Political economy

Question 1

what is political economy?

Answer 1

the study of how politics and economics are related, and how their interations impact citizens

Question 2

what is collectivism?

Answer 2

primacy of collective goals over individual goals

Question 3

difference between communism and social democrats

Answer 3

communism: socialism can only be achieved through violent revolution

social democrats: socialism is achieved through democratic means

Question 4

what is totalitarianism?

Answer 4

form of government in which one person or one party exercises absolute control over all spheres of human life and prohibits opposing political parties

Question 5

what is the definition of political risk for Howell?

Answer 5

the probability that an investor will lose moeny due to factors in a society, a government, or its international environment.

Question 6

what are some types of political risk?

Answer 6

1. forced divestment
2. unwelcome regulation
3. interference with operations

Question 7

which two organizations provide political risk insurance?

Answer 7

1. OPIC: overseas private investment corporation

2: MIGA: multilateral investment guarantee agency

Question 8

what does political risk insurance cover?

Answer 8

1. currency conversion
2. expropriation and nationalization
3. war damage
4. terrorism

Question 9

what are the 3 types of legal systems?

Answer 9

1. common law: based on precedent
2. civil law: based on a detailed set of laws organized into codes
3. theocratic law: based on religious teachings

Question 10

what is the major difference in contracts between common law and civil law?

Answer 10

common law: very detailed

civil law: covered by the civil code

Question 11

how can one protect intellectual property?

Answer 11

1. patents: rights to the manufacture, use, or sale of a product
2. copyrights: exclusive legal rights of authors, composers, playwriters to publish and disperse their work as they see fit
3. trademarks: design and names used to differentiate products

Question 12

how does political economy influence economic progress?

Answer 12

innovation and entrepreneurship, which are engines of long run economic growth, require market economy and strong property rights. Democratic regimes are probably more conductive to long term economic growth than dictatorship

Question 13

how do geography and education influence economic development?

Answer 13

1. countries with favorable geography are more likely to engage in trade
2. countries that invest in education have higher growth rates because the workforce is more productive

Question 14

how is the political economy changing?

Answer 14

democratic revolution and a shift toward market based economies (economic decisons depend on market dynamics)

Question 15

what is the nature of economic transformation / how does the shift toward a market based system happen?

Answer 15

1. deregulation
2. privatization
3. creation of a legal system to safeguard property rights

Question 16

what are the three main risk managers must consider when entering foreign markets?

Answer 16

1. political risk: likelyhood that political forces will adversely affect profits and other goals
2. economic risk: likelyhood that economic mismanagement will cause drastic changes in a country’s business environment
3. legal risk: likelyhood that a trading partner will break a contract and the company is not adequately legally protected