Understanding Political Systems

Political Systems

• The political system of a country shapes its economic and legal systems
• Understanding different political systems is crucial before discussing economic and legal systems
• By political system, this refers to the system of government in a nation
• Political systems are assessed by:
  • Emphasis on collectivism vs individualism
  • Whether they are democratic or totalitarian
• Collectivist systems tend to lean toward totalitarianism
• Systems valuing individualism tend to be democratic
• Democratic societies may emphasize a mix of collectivism and individualism
• Totalitarian societies are not always collectivist

Collectivism and Individualism

• Collectivism prioritizes collective goals over individual goals
• In collectivist societies, societal needs outweigh individual freedoms
• Individual rights may be limited if they contradict the "good of society" or "common good"
• Plato (427–347 B.C.) advocated collectivism in The Republic
  • He argued that individual rights should be sacrificed for the majority's good
  • He proposed common property ownership
  • He stratified society into classes with rulers administering for the benefit of all
• Modern socialists have endorsed collectivism
• Karl Marx (1818–1883) argued that capitalism benefits the few at the expense of the many
• Marx stated that:
  • Capitalists accumulate wealth while suppressing workers' wages to subsistence levels
  • Capitalists exploit the value created by workers, offering only minimal compensation
• Marx supported state ownership of production
  • With state ownership, workers would be fully compensated for their labor
  • State-owned enterprises would benefit society, not individual capitalists

Socialism

• Socialist ideology split in two in the early 20th century
  • Communists: Socialism could be achieved only through violent revolution and totalitarian dictatorship
  • Social democrats: Committed to achieving socialism through democratic means avoiding violence and dictatorship
• Communism peaked in the late 1970s
  • The majority of the world's population lived in communist states
  • These states included the Soviet Union, Eastern European nations, China, Southeast Asian nations, African nations, and Latin American nations
• Communism declined by the mid-1990s
  • The Soviet Union collapsed and was replaced by 15 republics
  • Communism was overthrown in Eastern Europe through bloodless revolutions in 1989
• China currently is still a communist state with limitations on political freedom, but economic activity has strayed from strict communist ideology
• North Korea remains one of the few old-style communist nations
• Social democracy may prove more enduring than communism -Influential on democracies such as:
  • Australia, Denmark, Finland, France, Germany, Great Britain, Norway, Spain, and Sweden, India and Brazil
• Social democratic governments nationalized private companies after World War II, running them for the "public good"
• Great Britain state-owned companies monopolized telecommunications, electricity, gas, coal, railway, and shipbuilding, with sizable interests in oil, airline, auto, and steel industries by the late 1970s
• State ownership proved to counter public interest
• State-owned companies performed poorly, lacked efficiency, and individuals funded state ownership through higher prices and taxes
• Western democracies voted many social democratic parties out of office between the late 1970s and early 1980s
  • Parties, such as Britain's Conservative Party and Germany's Christian Democratic Party, succeeded them
  • They privatized state-owned enterprises
• Even when social democratic parties regained power, they committed to continued private ownership

Individualism

• Individualism refers to the idea that an individual should have economic and political pursuits
• Advocates of individualism state that individual self-interests should take precedence over state interests
• Aristotle argued Individual diversity and private ownership are desirable
  • Private property encourage communal property
  • Individuals care more for what they possess
• Individualism was reborn in the 16th century
• British philosophers like David Hume (1711–1776), Adam Smith (1723–1790), and John Stuart Mill (1806–1873) refined individualism
• Individualism had a profound influence on those in the American colonies that sought independence from Great Britain
• Nobel Prize-winning economists such as Milton Friedman, Friedrich von Hayek, and James Buchanan, also championed Individualism.
• Individualism is built on two tenets:
  • Emphasis on guaranteeing individual freedom and self-expression
  • Society’s welfare served by letting people pursue own economic self-interest
• Individual economic and political freedoms are the ground rules on which a society is based
• Individualism conflicts with collectivism as it asserts the opposite meaning

Democracy and Totalitarianism

• Democracy and totalitarianism are at opposing ends of the political spectrum
• Democracy indicates a political system in which the government is led by its people
  • Citizens can participate directly or elect representatives
• Totalitarianism indicates a form of government in which only the leading individual or political party possess absolute control over all areas of human control
• The democratic-totalitarian dimension depend on the individualism-collectivism dimension
  • Democracy and individualism operate with each other, as do the communist version of collectivism and totalitarianism
• Democratic State can allow the majority hold certain collective beliefs or views, whilst a Totalitarian state can embrace individualism
• China and Vietnam have moved towards individual freedom, but the ruling parties still dictate any political actions.

Democracy

• Pure democracy requires citizens to have direct involvement in decision making
• Pure democracy is impractical in complex modern societies

Representative Democracy

• Most modern democracies work by citizens periodically electing individuals to represent them
• Elected representatives form a government that can make decisions on behalf of the electorate
• Elected representatives must adequately fulfil requirements or will be voted out of office at the next election

Representative Democracy Safeguards

• Representative democracies require safeguards typically present in constitutional law
  • Individual freedoms
  • Free media
  • Regular elections with universal adult suffrage
  • Limited terms for elected representatives
  • A fair and independent court system
  • A nonpolitical state bureaucracy, police force, and armed service
  • Free access to state information

Totalitarianism

• Totalitarian countries reject constitutional guarantees of freedom of expression, free media, and regular elections
• Political repression is widespread, free and fair elections are lacking, the media is heavily censored, and basic civil liberties are denied
• Those who question the right of the rulers to rule find themselves imprisoned or worse
• Forms of totalitarianism are:
  • Communist
  • Theocratic
  • Tribal
  • Right-wing
• Communist Totalitarianism
  • Communist totalitarianism has declined since 1989
  • Dictatorships collapsed with exceptions (China, Vietnam, Laos, North Korea, and Cuba)
  • Communist Party's Power is Eroding From widespread market economic reforms in government
  • Basic civil liberties are still rejected
  • Late president Hugo Chavez and Vladimir Putin shared displayed totalitarian tendencies

Theocratic Totalitarianism

• Political power is monopolized by a party, group, or individual that governs according to religious principles
• The most common form is based on Islam, exemplified by Iran and Saudi Arabia
• Freedom of political and religious expression is limited with laws based on Islamic principles

Tribal Totalitarianism

• Tribalism has appeared in countries from time to time like Zimbabwe, Tanzania, Uganda, and Kenya
• This is due to the African States' borders that reflect the former European Colonial Powers, and contain several tribes

Right-Wing Totalitarianism

• Permits economic freedom, but restricts individual political freedom, rooted in a hatred of socialism
• Right-wing dictatorship has overt rejection to social or communist ideas
• Often rely upon the military, sometimes made up of military officers
• The facist regimes from the 1930s-1940s were right-wing autocratic States

Pseudo-Democracies

• Pseudo-democracies are imperfect governments between pure democracies and completed totalitarian states
• Captured Authoritarian elements deny civil liberties
• Example Russia: Elections are still held, people still have the freedom to compete in elections, however Putin and other people in charge systematically suppress liberties of opposition forces.
• Example Zimbabwe: The democratic institutions have been undermined

Economic Systems

• Where individual objectives are given, market based economies are likely
• When the the opposite is the case, the state will maintain ownership over many companies, and have more control over free market activity.
• Broadly there are 3 kinds of economic systems
  • Market
  • Command
  • Mixed

Market Economy

• Market economies feature privately owned productive activities
• Goods and services are not planned by anyone, but dictated through supply and demand
• If the demand can't keep up with supply, then prices rise- signalling more productivity to be created
• In turn, supply exceeds demand then prices decreases, and productively is then reduced.
• Market economies require supply to not be restricted, as in the case of a supply restriction
• Monopolists create problems for the price system by by restricting and controlling outputs, and cause inefficient, high-priced, low-quality goods
• governments prevent this by promoting free and fair competition

Command Economy

• Command economies plan their own output, quantity and prices
• Follows collectivism, used to allocate resources for goods of society
• all entities are State Owned, which directs businesses to create in the Nation's best Self Interests
• Communist nations followed, and now are becoming less prominent
• Government plans have fallen into disfavor in many countries
• state owned enterprises possess little motivations to control costs, cannot go out of business
• Also lack of encouragement of customer innovation
• economies stagnate, and do not grow

Mixed Economy

• Falls between command and Market.
• certain sectors of the economy have State control and free markets/ownerships.
• becoming much less common
• Privatization reduced state control in Great Britain, France, and Sweden.
• state involvement has risen again in states like Russia and Venezuela.

Legal Systems

• Legal systems refer to the laws that regulate a certain behaviour
• Very important for business
• the prevailing political system greatly determines state business practice
• In particular Private Property, Patents, and Trademarks
• Variations can great affect the attraction as an investment on the site
• In general, there are three main types of systems
  • Common
  • Civil
  • Theocratic

Common Law

• Developed in England over a thousand years
• Tradition, precedent, and custom
• Legal History , Cases before court
• Laws are applied in any circumstances
• Great degree of flexibility
• Laws are altered and clarified to match new precedents
• The Judges interpret them so that law applies differently

Civil Law

• Detailed sets of coded laws
• more than 80 states, Germany, France, Japan, Russia
• The codes are heavily relied upon from the judges
• Less adversarial
• Judges do not have the power to interpret, only apply the code

Theocratic Law

• Laws are based on religious Teachings
• Islamic Law remains the most practiced but both Hindu and Jewish are both known to still be followed
• Laws are largely not commericially driven, and focus on the core teaching of religion
• Islamic law largely covers all aspects of life, and comes from The Koran, and the Sunnah. The decisions of the Prophet Muhammad
• Islamic jurists also try to add modern context to the laws
• Islamic law can also cover commercial activities as in the case of money dealings

Contract Law

• Each system treats each Contract Law differently
• Contracts are documents that specify conditions
• all agreements must fulfil these agreements if you want the party agree in spirit
• Contracts under the Common Law System must be highly detailed and cover any events necessary
• Resolving each dispute can be adversarial

Contracts in Civil Law

• Much shorter and specific due to how much the laws are covered in the codes
• cheaper to draft
• judges have grater advantages for interpretations.
• UN Convention of contracts for the international sales of goods (CISG).

Property rights and corruption

• Property rights and the laws for all use of the resource and income made from it
• Laws are almost in order to protect laws, and are mostly enforced, however often can be violated
• By both private and public action

Private Action

• Theft and like crimes all have roots from the legal system
• example with weak force, black mail and other crimes offered both Business both domestic and Foreign
• and Russia in particular
• There needs to be police and a Judicial system available to serve protection

Public Action and Corruption

• Politicians will extortion income and resources such as taxes
• Bribes are necessary for all to serve if needs
• Corruption has been seen at high levels everywhere, however the extent varies
• The rule of law, if discovered is punished fully
• in other countries is rife, and the officials openly act corrupt.

Corruption and the Law

• Corruption reduces foreign investment and trade growth
• The FCPA was passed to make it Illegal bribe a government official
• OECD then adopted a convention to Combat bribery and give criminal offenses.

Intellectual property

• Piracy, and Software estimates equal to 63 billion In revenues
• All Applications in 2011 world pirated,
• The agreements, GATT, and WTO cover all patents, which are 20 years minimum to use
• Or copyrights to pass on 50 year to heir.
• One example of fighting software has to be cases. Starbucks won a copywrite over a Coffee brand,

Product Safety and Liability

• laws set certain regulations of which a Product adhere
• all countries have civil and criminal laws
• Civil includes payment and Monetary, where as criminal liability leads to fines and
• Laws cause ethical issues, is it right to operate a product that may endanger citizens

A nations Economic system requires

• Market based and limits of corruption

Economic growth rate requires

• geography ,Education and transition

The spread of Democracy Requires

• One notable development of the last 30 years has been the spread of democracy
• Totalitarian governments fell and were replaced by democratically

The new world order requires

• As for terrorism, in Huntington’s conclusion, global terrorism is a product of the tension between civilizations and the clash of value systems and ideology
• Other say there are conflicts that simply defy politics

the spread of market based System

• Paralleling the spread of democracy since the 1980s has been the transformation from centrally planned command economies to market-based economies.

Deregulation means

• removing legal restrictions to how businesses operate.
• Then privatization refers to tranfering sale of sales to entities hand and private sector

Economic changes require

• Legal systems and contracts to have enforcements.

A nations legal system requires certain elements

• is the likelihood that political forces will cause drastic changes in a country's business environment that adversely affect the profit and other goals of a business enterprise.