C03 |
Country Differences
Political Systems
For chapter
reference,
use course
outline
The most obvious difference is Culture, for sure.
Beyond that …
Some specifics
2/20
The close relationship between politics and economics is neither
neutral nor coincidental. Large governments evolve through history
in order to protect large accumulations of property and wealth.1
Michael Parenti, 1974
China: Last Australian journalists flee China after diplomatic
standoff | DW News2
https://youtu.be/Ha65I4JZjdg
1Michael
2DW
Parenti. (n.d.). AZQuotes.com. Retrieved September 19, 2020, from AZQuotes.com Web site: https://www.azquotes.com/quote/696956
News.(2020, September 8). Last Australian journalists flee China after diplomatic standoff | DW News[Video]. YouTube. https://youtu.be/Ha65I4JZjdg
3/20
What impacts differences between countries
1
Political
Systems
3
Economic
Systems
Key Aspects
2
Legal
Systems
4
Culture
and
others
1. System of Governance
2. Refers to a procedure or
process for interpreting and
enforcing the law..
3. An economic system (also
economic order) is a system
of production, resource
allocation and distribution
of goods and services within
a society or a given
geographic area
4. Society’s values and beliefs
etc
4/20
Today’s agenda and focus
1. Political systems at play
2. Risks to business at an international level from politics
3. Evaluating and measuring dimensions of political ‘freedom’
And finally,
4. Government role in business
5/20
1. Political systems at play - what are they guided by
Individualism
Democracy
Presidential
Parliamentary
Social
Collectivism
Autocracy
Authoritarian
Totalitarian
Theocratic
Others
Communism
& Socialism
6/20
Political Systems
Individualism: Anchored on two core principles
1. Emphasis on guaranteed freedom and self-expression.
2. Economic self-interest is best equipped to power society individual should be allowed to pursue self-enterprise in selfinterest
Collectivism: A political system emphasising collective goals as
opposed to individual goals - Needs of society are superordinate.
Socialism: Socialism is a range of economic and social systems
characterised by social ownership and workers' self-management of
the means of production as well as the political theories and
movements associated with them.
7/20
Political Systems
Individualism: Anchored on two core principles
1. Emphasis on guaranteed freedom and self-expression.
2. Economic self-interest is best equipped to power society individual should be allowed to pursue self-enterprise in selfinterest
Collectivism: A political system emphasising collective goals as
opposed to individual goals - Needs of society are superordinate.
Socialism evolved
overis
a period
of of
time:
Socialism:
Socialism
a range
economic and social systems
● Communists: Focus on revolution, violent struggle, totalitarianism,
characterised
by social ownership and workers' self-management of
infringement on individual rights
the
of production
as well
as the political
theories
and
● means
Social Democrats:
emphasis
on democracy,
emphasis
on public
good,
public ownership,
state
support
etc (Germany, Norway, Sweden..).
movements
associated
with
them.
Welfarism in a real sense.
8/20
Political systems - Governance Structures
Governance Structures
● Democracy: Representative, one person, one vote. Individual
constitutionally protected with a charter of rights. Administration
non-political, though the masters are political. Freedom of
expression.
● Totalitarianism: no individual rights. Power rests with the
administration or the regime in power.
○ Tribal - Mostly in societies in certain parts/countries of the
world. Power flows from the size and control which a tribe exerts
○ Theocratic (religion based) - power held on the basis of religion by
a set of people who may have monopolized/control it.
○ Right-wing: Economic freedom may be allowed yet, individual
political freedom may not be permitted.
9/20
2. Risks to Business
1. Macro level
2. Micro level
3. Currency related risks (arising from econo-political action)
10/20
Risks to Business
1.
Macro level
2. Micro level
3. Currency related risks
(arising from econopolitical action)
Seizure of assets, nationalisation,
shutting down businesses, closing supply
of raw materials, changing laws
overnight
At a firm level, local level possibly.
Changing contract, stoppage of project,
corruption/kickback issues, local political
issues triggered - of employment
Countries/economies not doing well can
suddenly place currency trade controls a direct outcome of the country’s overall
economic strength
11/20
3. Dimension and measures of freedom
Economic freedom is the fundamental right of every human to
control his or her own labor and property.1
Heritage Foundation
The key aspect - economic freedom and political freedom are
interrelated. They directly impact rights of individuals to ‘own’
resources, and take ‘risks’.
1About
The Index. (n.d.). Retrieved September 19, 2020, from https://www.heritage.org/index/about
12/20
Dimension and measures of freedom
The Global Map of Freedom1
Key measures:
● Rule of Law
1(n.d.).
●
Government Size
●
Regulatory Efficiency
●
Open Markets
Retrieved September 20, 2020, from https://www.heritage.org/index/heatmap?version=106
13/20
Dimension and measures of freedom
Economic freedom1 The Heritage Foundation has identified measures
of economic freedom generating an index based on various factors.
Key measures:
● Rule of Law
Property Rights,Judicial Effectiveness, Government Integrity
● Government Size
Tax Burden, Government Spending, Fiscal Health
● Regulatory Efficiency
Business Freedom, Labour Freedom, Monetary Freedom
● Open Markets
Trade Freedom, Investment Freedom, Financial Freedom
1(n.d.).
Retrieved September 20, 2020, from https://www.heritage.org/index/heatmap?version=106
14/20
What does this mean in business terms?
Higher levels of freedom relate to higher per capita GDP - appears to
aid higher levels of consumption, lesser risks for business etc.
Some sudden events can influence global business dramatically.
Throwing all opportunities out and increasing risks suddenly.
● Uncertainty and the never ending Brexit Story1!
● Covid-19 and global business
○ Video A2
○ Video B3
○ Video C4
1BBC
News. (2020, September 16). Boris Johnson bows to Conservative rebels with Brexit bill compromise - BBC News [video]. https://youtu.be/18jUQxhjkGc
Economist. (2020, May 27). Covid-19: why the economy could fare worse than you think | The Economist [Video]. YouTube. https://youtu.be/f9v6givfTEA
3Harvard Business Review. (2020, May 21). Understanding the Economic Shock of the Covid-19 Crisis[Video]. YouTube. https://youtu.be/RK2IfGPSqO0
15/20
4World Trade Organisation. (2020, March 25). COVID-19 and world trade [Video]. YouTube. hhttps://youtu.be/v_-ZY1QAr2g
2The
4. Government and Business
Should the government run businesses1?
Things that they can do, have done ...
1. Disinvestment2
2. Overall enactment of policy (incentives etc)3 and rights of
ownership
3. Regulation and deregulation, control4
At the end of the day, the taxpayer funds many businesses5 (through
the government)
1New
China TV. (2020, July 11). Volkswagen to deepen partnership with Chinese auto company JAC [video]. https://youtu.be/LsmOKOTi05I
Toronto. (2020, February 13). Airbus, Quebec government buys out Bombardier's stake in A-220 Jet [video]. https://youtu.be/tlAkEOfZKog
3Now This News. (2019, February 04). Alexandria Ocasio-Cortez Stands Up to Big Pharma | NowThis [video]. https://youtu.be/HIQk5B0il-A
4CBC News. (2020, July 17). U.K. banned Huawei. Will Canada follow suit? [video]. https://youtu.be/IvjfsDqf-QY
5KPIX CBS SF Bay Area. (2019, December 4). California Cuts Electric-Car Rebates, Drops Luxury Models [video]. https://youtu.be/EODR9Xy7CPk
2CityNews
16/20
In conclusion
One must be be in a position to understand the nuances of
governmental interplay with business and policy in different
countries.
View the risks and opportunities in that context. Even as numbers
tell a story, it is truly much more than that.
17/20
References
Michael Parenti. (n.d.). AZQuotes.com. Retrieved September 19, 2020, from AZQuotes.com Web site:
https://www.azquotes.com/quote/696956
DW News.(2020, September 8). Last Australian journalists flee China after diplomatic standoff | DW
News[Video]. YouTube. https://youtu.be/Ha65I4JZjdg
About The Index. (n.d.). Retrieved September 19, 2020, from https://www.heritage.org/index/about
(n.d.). Retrieved September 20, 2020, from https://www.heritage.org/index/heatmap?version=106
BBC News. (2020, September 16). Boris Johnson bows to Conservative rebels with Brexit bill compromise - BBC
News [video]. https://youtu.be/18jUQxhjkGc
The Economist. (2020, May 27). Covid-19: why the economy could fare worse than you think | The Economist
[Video]. YouTube. https://youtu.be/f9v6givfTEA
Harvard Business Review. (2020, May 21). Understanding the Economic Shock of the Covid-19 Crisis[Video].
YouTube. https://youtu.be/RK2IfGPSqO0
World Trade Organisation. (2020, March 25). COVID-19 and world trade [Video]. YouTube. hhttps://youtu.be/v_ZY1QAr2g
18/20
References
New China TV. (2020, July 11). Volkswagen to deepen partnership with Chinese auto company JAC [video].
https://youtu.be/LsmOKOTi05I
CityNews Toronto. (2020, February 13). Airbus, Quebec government buys out Bombardier's stake in A-220 Jet
[video]. https://youtu.be/tlAkEOfZKog
Now This News. (2019, February 04). Alexandria Ocasio-Cortez Stands Up to Big Pharma | NowThis [video].
https://youtu.be/HIQk5B0il-A
CBC News. (2020, July 17). U.K. banned Huawei. Will Canada follow suit? [video]. https://youtu.be/IvjfsDqf-QY
KPIX CBS SF Bay Area. (2019, December 4). California Cuts Electric-Car Rebates, Drops Luxury Models [video].
https://youtu.be/EODR9Xy7CPk
19/20
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20/20