapter 2: National Differences
in Political Economy
3.2 Differences in Contract Law
a) Contract law
b) Civil law
c) Common law
d) Theocratic law
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Chapter 2: National Differences
in Political Economy
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Chapter 2: National Differences
in Political Economy
3.3.1 Private Action
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Chapter 2: National Differences
in Political Economy
3.3.3 Foreign Corrupt Practices Act
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Chapter 2: National Differences
in Political Economy
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Chapter 2: National Differences
in Political Economy
3.4.1 Intellectual Property rights include:
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Chapter 2: National Differences
in Political Economy
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Chapter 2: National Differences
in Political Economy
3.5 Product Safety and Product Liability
Political Economy
and Economic
Development
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Chapter 2: National Differences
in Political Economy
THE DETERMINANTS OF ECONOMIC DEVELOPMENT
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Chapter 2: National Differences
in Political Economy
The GNI per capita of the world’s nations in 2004 is shown in
Map 2.1.
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Chapter 2: National Differences
in Political Economy
5.1 Broader Conceptions of Development: Amartya Sen
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Chapter 2: National Differences
in Political Economy
5.2 Political Economy and Economic Progress
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Chapter 2: National Differences
in Political Economy
5.2.3 Innovation and Entrepreneurship Require Strong Property Rights:
• strong legal protection of property rights is another requirement for a
business environment conducive to innovation, entrepreneurship, and
economic growth
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Chapter 2: National Differences
in Political Economy
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Chapter 2: National Differences
in Political Economy
• There has been a move away from centrally planned and mixed
economies towards free markets
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Chapter 2: National Differences
in Political Economy
6.1 Spread of Democracy
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Chapter 2: National Differences
in Political Economy
Political freedom around the world in 2005 is charted in Map 2.5.
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Chapter 2: National Differences
in Political Economy
6.2 The New World Order and Global Terrorism
The end of the Cold War and the “new world order” that
followed the collapse of communism in Eastern Europe and the
former Soviet Union, taken together with the collapse of many
authoritarian regimes in Latin America, have given rise to intense
speculation about the future shape of global geopolitics.
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Chapter 2: National Differences
in Political Economy
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Chapter 2: National Differences
in Political Economy
Economic freedom around the world is summarized in Map 2.6.
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Chapter 2: National Differences
in Political Economy
• deregulation
• privatization
• legal enforcement of property rights
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Chapter 2: National Differences
in Political Economy
7.1 Deregulation
7.2 Privatization
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Chapter 2: National Differences
in Political Economy
• Without a legal system that protects property rights, and without the
machinery to enforce that system, the incentive to engage in economic activity
can be reduced substantially by private and public entities that expropriate the
profits generated by the efforts of private sector entrepreneurs.
• Markets that were formerly off-limits to Western business are now open,
however, just as the potential gains are large, so are the risks
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Chapter 2: National Differences
in Political Economy
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Chapter 2: National Differences
in Political Economy
8.1.1 Benefits
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Chapter 2: National Differences
in Political Economy
8.1.2 Costs
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Chapter 2: National Differences
in Political Economy
8.1.3 Risks
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Chapter 2: National Differences
in Political Economy
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Chapter 2: National Differences
in Political Economy
Classroom Performance System
a) Contract risk
b) Economic risk
c) Legal risk
d) Political risk
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Chapter 2: National Differences
in Political Economy
CRITICAL THINKING QUESTIONS
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Chapter 2: National Differences
in Political Economy
CRITICAL THINKING QUESTIONS
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Chapter 2: National Differences
in Political Economy
CRITICAL THINKING QUESTIONS
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Chapter 2: National Differences
in Political Economy
CRITICAL THINKING QUESTIONS
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Chapter 2: National Differences
in Political Economy
CRITICAL THINKING QUESTIONS
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Chapter 2: National Differences
in Political Economy
CRITICAL THINKING QUESTIONS
6. Read the Country Focus on India in this chapter and answer the following questions:
a. What kind of economic system did India operate during 1947-1990? What kind of system is it
moving towards today? What are the impediments to completing this transformation?
b. How might widespread public ownership of businesses and extensive government regulations
have impacted (i) the efficiency of state and private businesses, and (ii) the rate of new business
formation in India during the 1947-1990 time frame? How do you think these factors affected the
rate of economic growth in India during this time frame?
c. How would privatization, deregulation, and the removal of barriers to foreign direct investment
affect the efficiency of business, new business formation, and the rate of economic growth in India
during the post-1990 time period?
d. India now has pockets of strengths in key high technology industries such as software and
pharmaceuticals. Why do you think India is developing strength in these areas? How might
success in these industries help to generate growth in other sectors of the Indian economy?
e. Given what is now occurring in the Indian economy, do you think that the country represents an
attractive target for inward investment by foreign multinationals selling consumer products?
Why?
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