1. Political Forces Chapter 9

2. Ideological Forces Communism Communism Who controls factors of production? Who controls factors of production? Expropriation Expropriation Confiscation Confiscation Why did it fail? Why did it fail? Capitalism Capitalism Are any organizations government-owned? Are any organizations government-owned? Socialism Socialism European socialism European socialism Developing countries Developing countries

3. Conservative v. Liberal Conservative Conservative Right wing Right wing Liberal Liberal Left wing Left wing Political advocacy groups Political advocacy groups

4. Government Ownership Why? Why? Five reasons Five reasons Unfair Competition? Unfair Competition? Can lower prices Can lower prices Cheaper financing Cheaper financing Government contracts Government contracts Export assistance Export assistance Can hold wages down Can hold wages down

5. Privatization “Transfer of public-sector assets to private sector, the transfer of management of state activities through contracts and leases and the contracting out of activities previously conducted by the state.” “Transfer of public-sector assets to private sector, the transfer of management of state activities through contracts and leases and the contracting out of activities previously conducted by the state.” Examples Examples 1985-2002: $525 billion assets privatized 1985-2002: $525 billion assets privatized US privatizing? US privatizing? Example: Water in the UK Example: Water in the UK

6. Government Protection Gulf War Gulf War Terrorism Terrorism Italy Italy September 11 September 11 Department of Homeland Security Department of Homeland Security Other changes Other changes Other groups Other groups

7. Government Protection Terrorism (cont’d) Terrorism (cont’d) Kidnapping Kidnapping Columbia & Peru Columbia & Peru Pay the ransom? Pay the ransom? Countermeasures Countermeasures Cassidy & Davis Cassidy & Davis International Training, Inc. International Training, Inc. Other terrorism Other terrorism Ethnocentrism Ethnocentrism Nuclear terrorism Nuclear terrorism Chemical and biological terrorism Chemical and biological terrorism Islamic fundamentalism Islamic fundamentalism

8. Government Stability Government is stable if Government is stable if Maintains itself in power, or Maintains itself in power, or Its fiscal, monetary, and political policies are predictable and not subject to sudden, radical changes Its fiscal, monetary, and political policies are predictable and not subject to sudden, radical changes Unstable Unstable Lebanon Lebanon Zimbabwe Zimbabwe

9. Traditional Hostilities Arab Countries – Israel Arab Countries – Israel Hutus & Tutsis Hutus & Tutsis Massacre Massacre Retribution Retribution Zaire Zaire Tamils – Sinhalese Tamils – Sinhalese Sri Lanka Sri Lanka Albanians, Bosnians, Croats, and Serbs Albanians, Bosnians, Croats, and Serbs Ethnic cleansing Ethnic cleansing United Nations & NATO United Nations & NATO South Africa South Africa

10. International Organizations United Nations United Nations Main functions Main functions Transnational Corporation Division Transnational Corporation Division UN Conference on Trade & Development UN Conference on Trade & Development IMF IMF GATT/WTO GATT/WTO OPEC OPEC EU EU OECD OECD

11. Country Risk Assessment “Bank or business having an asset in or payable from a foreign country or considering a loan or an investment there, evaluates that country’s economic situation and policies and its politics to determine how much risk exists of losing the asset or not being paid.” “Bank or business having an asset in or payable from a foreign country or considering a loan or an investment there, evaluates that country’s economic situation and policies and its politics to determine how much risk exists of losing the asset or not being paid.”

12. Country Risk Analysis Five Types of Risk Five Types of Risk Information Content Information Content Nature of Business Nature of Business Length of Tome Required Length of Tome Required Who does a CRA? Who does a CRA? Lessons of International Debt Crises Lessons of International Debt Crises External shocks occur to developing countries External shocks occur to developing countries Economic policies impact default Economic policies impact default Need substantial growth Need substantial growth Social and potential political costs of development Social and potential political costs of development Ripple effects Ripple effects