Political, Legal & Economic Differences

Question 1

On what matrices do political systems differ

Answer 1

collectivism/individualism
democracy/totalitarianism

Question 2

political economy

Answer 2

Political, economic, and legal systems of a country are interdependent​

They influence each other​

We use the term political economy to stress that the political, economic, and legal systems of a country are interdependent; they interact with and influence each other, and in doing so, they affect the level of economic well-being

Question 3

Collectivism vs Socialism

Answer 3

Collectivism​

The needs of society as a whole are generally viewed as being more important than individual freedoms​

Socialism​

Karl Marx: The few benefit at the expense of the many in a capitalist society where individual freedoms are not restricted​

Communists vs. social democrats​

Privatization​

Question 4

Individualism

Answer 4

Individualism​

An individual should have freedom in his or her economic and political pursuits​

The interests of the individual should take precedence over the interests of the state​

Two tenets​

1.Guarantee of individual freedom and self-expression​

2.Welfare of society best served by letting people pursue their own economic self-interest​

Question 5

Democracy and Totalitarianism​ and Individualism and Collectivism

Answer 5

At different ends of a political dimension​

Democracy and individualism go hand in hand, as do the communist version of collectivism and totalitarianism, with exceptions​

Question 6

type of democracies and totalitarianism

Answer 6

Democracy​

Representative democracy​
Constitutional Democracy

Totalitarianism​

Communist totalitarianism​

Theocratic totalitarianism​

Tribal totalitarianism ​

Right-wing totalitarianism ​

Question 7

Pseudo-democracies

Answer 7

Lie between pure democracies and complete totalitarianism systems​

Authoritarian elements have captured some or much of the machinery of state and use this in an attempt to deny basic political and civil liberties

Question 8

totalitarianism key points

Answer 8

Totalitarianism is a system of government under which the people are allowed virtually no authority, with the state holding absolute control.
Totalitarianism is considered an extreme form of authoritarianism, in which government controls almost all aspects of the public and private lives of the people.
Most totalitarian regimes are ruled by autocrats or dictators.
Totalitarian regimes typically violate basic human rights and deny common freedoms in maintaining total control over their citizens.

Question 9

constitutional vs representative democracy

Answer 9

Representative democracy
In a representative democracy, representatives are elected by the people and entrusted to carry out the business of governance. Australia is a representative democracy.

Most modern democratic states practice representative democracy. The United States, for example, is a constitutional republic that operates as a representative democracy. In a representative democracy, citizens periodically elect individuals to represent them. These elected representatives then form a government whose function is to make decisions on behalf of the electorate. In a representative democracy, elected representatives who fail to perform this job adequately will be voted out of office at the next election

Constitutional democracy
In a constitutional democracy a constitution outlines who will represent the people and how. Australia is also a constitutional democracy.

Question 10

Economic systems: types

Answer 10

market economy, command economy, mixed economy

Question 11

Market Economy

Answer 11

All productive activities are privately owned​

Production is determined by supply and demand​

Government encourages vigorous free and fair competition​

Question 12

Command Economy

Answer 12

Government plans the good and services, quantity and price, then allocates them for “the good of society”​

All businesses are state owned​

Historically found in communist economies​

No incentive for individuals to look for better ways to serve needs​

Question 13

Mixed Economy

Answer 13

Some sectors are privately owned, some are government owned​

Once common in developed world, less so now​

Government may aid troubled firms​

U.S. helped Citigroup, General Motors​

Question 14

Legal Systems components

Answer 14

Rules or laws that regulate behavior​

Process through which laws are enforced​

Redress for grievances​

Influenced by the prevailing political system​

Question 15

Different Legal Systems

Answer 15

1.Common Law​

Tradition, precedent, custom​

More flexible than other systems​

2.Civil Law​

Laws organized into codes​

Less adversarial​

3.Theocratic Law​

Based on religious teachings​

Most common is Islamic law​

Question 16

Differences in Contract Law

Answer 16

Governs the enforcement of contracts​

Common law​

-Contracts are very detailed with all contingencies spelled out​

-More expensive and can be adversarial.​

Civil law​

-Contracts tend to be much shorter and less specific​

Question 17

United Nations Convention on Contracts for the International Sale of Goods (CISG)​

Answer 17

Establishes a uniform set of rules governing certain aspects of the making and performance of everyday commercial contracts between sellers and buyers who have their places of business in different nations​

Applies automatically to all contracts for the sale of goods between different firms based in countries that have ratified the convention, unless the parties opt out​

Question 18

United Nations Convention on Contracts for the International Sale of Goods (CISG)​

Answer 18

Establishes a uniform set of rules governing certain aspects of the making and performance of everyday commercial contracts between sellers and buyers who have their places of business in different nations​

Applies automatically to all contracts for the sale of goods between different firms based in countries that have ratified the convention, unless the parties opt out​

Question 19

Property Rights def

Answer 19

Property is a resource that an individual or business owns​

Land, buildings, equipment, capital, mineral rights, businesses, intellectual property​

Most countries protect property rights​

Question 20

Private vs Public Action

Answer 20

Private action​

Theft, piracy, blackmail​

Public action and corruption​

Public officials extort income, resources, or property​

Levying excessive taxation, requiring expensive licenses or permits from property holders, taking assets into state ownership without compensating the owners, redistributing assets without compensating the prior owners​

Corruption, demanding bribes

In terms of violating property rights, private action refers to theft, piracy, blackmail, and the like by private individuals or groups. Although theft occurs in all countries, a weak legal system allows a much higher level of criminal action.

Public action to violate property rights occurs when public officials, such as politicians and government bureaucrats, extort income, resources, or the property itself from property holders. This can be done through legal mechanisms such as levying excessive taxation, requiring expensive licenses or permits from property holders, taking assets into state ownership without compensating the owners, or redistributing assets without compensating the prior owners. It can also be done through illegal means, or corruption, by demanding bribes from businesses in return for the rights to operate in a country, industry, or location.

Question 21

Corruption by country

Answer 21

slide 19

Question 22

FCPA

Answer 22

Foreign Corrupt Practices Act (FCPA)​

Illegal to bribe a foreign government official to obtain or maintain business over which that foreign official has authority​

Requires all publicly traded companies to keep detailed records that would reveal whether a violation of the act has occurred​

Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (1997)​

Allows for facilitating or expediting payments​

Question 23

The Protection of Intellectual Property types

Answer 23

Patent​ - grants the inventor of a new product or process exclusive rights for a defined period to the manufacture, use, or sale of that invention.

Copyrights​ - the exclusive legal rights of authors, composers, playwrights, artists, and publishers to publish and disperse their work as they see fit.

Trademarks​ - designs and names, officially registered, by which merchants or manufacturers designate and differentiate their products (e.g., Christian Dior clothes). In the high-technology “knowledge” economy of the twenty-first century, intellectual property has become an increasingly important source of economic value for businesses.

Protecting intellectual property has also become increasingly problematic, particularly if it can be rendered in a digital form and then copied and distributed at very low cost via pirated DVDs or over the Internet (e.g., computer software, music, and video recordings).

World Intellectual Property Organization​

Paris Convention for the Protection of Industrial Property​

Question 24

Product Safety and Product Liability​

Answer 24

Product safety​ - the ability of a product to be safe for intended use, as determined when evaluated against a set of established rules.

Product liability​ - Product liability is the area of law in which manufacturers, distributors, suppliers, retailers, and others who make products available to the public are held responsible for the injuries those products cause.

Greater if a product does not conform to safety standards​

Criminal and civil laws apply​

Question 25

3 broad implications​

Answer 25

Political, economic, and legal systems of a country raise important ethical issues that have implications for international business.​

Political, economic, and legal environments of a country clearly influence the attractiveness of that country as a market or investment site.​

A country with democratic political institutions, market-based economic system, and strong legal system clearly more attractive to do business in.

Question 26

Collectivism: lina

Answer 26

Collectivism: group more important than the individual

Collectivism refers to a political system that stresses the primacy of collective goals over individual goals.

In such circumstances, an individual’s right to do something may be restricted on the grounds that it runs counter to “the good of society” or to “the common good.”

Question 27

Apparently collectivism can turn inro socialism – benefit of all at the expense of the many

Answer 27

Marx: While successful capitalists accumulate considerable wealth, Marx postulated that the wages earned by the majority of workers in a capitalist society would be forced down to subsistence levels. He argued that capitalists expropriate for their own use the value created by workers, while paying workers only subsistence wages in return.

Marx: To correct this perceived wrong, Marx advocated state ownership of the basic means of production, distribution, and exchange (i.e., businesses). His logic was that if the state owned the means of production, the state could ensure that workers were fully compensated for their labor. Thus, the idea is to manage state-owned enterprise to benefit society as a whole, rather than individual capitalists.

Question 28

In the early twentieth century, the socialist ideology split into two broad camps

Answer 28

The communists believed that socialism could be achieved only through violent revolution and totalitarian dictatorship, whereas the social democrats committed themselves to achieving socialism by democratic means, turning their backs on violent revolution and dictatorship.

Question 29

Individualism: lina

Answer 29

Individualism - philosophy that an individual should have freedom in his or her economic and political pursuits. In contrast to collectivism, individualism stresses that the interests of the individual should take precedence over the interests of the state.

In a passage that might have been taken from a speech by contemporary politicians who adhere to a free market ideology, he argued that private property is more highly productive than communal property and will thus stimulate progress. According to Aristotle, communal property receives little care, whereas property that is owned by an individual will receive the greatest care and therefore be most productive.

Individualism is built on two central tenets.

1.The first is an emphasis on the importance of guaranteeing individual freedom and self-expression.

2.The second tenet of individualism is that the welfare of society is best served by letting people pursue their own economic self-interest, as opposed to some collective body (such as government) dictating what is in society’s best interest

Question 30

democracy refers

Answer 30

to a political system in which government is by the people, exercised either directly or through elected representatives.

Question 31

To guarantee that elected representatives can be held accountable for their actions by the electorate, an ideal representative democracy has a number of safeguards that are typically enshrined in constitutional law. These include

Answer 31

(1) an individual’s right to freedom of expression, opinion, and organization;

(2) a free media;

(3) regular elections in which all eligible citizens are allowed to vote;

(4) universal adult suffrage;

(5) limited terms for elected representatives;

(6) a fair court system that is independent from the political system;

(7) a nonpolitical state bureaucracy;

(8) a nonpolitical police force and armed service; and

(9) relatively free access to state information

Question 32

Totalitarianism - definition and types

Answer 32

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

Communist totalitarianism

Theocratic totalitarianism - Theocratic totalitarianism is found in states where political power is monopolized by a party, group, or individual that governs according to religious principles

Tribal totalitarianism - Tribal totalitarianism has arisen from time to time in African countries such as Zimbabwe, Tanzania, Uganda, and Kenya. The borders of most African states reflect the administrative boundaries drawn by the old European colonial powers rather than tribal realities. Consequently, the typical African country contains a number of tribes (e.g., in Kenya there are more than 40 tribes). Tribal totalitarianism occurs when a political party that represents the interests of a particular tribe (and not always the majority tribe) monopolizes power

Right-wing totalitarianism - Right-wing totalitarianism generally permits some individual economic freedom but restricts individual political freedom, frequently on the grounds that it would lead to the rise of communism. A common feature of many right-wing dictatorships is an overt hostility to socialist or communist ideas. Many right-wing totalitarian governments are backed by the military, and in some cases, the government may be made up of military officers.

Question 33

Most totalitarian states

Answer 33

In most totalitarian states, political repression is widespread, free and fair elections are lacking, media are heavily censored, basic civil liberties are denied, and those who question the right of the rulers to rule find themselves imprisoned or worse

Question 34

connections between the two types of political system dimensions

Answer 34

These dimensions are interrelated; systems that emphasize collectivism tend to lean toward totalitarianism, whereas those that place a high value on individualism tend to be democratic

The democratic–totalitarian dimension is not independent of the individualism–collectivism dimension

However, a large gray area exists in the middle. It is possible to have democratic societies that emphasize a mix of collectivism and individualism.

Question 35

Market economy: long

Answer 35

Given the dangers inherent in monopoly, one role of government in a market economy is to encourage vigorous free and fair competition between private producers. Governments do this by banning restrictive business practices designed to monopolize a market. Private ownership also encourages vigorous competition and economic efficiency. Private ownership ensures that entrepreneurs have a right to the profits generated by their own efforts. This gives entrepreneurs an incentive to search for better ways of serving consumer needs. That may be through introducing new products, by developing more efficient production processes, by pursuing better marketing and after-sale service, or simply through managing their businesses more efficiently than their competitors. In turn, the constant improvement in product and process that results from such an incentive has been argued to have a major positive impact on economic growth and development.

In the archetypal pure market economy, all productive activities are privately owned, as opposed to being owned by the state. The goods and services that a country produces are not planned by anyone. Production is determined by the interaction of supply and demand and signaled to producers through the price system. If demand for a product exceeds supply, prices will rise, signaling producers to produce more. If supply exceeds demand, prices will fall, signaling producers to produce less. In this system, consumers are sovereign. The purchasing patterns of consumers, as signaled to producers through the mechanism of the price system, determine what is produced and in what quantity

For a market to work in this manner, supply must not be restricted. A supply restriction occurs when a single firm monopolizes a market. In such circumstances, rather than increase output in response to increased demand, a monopolist might restrict output and let prices rise.

Question 36

Command economies: long

Answer 36

In a pure command economy, the government plans the goods and services that a country produces, the quantity in which they are produced, and the prices at which they are sold. Consistent with the collectivist ideology, the objective of a command economy is for government to allocate resources for “the good of society.”

” In addition, in a pure command economy, all businesses are state owned, the rationale being that the government can then direct them to make investments that are in the best interests of the nation as a whole rather than in the interests of private individuals.

While the objective of a command economy is to mobilize economic resources for the public good, the opposite often seems to have occurred. In a command economy, stateowned enterprises have little incentive to control costs and be efficient because they cannot go out of business. Also, the abolition of private ownership means there is no incentive for individuals to look for better ways to serve consumer needs; hence, dynamism and innovation are absent from command economies. Instead of growing and becoming more prosperous, such economies tend to stagnate.

Question 37

Mixed economies

Answer 37

Mixed economies can be found between market and command economies. In a mixed economy, certain sectors of the economy are left to private ownership and free market mechanisms, while other sectors have significant state ownership and government planning.

In mixed economies, governments also tend to take into state ownership troubled firms whose continued operation is thought to be vital to national interests. For example, in 2008 the U.S. government took an 80 percent stake in AIG to stop that financial institution from collapsing, the theory being that if AIG did collapse, it would have very serious consequences for the entire financial system.

Question 38

the legal system of a country refers

Answer 38

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. The legal system of a country is of immense importance to international business. A country’s laws regulate business practice, define the manner in which business transactions are to be executed, and set down the rights and obligations of those involved in business transactions. The legal environments of countries differ in significant ways. As we shall see, differences in legal systems can affect the attractiveness of a country as an investment site or market.

Question 39

Common law explanation

Answer 39

Common law is based on tradition, precedent, and custom. Tradition refers to a country’s legal history, precedent to cases that have come before the courts in the past, and custom to the ways in which laws are applied in specific situations. When law courts interpret common law, they do so with regard to these characteristics. This gives a common law system a degree of flexibility that other systems lack. Judges in a common law system have the power to interpret the law so that it applies to the unique circumstances of an individual case. In turn, each new interpretation sets a precedent that may be followed in future cases. As new precedents arise, laws may be altered, clarified, or amended to deal with new situations

Question 40

A civil law system is based on

Answer 40

a detailed set of laws organized into codes. When law courts interpret civil law, they do so with regard to these codes. More than 80 countries— including Germany, France, Japan, and Russia—operate with a civil law system. A civil law system tends to be less adversarial than a common law system because the judges rely on detailed legal codes rather than interpreting tradition, precedent, and custom. Judges under a civil law system have less flexibility than those under a common law system. Judges in a common law system have the power to interpret the law, whereas judges in a civil law system have the power only to apply the law

Question 41

A theoretic law system

Answer 41

is one in which the law is based on religious teachings. Islamic law is the most widely practiced theocratic legal system in the modern world, although usage of both Hindu and Jewish law persisted into the twentieth century. Islamic law is primarily a moral rather than a commercial law and is intended to govern all aspects of life.

Question 42

common law and civil law systems

Answer 42

The difference between common law and civil law systems can be illustrated by the approach of each to contract law (remember, most theocratic legal systems also have elements of common or civil law). A contract is a document that specifies the conditions under which an exchange is to occur and details the rights and obligations of the parties involved. Some form of contract regulates many business transactions.

Question 43

Contract Law

Answer 43

is the body of law that governs contract enforcement. The parties to an agreement normally resort to contract law when one party feels the other has violated either the letter or the spirit of an agreement.

Question 44

Property

Answer 44

In a legal sense, the term property refers to a resource over which an individual or business holds a legal title, that is, a resource that it owns. Resources include land, buildings, equipment, capital, mineral rights, businesses, and intellectual property (ideas, which are protected by patents, copyrights, and trademarks). Property rights refer to the 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

Question 45

corruption vs FDI

Answer 45

Economic evidence suggests that high levels of corruption significantly reduce the foreign direct investment, level of international trade, and economic growth rate in a country

Question 46

Product safety laws

Answer 46

set certain safety standards to which a product must adhere.

Question 47

Product liability

Answer 47

involves holding a firm and its officers responsible when a product causes injury, death, or damage. Product liability can be much greater if a product does not conform to required safety standards.

Question 48

civil and criminal product liability laws

Answer 48

Civil laws call for payment and monetary damages. Criminal liability laws result in fines or imprisonment. Both civil and criminal liability laws are probably more extensive in the United States than in any other country, although many other Western nations also have comprehensive liability laws. Liability laws are typically the least extensive in less developed nations. A boom in product liability suits and awards in the United States resulted in a dramatic increase in the cost of liability insurance. Many business executives argue that the high costs of liability insurance make American businesses less competitive in the global marketplace