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Management Core
MGCR 382
John Saba

World’s countries as 3 types 1. Developed countries of the global NORTH a. Mostly located in geographic NORTH of NA, Japan, EU, also Aus & NZ b. Advanced industrial countries, post industrial countries. Goal: prosperity c. Common elements: i. Highest levels of GDP per capita ii. Relatively high social development iii. Generally urbanized & secularized iv. High levels of health, literacy & welfare d. Policy choice i. Central policy debate in most of the developed countries is the appropriate level of state activity in the economy with 2 approaches 1. Mixed economy i.e. diff levels of democratic socialist with BOTH market & large gov sectors 2. Market/capitalist economy e.g. US gov doesn’t intervene at all e. COMMAND economies i. Most economic activities occur in very large state-controlled Public sectors e.g. Russia, North Korea, Cuba, Vietnam ii. Public sector > private sector f. MARKET economy e.g. US i. Most economic activity occurs in the very large private sector with decentralized decision- making. ii. Private sector > public sector g. MIXED economy i. MOST economies fall b/w the extremes of pure COMMAND & MARKET economies with significant public AND private sectors. ii. decisions about how resources are used being made partly by public & partly by private h. challenges to prosperity i. globalization’s effect: today the BRIC & emerging economies have much higher economic growth rates than these developed countries ii. EU sovereign debt crisis of the PIIGS (Portugal, Ireland, Italy, Greece, spain) i. Goal: stability, liberal democracies i. All developed countries are constitutionally based liberal democracies ii. Most are stable parliamentary or presidential gov systems with multiparty/2 party systems iii. Political power is distributed rather than concentrated in a single gov structure iv. These countries have 1. Large & efficient bureaucracies 2. Indep. judiciaries 2. Developing countries of the global SOUTH a. Formerly called 3 world countries, located SOUTH of developed countries b. 125-150 countries, mainly Africa, but also countries in Asia & South America c. Common elements: lowest GDP per capita, relatively low social development, generally more rural agricultural-based economies, low levels of health, literacy & welfare d. Goal: prosperity i. Low GDP 1. Limited production of goods 2. Goods are often unequall distributed 3. Gap b/w rich & poor countries continues to grow 4. Exceptions: some moved into emerging market category such that their GDPs have grown significantly e.g. newly industrializing east Asian countries ii. 1.4b people live on discriminate in favour of their own agricultural products, textiles & clothing by implementing tariffs & subsidies e.g. $1b subsidy daily to farmers in developed countries => poor country farmers hard to compete 2. Trade agreements a. Developing countries argue that these agreements are biased towards developed countries e.g. WTO, regional trade agreements e.g. EU, NAFTA ii. Others 1. High birthrates 2. Growing populations must be provided with food, jobs, homes (cities increasingly congested -> more slums) 3. Growing disparities of wealth & income b/w riches & poorest classes 4. Environmental problems e.g. pollution, exhaustion of natural resources f. Goal: stability i. Few developing countries have succeeded in establishing stable political systems, whether democratic/authoritarian ii. Effect: political decay 1. Developing country politics diverges from politics in consolidated democracies in 3 key ways: a. Liberal democracies have been rare in developing world b. Developing countries have weak governmental institutions with little citizen support c. Violence often happens e.g. coup d’etats, civil wars (effect: military regimes arise to restore order) iii. Putting problems into perspective 1. Democratization has been under way for more than 200 years in the democracies of Western Europe & NA 2. To expect Africa, asia, & latin America to cover same dist in a decade is unrealistic 3. But recent years there’s been pressure in Global South to shift away from authoritarian & military regimes to increasingly accountable, honest & efficient gov iv. Qualification: poverty makes good gov difficult 1. In poor countries, leaders gain wealth by controlling state institutions (effect: leaders reluctant to let democratic institutions develop & threaten their power) 2. Poor countries find it difficult to establish an honest, efficient & knowledgeable gov bureaucracy (effect: underpaid civil servants tend to be corrupt as they seek other sources of income like bribes) 3. 2 types of TRANSITIONAL countries a. Certain mid-range countries that rank b/w developed & developing countries in terms of economic & social development b. Post-communist emerging countries (PCECs > developing) i. 14 of this group are considered developing countries e.g. Albania, Armenia, Azerbaijan, moldova, Tajikistan ii. 14 are PCECs e.g. Latvia, Lithuania, Russia, Bulgaria, Croatia, Czech, Georgia, hungary, Poland, Ukraine iii. Goal: prosperity 1. Centrally planned economy -> inefficiency & lower SOL than mixed & market economies 2. Early 1990s – today: PCECs tried to quickly transition to a market/mixed political economy with a. Perestroika (“restructuring” of soviet union’s political & economic system, effect: ended USSR’s centrally planned economy & replaced ith with a mixed economy) b. Privatization 3. Performance: a. early 1990s substantial drop in GDP, high unemployment, hyperinflation b. Late 1990s – today: improvement with soume conutries getting positive economic growth iv. Goal: stability 1. Communism assumption: prosperity + equality = stability 2. Problems: insufficient level of prosperity, inequality persists 3. Challenges to stability in all PCECs because of a. Social disorder (combination of capitalism, fewer social controls, increased inequality & poverty) b. Nationality issues (ethno-nationalism) c. Globalization c. NICs (newly industrializing [emerging] countries) i. Russia is a PCEC & NIC ii. 2 key areas in transition (asia & latin America) iii. 2 types of state-directed capitalist models of industrialization 1. Import substitution model a. Economic devt model whereby a free-market/capitalist system is the basis & a country ….  focuses on Domestic consumption  seeks autarky (i.e. self-sufficiency)  gov protect their domestic firms by reducing imported goods through high tariffs on import. Goal -> diversify country’s economy by producing more goods internally  problems: inefficient, less variety  results: short-run success, new industries & jobs were created, but long-run failure coz industries keep requiring protection meaning consumers pay via higher prices & lower quality products 2. Export promotion model (japan success) a. Economic devt model whereby a free-market/capitalist system is the basis &  a country’s gov & biggest firms work closely to develop export industries  country’s gov influences investments, provides incentives for exports & decides if firms are allowed to export products  foreign firms are often required to form partnerships with local firms, transfer technology & leave some of their profits in the country  country’s currency & labour wages are kept artificially low  e.g. mostly applied in asia & often called the “ASIAN model”  2 key elements: 1. Works with democratic & authoritarian gov. south korea, Taiwan, & Indonesia were dictatorships when they began their spectacular devt but are now democracies 2. Model has worked best in asia. Some argue that this succss reflects cultural factors, including a strong work ethnic, family & moral values, thrift, discipline + emphasis on social cohesion rather than individualism iv. Goal: prosperity 1. Performance – Asian NICs have relatively high GDP / person, averaging 6-7% annually 2. Latin American NICs – gov economic policies have been less interventionist than in Asian NICs 3. Since 1990s, lation American NICs have only sporadic economic growth 4. Gov have implemented structural adjustment programs required by IMF with following effect: a. Increased
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