National Differences in Political Economy

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National Differences in Political Economy
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The Impact of Privatization
1994 Sales 253m Loss 310m
1998(3Q) Sales 934m Profits 260.2m
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Political Systems
The System of Government in a Nation
Individualism Collectivism
Democratic Totalitarian
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Collectivism and Individualism

• Collectivism
• Socialism
• Communists
• Social Democrats
• Individualism
• Guarantee individual freedom and expression
• People can pursue own economic self-interest

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Democracy and Totalitarianism

• Democracy
• Government by people exercised directly or
  through elected representatives.
• Totalitarianism
• One person or party exercises control over all
  spheres of human life.
• Opposing political parties are prohibited.

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Democracy

• Representative Democracy
• Freedoms
• expression, opinion, organization
• media
• regular elections with universal suffrage
• limited terms for elected representatives
• fair and independent court system
• non political bureaucracy, police force and armed
  service
• relatively free access to state information

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Totalitarianism

• Constitutional guarantees are denied.
• Four major forms
• Communist
• Theocratic
• Tribal
• Right Wing

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Economic Systems

• Market Economy
• Command Economy
• Mixed Economy
• State Direct Economy

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Economic Systems
Market
Mixed
Command
State-Directed
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Legal Systems

• Rules or laws that regulate behavior.
• Property rights
• Private action
• Public action

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International Property Issues

• Protection of Intellectual Property
• Lax enforcement
• Product Safety and Product Liability
• Competitiveness
• Ethics

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PPP Index and GNP Data(Selected Count
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Other Determinants of Development Geography and
Education
Throughout history, coastal states, with their
long engagements in international trade, have
been more supportive of market institutions than
landlocked states, which have tended to organize
themselves as hierarchical (and often military)
societies. Mountainous states, as a result of
physical isolation, have often neglected
market-based trade. Temperate climes have
generally supported higher densities of
population and thus a more extensive division of
labor than tropical regions. -Jeffrey Sachs-
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Singapore

• Population 2.8 million
• Literacy rate 91.1
• GDP (B) 83
• Per Capita GDP 26,294
• Strategic location Malacca Straits
• Worlds second busiest port cargo tonnage
• Average GDP growth over 25 years 8

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Spread of Democracy

• Totalitarian regimes failed to deliver economic
  progress.
• New information technologies (internet)
  restricted a states ability to control
  information.
• Emergence of prosperous middle class demanding
  democratic reforms.

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Universal Civilization
we may be witnessingthe end of history as such
that is, the end point of mankinds ideological
evolution and the universalization of Western
liberal democracy as the final form of human
government. - Francis Fukuyama -
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Clash of Civilization
There is no universal civilization based on
widespread acceptance of Western liberal
democratic ideals.
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Real Percentage GDP Growth, 1990-94, for Five
Post-Communist State
5
0
1990 1991
1992 1993
1994
-5
-10
-15
Czech Republic Hungary Poland Russia Ukraine
-20
-25
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The Changing Political Economy of India

• Population 936 million
• GDP 1.254 trillion
• GDP growth 5-6 per year
• 10 of population produces 40 of national income
• Agriculture is 70 of employment, but only 35 of
  GDP

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Indias GDP
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The Falling Rupee
US Dollar Value of 100 Indian Rupees

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Percentage of Indias Exports and Imports (By
Region)
36.0B
31.6B
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Foreign Investment in India
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The Nature of Economic Transformation

• Deregulation
• Removal of legal restrictions to free markets.
• Privatization
• Transfer of state ownership of property into
  private hands.
• Creation of legal systems to protect property
  rights.

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The Nature of Risk

• Political Risk
• Likelihood that political forces will cause
  drastic changes that adversely affect profits and
  other goals.
• Economic Risk
• Likelihood that economic mismanagement will cause
  drastic changes that adversely affect profits and
  other goals.
• Legal Risk
• Likelihood that a trading partner will
  opportunistically break a contract or expropriate
  property rights

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