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international busniss

  1. 1. Lecture II: Country Factors
  2. 2. Political Systems: Collectivism <ul><li>Collectivisim: refers to a political system that stresses the primacy of collective goals over individual goals. </li></ul><ul><ul><li>Socialism: State owns means of production so that it can fully compensate workers for their labor </li></ul></ul><ul><li>Communists vs. Social Democrats </li></ul><ul><ul><li>Communists: socialism can be achieved only through violent revolution and totalitarian dictatorship </li></ul></ul><ul><ul><li>Social democrats: socialism can be achieved by democratic means </li></ul></ul>
  3. 3. Political Systems: Individualism <ul><li>Individualism: Philosophy that an individual should have freedom in his or her economic and political pursuits </li></ul><ul><li>Tenets of individualism: </li></ul><ul><ul><li>Guaranteed individual freedom and self-expression </li></ul></ul><ul><ul><li>Welfare of society is best served by letting people pursue their own economic self interest </li></ul></ul>
  4. 4. Democracy and Totalitarianism <ul><li>Democracy : a political system in which government is by the people, exercised either directly or through elected representatives </li></ul><ul><li>Totalitarianism: form of government in which one person or political party exercises absolute control over all spheres of human life and prohibits opposing political parties </li></ul>
  5. 5. Elements of Representative Democracy <ul><li>Representative Democracy’s elements: </li></ul><ul><li>An individual’s right to freedom of expression, opinion and organization </li></ul><ul><li>A free media </li></ul><ul><li>Regular elections in which all citizens are allowed to vote </li></ul><ul><li>Universal adult suffrage </li></ul><ul><li>Limited terms for elected representatives </li></ul><ul><li>A fair court system that is independent from the political system </li></ul><ul><li>A nonpolitical bureaucracy </li></ul><ul><li>A nonpolitical police force and armed service </li></ul><ul><li>Relatively free access to state informatioin </li></ul>
  6. 6. 4 forms of Totalitarianism <ul><li>Communist Totalitarianism </li></ul><ul><li>Theocratic Totalitarianism </li></ul><ul><li>Tribal Totalitarianism </li></ul><ul><li>Right-wing Totalitarianism </li></ul>
  7. 7. Economic Systems Comparison: Market, Command, Mixed <ul><li>Market Economy : </li></ul><ul><li>All productive activities are privately owned, as opposed to being owned by the state. </li></ul><ul><li>Goods and services produced by the country are not planned by anyone </li></ul><ul><li>Production is determined by the interaction of supply and demand </li></ul>
  8. 8. Economic Systems Comparison: Market, Command, Mixed <ul><li>Command Economy : </li></ul><ul><li>The goods and services, their quantity and prices are all planned by the government </li></ul><ul><li>Objective of the command economy: to allocate resources for ‘the good of society’. </li></ul>
  9. 9. Economic Systems Comparison: Market, Command, Mixed <ul><li>Mixed Economy : </li></ul><ul><li>Certain sectors of the economy are left to private ownership and free market mechanisms while other sectors have significant state ownership </li></ul><ul><li>Countries with mixed economies often take up ownership of industries that are troubled. Example: France taking over Renault as it felt social costs of large unemployment undesirable </li></ul>
  10. 10. Legal Systems: Property Rights <ul><li>Legal System : refers to the rules , or laws, that regulate behavior along with the processes by which the laws are enforced and through which redress for grievances is obtained </li></ul>
  11. 11. Different Legal Systems <ul><li>Common Law: Based on tradition (legal history), precedent (prior cases), and custom (ways in which laws are applied in specific situations) </li></ul><ul><li>Civil Law: based on very detailed set of laws organized I </li></ul><ul><li>Theocratic Law: Law based on religious teachings </li></ul>
  12. 12. Country Focus: 40 Years of Corruption in Nigeria <ul><li>Despite tremendous oil reserves, people are poor. </li></ul><ul><ul><li>300 billion in 30 years from oil </li></ul></ul><ul><ul><ul><li>$30 billion debt </li></ul></ul></ul><ul><ul><ul><li>Life expectancy 50 years </li></ul></ul></ul>
  13. 13. Contract law <ul><li>Contract law : body of law that governs contract enforcements </li></ul><ul><li>Property rights : refer to the bundle of legal rights over the use to which a resource is put and over the use made of any income that may be derived from that resource </li></ul>
  14. 14. Lecture II: Determinants of Economic Development
  15. 15. Differences in Economic Development <ul><li>GNP vs. PPP (Purchasing power parity) </li></ul><ul><ul><li>GNP: measures total annual income received by residents in a country </li></ul></ul><ul><ul><li>PPP: allows for a more direct comparison in living standards between countries depending on whether the cost of living is lower or higher as compared to the USA </li></ul></ul>
  16. 16. Broader Conceptions of Development <ul><li>Noble Prize winner Amartya Sen argues that development should be assessed less by material output measures like GNP or PPP and more by capabilities and opportunities people enjoy </li></ul><ul><li>HDI is used – </li></ul><ul><ul><li>Life Expectancy (function of health care) </li></ul></ul><ul><ul><li>Educational attainment (adult literacy, levels of education) </li></ul></ul><ul><ul><li>If average incomes sufficient to meet basic requirements </li></ul></ul>
  17. 17. Political Economy and Economic Progress <ul><li>Innovation and Entrepreneurship are engines of growth </li></ul><ul><li>Innovation and entrepreneurship require a market economy </li></ul><ul><li>I and E require strong property rights </li></ul><ul><li>Stable Political system </li></ul>
  18. 18. States in Transition <ul><li>Spread of democracy </li></ul>
  19. 19. Evolution of Commercial Institutions <ul><li>Evolution of societies – </li></ul><ul><li>Why are individual groups better at business than others? </li></ul><ul><li>The gender gap </li></ul><ul><li>Property rights </li></ul><ul><li>Evolution of religions </li></ul><ul><li>Evolution of economic groups </li></ul>
  20. 20. The New World Order <ul><li>Huntington’s thesis vs. Fukayama’s ideas </li></ul>
  21. 21. Nature of Economic Transformation <ul><li>Deregulation: involves removing of legal restrictions to the free play of markets, the establishment of private enterprises, and the manner in which private enterprises operate </li></ul><ul><li>Privatization: transfers the ownership of state property into the hands of private individuals frequently by sale of state assets through auctions. </li></ul>
  22. 22. Article Review <ul><li>Return of Economic Nationalism: </li></ul><ul><li>What is economic nationalism? </li></ul><ul><li>How does trade benefit? (see next slide) </li></ul><ul><li>What fear does the article raise? </li></ul><ul><li>Why would raising tariffs result in greater chaos? </li></ul><ul><li>Why does the article say that “Buy American” label be erased? </li></ul><ul><li>What are the three principles it suggests Obama should follow? </li></ul>
  23. 23. Spread of Market-Based Systems <ul><li>Why is trade a good thing? </li></ul><ul><li>Trade encourages specialisation, which brings prosperity; </li></ul><ul><li>global capital markets, for all their problems, allocate money more efficiently than local ones;  </li></ul><ul><li>economic co-operation encourages confidence and enhances security. </li></ul>
  24. 24. Article Review <ul><li>Anatomy of an Idea: </li></ul><ul><li>What does the word ‘liberal’ mean in Europe? </li></ul><ul><li>What does it mean in America? </li></ul>