This slides includes brief intro to political and legal system. It includes types of totalitarian and Democratic political system and its types.

1. Political and Legal System
Government Intervention and Investment barriers

2. Political system
1. Democratic political system
2. Totalitarian political system

3. “1.Democracy refers to a political system in
which government is by the people, exercised
either directly or through elected
representatives
 existence of multiparty political system
 Regular election
 Independent court system
 Free media
 Non-political/professional state bureaucracy and
defense infrastructure
 Individual’s right to freedom of expression

4. Totalitarianism
 Under totalitarian state, a single party, individual or group
of individuals monopolizes political power and neither
recognizes nor permits opposition. Only a few individuals
participate in decision-making. All countries considered
not free and many considered partly free are totalitarian.
 -It denies individual’s right to freedom of expression &
organization.
 -No free media exist.
 -No regular election is held

5. Types of totalitarianism
 1.Theocratic totalitarianism :It is that political system where religious
leaders are also the political leaders; where political power is
monopolized by a party, group, or individual that governs according to
religious principles
 2.Secular totalitarianism :It is that political system where government
exerts control through military power
 3.Tribal totalitarianism: It has arisen from time to time in African
countries such as Zimbabwe, Tanzania, Uganda, and Kenya. Under it,
political party represents the interests of a particular tribe
 4.Authoritarian
 5.Fascism :It desires to control people’s minds and souls and to
convert them into its own faith (E.g. Germany under Hitler, Italy under
Mussolini). It is extreme form of nationalism

6. Legal system
 The legal system of a country 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.
 There are three types of legal system:
1.common law : based on tradition, precedents and custom
2. civil law: set of detailed rules and regulation
3. Theocratic law: A theocratic law system is one in which
the law is based on religious teachings

7. Actors in political and legal system
 (1) Government
 (2) International Organizations
 (3) Regional Economic Blocs or institutions
 (4) Competing Firms
 (5) Interest groups

8. Government Intervention
and Investment barriers

9. Government intervention
• Governments intervene in trade and investment to achieve
political, social, or economic objectives.
• Governments impose trade and investment barriers that
benefit interest groups, such as domestic firms, industries, and
labor unions.
• Government intervention alters the competitive landscape, by
hindering or helping the ability of firms to compete
internationally.
• Government intervention is an important dimension of country
risk.

10. Government intervention
• Protectionism — national economic policies that restrict free
trade. Usually intended to raise revenue or protect domestic
industries from foreign competition.
• Customs — the
checkpoint at national
ports of entry where
officials inspect imported
goods and levy tariffs.

11. Government Intervention: Key Instruments
• Tariff – a tax on imports (e.g., citrus, textiles)
ad valorem duty, specific duty, compound duty.
• Non-tariff trade barrier – government policy, regulation, or
procedure that impedes trade
aid and loans,subsidies.

12. Example of Protectionism: U.S steel industry
• The Bush administration imposed tariffs on imports
of foreign steel to protect U.S. steel manufacturers from
foreign competition, aiming to give the U.S. steel industry time
to restructure and revive itself.
• However It resulted in:
 higher steel costs;
 increased production costs for firms that use steel, such as Ford,
Whirlpool and General Electric
 reduced prospects for selling products in world markets, making
U.S. steel firms less competitive.
• The steel tariffs were removed within two years.

13. General Rationale for Government Intervention
• Tariffs can generate substantial government revenue. This is
a key rationale for protectionism in undeveloped economies.
• Helps ensure the safety, security, and welfare of citizens. E.g.,
most countries have basic regulations to protect the national
food supply.
• Helps the government pursue broad economic, political, and
social objectives for the nation.
• Can serve the interests of the nation’s firms and industries.

14. Defensive Rationale for Government Intervention
• Protection of the national economy – weak or young
economies sometimes need protection from foreign
competitors. E.g. India imposed barriers to shield its huge
agricultural sector, which employs millions.
• Protection of an infant industry – a young industry may
need protection, to give it a chance to grow and succeed. E.g.,
Japan long protected its car industry.
• National security – the United States prohibits exports of
plutonium and similar products to North Korea.
• National culture and identity – Canada restricts foreign
investment in its movie and TV industries