INTB 2202 Lecture 2: Chap 2
19 Feb 2019
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CHAP 2: National Differences in Political, Economic and Legal
Systems
A country’ s political economy refers to its political, economic, and legal systems
•These systems are interdependent, and interact and influence each other
•A country’s political system has major implications for the practice of international business
•Political system: the system of government in a nation
•Political systems can be assessed in terms of the degree to which they:
– Are democratic or totalitarian
– Emphasize collectivism as opposed to individualism
•Collectivism: a system that stresses the primacy of collective goals over individual goals
– Can be traced to the Greek philosopher Plato (427-347BC)
– Today, socialists support collectivism
•When collectivism is emphasized, the needs of the society as whole are generally viewed as
being more important than individual freedoms
•Socialists advocate state ownership of the basic means of production, distribution, and exchange
•State-owned enterprises are managed to benefit society as a whole, rather than individual
capitalists
In the early 20th century, socialism split into:
•Communism: socialism can only be achieved through violent revolution and totalitarian
dictatorship
•Social democrats: socialism is achieved through democratic means
•By the mid-1990s, communism was in retreat worldwide
•Social democracy is also retreating as many countries move toward free market economies
•State-owned enterprises have been privatized
•Individualism: philosophy that an individual should have freedom in his own economic and
political pursuits
•Individualism can be traced to Greek philosopher, Aristotle (384-322 BC), who argued that
individual diversity and private ownership are desirable
•Under individualism, individual economic and political freedoms are the ground rules on which
a society should be based
•More practically, individualism means democratic political systems and free market economies
What is the difference between a democracy and totalitarianism?
àDemocracy: political system in which government is by the people, exercised either
directly or through elected representatives
– Most common form today is representative democracy: elected
representatives vote on behalf of constituents
àTotalitarianism: form of government in which one person or political party exercises
absolute control over all spheres of human life, and opposing political parties are
prohibited
Document Summary
Chap 2: national differences in political, economic and legal. Emphasize collectivism as opposed to individualism: collectivism: a system that stresses the primacy of collective goals over individual goals. Can be traced to the greek philosopher plato (427-347bc) Democracy: political system in which government is by the people, exercised either directly or through elected representatives. Most common form today is representative democracy: elected representatives vote on behalf of constituents. Economic systems: political ideology and economic systems are connected, in countries where individual goals are emphasized free market economies are likely. There are three types of economic systems: market economies: in a market economy all productive activities are privately owned and production is determined by the interaction of supply and demand. All businesses are state-owned, and governments allocate resources for the good of society . Define the manner in which business transactions are to be executed. Set down the rights and obligations of those involved in business transactions.
