Chapter 2: National Differences in Political, Economic and Legal Systems

International Business

What is important about political, economic, and legal systems?

These systems are interdependent. They influence each other.

What is the political system?

The system of government in a nation

What are the two dimensions used to assess political systems?

• The degree that is required to emphasize collectivism as opposed to individualism.

• Degree to which they are democratic or totalitarian.

What does collectivism emphasize?

Emphasizes collective goals over individual goals.

What is socialism?

Public ownership of the means of production for the common good.

What does individualism emphasize?

An individual should have freedom in economic and political pursuits.

What are the two tenets of individualism?

• Guarantee of individual freedom and self-expression.

• Welfare of society is best served by letting people pursue their own economic self-interest.

Define democracy.

government is by the people, exercised either directly or through elected representatives.

Define totalitarianism.

one person or political party exercises absolute control over all spheres of human life and prohibits opposing political parties.

What is representative democracy?

citizens periodically elect individuals to represent them.

What is communist totalitarianism?

socialism can be achieved only through a totalitarian dictatorship.

What is theocratic totalitarianism?

monopolized by a party, group, or individual that governs according to religious principles.

What are pseudo-democracies?

Lie between pure democracies and complete totalitarianism systems.

What defines a market economy?

• All productive activities are privately owned.

• Production is determined by the interaction of supply and demand.

• Role of government is to encourage vigorous free and fair competition

What defines a command economy?

• Government plans the goods and services, quantity and price, then allocates them for “the good of society.”

• All businesses are state-owned.

• No incentive for individuals to look for better ways to serve consumer needs.

What defines a mixed economy?

• Some sectors are privately owned, and some are government-owned.

• Government may aid troubled firms whose operations are vital to national interests.