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Lecture 4

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McGill University
Management Core
MGCR 382
John Saba

International Business Lecture 4Chapter 2 Global marketplace and business centers cont The worlds countries as 3 types cont 1The developed countries of the global north2The developing countries of the global south 3 The transitional developed countries There are certain midrange countries that rank higher on economic and social development than developing countries BUT lower than developed countries on one or both dimensions A PostCommunist Developed Countries PCDCs After the soviet union and its allied bloc broke up 28 new countriesstates emerged 15 from the former Soviet Union Another 13 were from other soviet allies in central Europe This cluster of 28 is the States in Transition ie in the process of substantial economic and political transformation 13 of this group are considered developing countrieseg Albania Armenia Azerbaijan Georgia Moldova Tajikistan 15 are post communist developed countries PCDCsGoal Prosperity Under communism there was government controlled command centrally planned economyEffect Inefficiency and lower standard of living than mixed and market economies From early 1990s to today the PCDCs have tried to quickly transition to a marketmixed political economy with PERESTROIKAIt was a political movement within the communist party of the Soviet Union widely associated with the soviet leader Mikhail Gorbachev It referred to the restructuring of the Soviet Unions political and economic systemEffect it eventually ended the USSRs centrally planned economy and replaced it with a mixed economyPRIVATIZATION Goal Stability Assumption under communismProsperity and equalitystability ProblemsInsufficient level of prosperity Inequality persistedDeath of the Soviet Union after a period of Glasnost challenges to stability in all PCDCs because of aSocial disorder Result from a combination of 1Capitalism 2Fewer social controls 3Increased inequality and poverty bNationality issues cEthnonationalism dGlobalization trends BNewly Industrializing Countries NIC NICs sometimes called emerging economies are rising faster than most other developing countries Examples Singapore Hong Kong Taiwan SouthKorea Malaysia South Africa Mexico TurkeyTwo key areas in transition 1Asia 2Latin AmericaAsian NICs Goal ProsperityMost successful NICs are those where the state is actively involved in economic development with Exportoriented market political economy Close cooperation between firms and government to target niches in which export goods can be soldPerformanceAsian NICs have relatively high levels of GDP per capita Leading Asian NICs have economic growth rates averaging 7 annually between 1980 and 2010 In 19978 and 20089 most Asian NICs experienced severe and unexpected recessionary decline but most have recovered nicelyLatinAmerican NICs goal Prosperity Government economic policies have been less interventionist than in the Asian NICs Performance Since the 1990s Most LatinAmerican NICs have had only sporadic economic growthGovernments have implemented structural adjustment programs required by the IMFEffectsIncreased unemployment Reductions in government service
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