2. chapter National Differences in Political Economy McGraw-Hill/Irwin Global Business Today, 5e © 2008 The McGraw-Hill Companies, Inc., All Rights Reserved. 2

3. 2 - 3 Chapter 2: National Differences in Political Economy INTRODUCTION This chapter explores how the political, economic, and legal systems of countries differ. Together these systems are known as the political economy of a country.

4. 2 - 4 Chapter 2: National Differences in Political Economy POLITICAL SYSTEMS A political system is the system of government in a nation Political systems can be assessed according to: the degree to which they emphasize collectivism as opposed to individualism the degree to which they are democratic or totalitarian

5. 2 - 5 Chapter 2: National Differences in Political Economy Collectivism and Individualism Democracy and Totalitarianism

6. 2 - 6 Chapter 2: National Differences in Political Economy ECONOMIC SYSTEMS A free market system is likely in countries where individual goals are given primacy over collective goals State-owned enterprises and restricted markets are common in countries where collective goals are dominant

7. 2 - 7 Chapter 2: National Differences in Political Economy Market Economy Command Economy Mixed Economy

8. 2 - 8 Chapter 2: National Differences in Political Economy 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.

9. 2 - 9 Chapter 2: National Differences in Political Economy Different Legal Systems Differences in Contract Law Property Rights and Corruption The Protection of Intellectual Property Product Safety and Product Liability

10. 2 - 10 Chapter 2: National Differences in Political Economy THE DETERMINANTS OF ECONOMIC DEVELOPMENT Differing political, economic, and legal systems can have a profound impact on the level of a country's economic development, and hence on the attractiveness of a country as a possible market and/or production location for a firm.

11. 2 - 11 Chapter 2: National Differences in Political Economy Differences in Economic Development Broader Conceptions of Development: Amartya Sen Political Economy and Economic Progress Geography, Education, and Economic Development

12. 2 - 12 Chapter 2: National Differences in Political Economy STATES IN TRANSITION Since the late 1980s, a wave of democratic revolutions has swept the world, and many of the previous totalitarian regimes collapsed There has been a move away from centrally planned and mixed economies towards free markets

13. 2 - 13 Chapter 2: National Differences in Political Economy STATES IN TRANSITION The Spread of Democracy The New World Order and Global Terrorism The Spread of Market-Based Systems The Nature of Economic Transformation Deregulation Privatization Legal Systems Implications of Changing Political Economy

14. 2 - 14 Chapter 2: National Differences in Political Economy IMPLICATIONS FOR MANAGERS Political, economic, and legal systems of a country raise important ethical issues that have implications for the practice of international business The political, economic, and legal environment of a country clearly influences the attractiveness of that country as a market and/or investment site

15. 2 - 15 Chapter 2: National Differences in Political Economy Benefits Costs Risks Overall Attractiveness