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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 This chapter explores how the political, economic, and legal system
s of countries differ. Together these systems are known as the political economy
of a country.
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POLITICAL SYSTEMS A political system is the system of government in a nation Polit
ical systems can be assessed according to: the degree to which they emphasize coll
ectivism as opposed to individualism the degree to which they are democratic or to
talitarian
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Collectivism and Individualism Democracy and Totalitarianism
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ECONOMIC SYSTEMS A free market system is likely in countries where individual goal
s are given primacy over collective goals State-owned enterprises and restricted m
arkets are common in countries where collective goals are dominant
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Market Economy Command Economy Mixed Economy
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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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Different Legal Systems Differences in Contract Law Property Rights and Corruption
he Protection of Intellectual Property Product Safety and Product Liability
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THE DETERMINANTS OF ECONOMIC DEVELOPMENT Differing political, economic, and lega
l systems can have a profound impact on the level of a country's economic develo
pment, and hence on the attractiveness of a country as a possible market and/or
production location for a firm.
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Differences in Economic Development Broader Conceptions of Development: Amartya Se
n Political Economy and Economic Progress Geography, Education, and Economic Devel
opment
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STATES IN TRANSITION Since the late 1980s, a wave of democratic revolutions has sw
ept the world, and many of the previous totalitarian regimes collapsed There has b
een a move away from centrally planned and mixed economies towards free markets
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STATES IN TRANSITION The Spread of Democracy The New World Order and Global Terror
ism The Spread of Market-Based Systems The Nature of Economic Transformation Deregu
lation Privatization Legal Systems Implications of Changing Political Economy
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IMPLICATIONS FOR MANAGERS Political, economic, and legal systems of a country rais
e important ethical issues that have implications for the practice of internatio
nal business The political, economic, and legal environment of a country clearly i
nfluences the attractiveness of that country as a market and/or investment site
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Benefits Costs Risks Overall Attractiveness
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