Key Concepts in Political Economy and Legal Systems

Legal Systems

  • Definition: Rules regulating behavior and law enforcement processes.
Types of Legal Systems
  • Common Law: Based on tradition, precedent, and custom; judges interpret the law.
  • Civil Law: Based on detailed written laws and codes.
  • Theocratic Law: Based on religious teachings.
Contract Law
  • Contract: Document detailing conditions of an exchange; specifies rights/obligations.
  • Contract Law: Governs contract creation and enforcement; invoked when agreements are violated.
International Trade and Contracts
  • CISG: United Nations Convention on Contracts for the International Sale of Goods; applies automatically to contracts unless opted out.

Property Rights

  • Definition: Legal title over resources (land, real estate, intellectual property).
  • Property Rights: Bundle of rights on how a resource can be used and its income.
Violations of Property Rights
  • Public Action and Corruption: Actions by officials that extort property holders (e.g., bribes, excessive taxing).
Country Examples (Corruption Perceptions Index)
  • Top Countries: Denmark (1), New Zealand (2), Finland (3).
  • Lowest: Somalia (180), South Sudan & Syria (178).

Ethics and Corruption

  • Corruption of Foreign Public Officials Act: Prohibits bribing both domestic and foreign officials; includes cultural considerations as potential defenses.

Intellectual Property

  • Paris Convention: International agreement for protecting industrial property rights.
  • TRIPS Agreement: Agreement among WTO states for enforcing stricter rules.

Changing Political Economy

  • Risks: Defined by political, economic, and legal factors affecting business environments.
  • Political Risk: Likelihood of political changes adversely affecting business.
  • Economic Risk: Economic mismanagement impacting profitability.
  • Legal Risk: Potential for broken contracts or expropriated property rights.

Overall Attractiveness of Countries for Business

  • Dependent on balancing benefits, costs, and risks associated with operations in the country.
  • Insurance: Available to protect against political risks; offered by various government agencies globally, including OPIC and EDC.