[국제경영론] Political economy_political system, economic system, mixed economy, legal system

국제경영론 International Business

Chapter. National Differences in Political Economy &Economic Development 

 

what is political economy?

• refers to its political,economic, and legal systems
• These systems are interdependent, and interact and influence each other
• A country’s political economic system has major implications for the practice of international business (한 나라의 정치 경제 체제는 국제적인 사업의 실행에 주요한 영향을 미침)

 

political system

• is the system of government in a nation
• it can be assessed
  • in terms of the degree to which they emphasize collectivism as opposed to individualism (C—I)
    • collectivism 집단주의
      • stress the primacy of collective goals over individual goals
      • the needs of society as whole are generally viewed as being more important than individual freedom
      • it can be traced to the ancient Greek philosopher plato
      • in modern: collectivist mantle has been picked up by socialists (집단주의의 맨틀은 사회주의자들에게 채택됨)
    • socialism 사회주의
      • modern socialists trace their roots to Karl Marx wh advocated state ownership of the basic means of production, distribution, exchange
      • the state then manages the enterprises for the benefit of society as a whole
      • In the early 20th century, socialism split into communists and social democrats
        • Communists generally believed that collectivism could only be achieved though revolution and totalitarian dictatorship
        • while social democrats worked to achieve the same goals by democratic means
        • Many state-owned enterprises failed to succeed, and today, many nations are implementing privatization programs whereby state-owned enterprises are sold to private investors
        • 중국, 베니수엘라, 라오스, 베트남, 북한, 쿠바, 볼리비아
    • individualism 개인주의
      • Individualism is a political philosophy that suggests individuals should have freedom over their economic and political pursuits
      • It can be traced to Aristotle who argued that individual diversity and private ownership are desirable
      • individualism stressed
        • individual freedom and self-expression
        • letting people pursue their own self-interests to achieve the best overall good for society
        • democratic systems and free markets
  • in terms of the degree to which they are democratic or totalitarain (D—T)
    • difference beween democracy and tolalitarianism
      • Democracy is a political system in which government is by the people, exercised either directly or through elected representatives
      • Totalitarianism is a 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
    • democracy
      • Generally, democracy and individualism go hand in hand
      • The most common form of democracy today is representative democracy, where elected representatives vote on behalf of constituents
    • totalitarianism
      • Collectivism and totalitarianism generally go hand in hand
      • In most totalitarian regimes:
        • there is widespread political repression
        • there are no free and fair elections
        • media is censored
        • basic civil liberties are denied
        • challenges to the regime are prohibited
      • four major form
        • communist totalitarianism: advocates achieving socialism through totalitarian dictatorship
        • theocratic totalitarianism: political power is monopolized by a party, group, or individual that governs according to religious principles
        • tribal totalitarianism: a political party that represents the interests of a particular tribe monopolizes power
        • right wing totalitarianism: individual economic freedom is allowed but individual political freedom is restricted in the belief that it could lead to communism

 

Economic system

• Political ideology and economic systems are connected
• There are three types of economic systems: the market economy, the command economy, and the mixed economy
• A free market system is likely in countries where individual goals are given primacy over collective goals
• State-owned enterprises and restricted markets are common in countries where collective goals are dominant
• pure commnad economy, pure competitive market 이런 것들은 없음
• market economy
  • In a pure market economy, the goods and services that a country produces, and the quantity in which they are produced is determined by supply and demand
  • Consumers, through their purchases, determine what is produced and in what quantity
  • The role of government is to encourage free and fair competition between private producers
• command economy
  • In a pure command economy, the goods and services that a country produces, the quantity in which they are produced, and the price at which they are sold are all planned by the government
  • All businesses are state-owned, and so have little incentive to control costs and be efficient
  • Because there is no private ownership, there is little incentive to better serve consumer needs
  • ex. North Korean leader Kim Jong-un visiting a factory.
• mixed economy
  • A mixed economy includes some elements of a market economy and some elements of a command economy.
  • Governments tend to take over troubled firms that are considered to be vital to national interests
  • p16 gm general moto : 2008년 경제 위기 → 파산위기를 맞음

 

 

legal system

• The legal system of a country refers to the rules, or laws, that regulate behavior, along with the processes by which the laws of a country are enforced and through which redress for grievances is obtained.
• A country’s legal system is important because:
  • laws regulate business practice
  • laws define the manner in which business transactions are tobe executed
  • laws set down the rights and obligations of those involved in business transactions
• three types of legal system
  • Common law (based on tradition, precedent, and custom)
    • found in most of Great Britain’s former colonies, including the United States
  • Civil law (based on a very detailed set of laws organized into codes)
    • found in over 80 countries, including Korea, Germany, France, Japan, and Russia ****
  • Theocratic law (based on religious teachings)− Islamic law is the most widely practiced theoretical legal system
• common law vs civil law
  • The two systems approach contract law (the body of law that governs contract enforcement) in different ways
  • 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
  • In a common law state, contracts are very detailed with all contingencies spelled out
  • In a civil law state, contracts are shorter and much less specific
• in a contract dispute, which country’s law should apply?
  • USPTO
  • The United Nations Convention in Contracts for the International Sales of Goods (CISG) 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
  • Countries that adopt CISG signal to other nations that they will treat the Convention’s rules as part of their law
• property rights and corruption
  • Property rights (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) are very important for the functioning of business.
    • Property rights can be violated
    • by private action (theft, piracy, blackmail, and the like by private individuals or groups)
    • by public action (when public officials extort income or resources from property holders using various legal mechanisms including excessive taxation, requiring expensive licenses or permits from property holders, or taking assets into state ownership without compensating the owners)
  • Corruption is present in all countries to some degree; however, when a country has a high level of corruption:
    • Foreign direct investment falls
    • International trade falls
    • Economic growth falls
  • Foreign Corrupt Practices Act
    • To limit corruption in the U.S., the Foreign Corrupt Practices Act (FCPA) was passed
    • The Act makes it a violation of the United States’ law to bribe a foreign government official in order to obtain or maintain business over which the foreign official has authority, and requires all publicly traded countries to keep detailed records so that it is clear whether a violation of the act has occurred
    • The Act does allow facilitating or expediting payments to secure the performance of routine government actions
  • protection of intellectual property
    • Intellectual property: property that is the product of intellectual activity
      • Patents: give inventor exclusive rights to the manufacturing, use, or sale of that invention
      • Copyrights: exclusive legal rights of authors, composers, playwrights,artists, and publishers to publish and dispose of their work as they see fit
      • Trademarks: designs and names, often officially registered, by which merchants or manufacturers designate and differentiate their products
    • Protection of intellectual property rights differs greatly from country to country
    • 185 nations are members of World Intellectual Property Organization (WIPO)
      • Paris Convention for the Protection of Industrial Property: agreement signed by 170+ countries to protect intellectual property rights
      • Enforcement is lax in many nations, especially China and Thailand
    • response to violantion of intellectual property
      • Lobbying governments for better laws and enforcement of those laws
        • Trade-Related Aspects of Intellectual Property Rights (TRIPS): requires WTO members to grant and enforce patents lasting at least 20 years and copyrights lasting 50 years
      • Filing lawsuits
      • Avoiding countries with poor intellectual property laws