GMS 724 Study Guide - Midterm Guide: Washington Consensus, Berlin Wall, Economic Nationalism
11 Nov 2018
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In venezuela, one faces economic nationalism; in brazil, one needs to understand congress"s multi-party alliances; in china, the task is interpreting the power and play of the ccp; in saudi. If the global financial crisis continues to shake people"s faith in democracy, companies face growing political risk at home and abroad. Systematic political risk: as a rule, a country"s political processes do not arbitrarily punish specific companies. In that case, new regulations will alter the macro-environment for all: similarly, a government may target an economic sector that it sees dominated by foreign interests, such as venezuela"s program to nationalize energy and media companies. In both situations, politically motivated policies alter the micro- environment, thereby creating systematic risks that affect all firms. If democracy continues faltering, the likely rise in corruption, weakened property rights, arbitrarily enforced laws, and freedom restrictions will increase systematic political risk in many countries: systematic risks do not necessarily reduce potential profits.
