Lecture 9: Government, Political and Social Factors Flashcards
Political system:
Political system: A set of formal institutions that constitute a government. It includes legislative bodies, political parties, lobbying groups, and trade unions. The system also defines how these groups interact with each other.
legal system:
Legal system: A system for interpreting and enforcing laws. The laws, regulations, and rules establish norms for conduct. It incorporates institutions and procedures for ensuring order and resolving disputes in commercial activities, as well as protecting intellectual property and taxing economic output.
Totalitarianism
- Government controls all economic and political matters
- Either theocratic (religion-based) or secular
- A state party is led by a dictator. Membership is mandatory for those wanting to advance.
- Power is sustained via secret police, propaganda, and regulation of free discussion and criticism.
- Today: Some countries in the Middle East and Africa; Cuba, North Korea.
socialism
Capital is vested in the state and used primarily as a means of production for use rather than for profit.
Group welfare outweighs individual welfare.
Government’s role is to control the basic means of production, distribution, and commercial activity.
Socialism occurs in much of the world as social democracy (e.g., Western Europe, Brazil, India).
Government intervention in the private sector
Corporate income tax rates are higher
Legal System: Common Law
The basis of law is tradition, past practices, and legal precedents set by courts via interpretation of statutes, legislation, and past rulings.
A legal system that originated in England and spread to Australia, Canada, USA, and other former members of the British Commonwealth (also known as case law).
Judges have much power to interpret laws based on the circumstances of individual cases. Thus, common law is relatively FLEXIBLE.
Legal System: Civil Law
Found in France, Germany, Italy, Japan, Turkey, and much of Latin America.
Based on an all-inclusive system of laws that have been “codified”—clearly written by legislative bodies.
Laws are more ‘cast in stone’ and not strongly subject to interpretation by courts.
A key difference is that common law is mainly judicial in origin and based on court decisions, whereas civil law is mainly legislative and based on laws passed by national and state legislatures.
Legal System: Religious Law
Strongly influenced by religious beliefs, ethical codes, and moral values and viewed as mandated by a supreme being.
Most important religious legal systems are based on Hindu, Jewish, and Islamic law.
Legal Systems: Mixed Systems
Two or more legal systems operating together.
The contrast between civil and common law has blurred as countries combine both systems.
Totalitarianism is most associated with religious law and socialist law.
Democracy is associated with common law, civil law, and mixed systems.
Extraterritoriality
Extraterritoriality: the application of home-country laws to other countries. For example, the European Union pursued Microsoft for monopolistic practices.
Protectionism
Protectionism – national economic policies that restrict free trade. Usually intended to raise revenue or protect domestic industries from foreign competition.
Customs
Customs – the checkpoint at national ports of entry where officials inspect imported goods and levy tariffs.
Subsidies
Subsidies are government grants (monetary or other resources) to firm(s) intended to ensure their survival or success by facilitating production at reduced prices or by encouraging exports.
Grants include cash, tax breaks, infrastructure construction, or government contracts at inflated prices.
import substitution vs. export-led development
Import substitution is a policy of restricting imports in order to protect home-country firms. It was widely tried in Latin America in the 1950s in an effort to promote industrialization and economic development. But most countries eventually rejected import substitution. By contrast,….
Export-led development was tried in Singapore, Hong Kong, Taiwan, South Korea, and other Asian countries. This model, which encouraged the development of export-intensive industries, proved very successful and led to rapid economic growth and high living standards.
