Business Culture & International Relations PDF

Introduction and culture in the workplace Culture - Every culture has a unique way of dealing with others - Since much of business deals with relationships and sales, understanding various cultures is an integral part of running, operating and expanding a business Theoretical understan...

Introduction and culture in the workplace Culture - Every culture has a unique way of dealing with others - Since much of business deals with relationships and sales, understanding various cultures is an integral part of running, operating and expanding a business Theoretical understanding of culture - You’re a student working over the summertime at a quite well recognized banking institution in Canada. Your boss belongs to the Muslim faith, and in your culture, when you thank someone, you typically bring them a gift. You think about how much you enjoyed working there this summer and want to do something nice. So, you go to the liquor store, buy a nice bottle of wine to give it to your boss as a thank you gift. Is there anything wrong with this? - Culture is extremely complex, there are often few books written about it and a lot of it is learned through experience and mistakes. - For the avid travelers in the room you'll know what im talking about Adaptations - As you already know from last unit companies will make adaptations to their products to appeal to their local consumer s - Adjusting menu for vegetarian or vegan - Changing packaging like different colors - Avoiding certain numbers on the packaging GOing global - Canadian firms want to go global must determine the extent and importance of cultural difference between canada and their targe nation - They must decide and whether to what extent products and process can be adapted to a foreign environment - Some cultural traits can be studied and learned, others can only be understood by living in a country and experiencing it firsthand - Teams to advise them, typically locals Relativism vs. ethnocentrism - Cultural relativism - the idea that a person's beliefs and practices should be understood based on the person's own culture - Ethnocentrism - analyze other cultures in relation to your own culture. Thai can be good in building national pride but can also be harmful in creating negative stereotypes and prejudice Case study - china - Since china opened its market to the world in the late 90s, companies all around the world have clamored to star run and expand their business to china - The chineses market represents an enormous economic opportunity for those who are and willing to take the risks of operating in the chinese market - Right at the beginning however, lessons about Chinese culture were invaluable in shaping the way that many “Westerners” did business in China. Western vs. eastern values  - First, and most importantly, in western culture, specifically in American or Canadian culture, individualism is highly prized. Ideas like, “if you work harder, you get more money” are second nature to us. - In China however, they are much more collectivist and group harmony is more important than individual success. Eastern religion - As many within china belong to confucianism this religion shapes not only the way that many chinese act bus also the way biz was don - He was philosopher , similar to buddhism - understand yourself and make sure u can reach this high level Confucianism - Philosophical and ethical system based on teaching of confucius a chinese philosopher from around 500 bce - It has deeply induced chineses culture and thought especially in areas related to social harmony, respect for authority, and interpersonal relationships. Respect for authority - C. places a strong emphasis on respecting elders superior and those in position or authority. In a biz context this manifests the way employees and subordinates interact with managers or senior executives. - Decision-making tends to be top-down, and junior employees are expected to defer to their superiors, showing deference in meetings and discussions Concept of guanxi - One of the most significant concepts in chinese business culture is guanxi, which refers to cultivation of personal relationships or networks - While not exclusively a confucian concept - guanxi is supported by confucian ideas of mutual respect trust and loyalty - Strong relationships are built over time, often involving personal favors and exchanges of benefits. In business, these relationships are crucial for success What this means for biz - Deals and partnerships are often based on personal relationships rather than strictly on formal contracts. - Building trust through guanxi is essential for long-term business success. - Foreign businesses entering China often need to establish strong local networks to navigate the regulatory environment and establish credibility Saving face - Companies expected to conduct themselves with honesty, fairness, integrity, ensuring that their actions align with moral values - Confucian ethics emphasize moral behavior, integrity and acting in the best interest of society. In biz this reelected a company's reputation or face and its commitment to ethical practices. - Reputation is very important in biz and individuals take great care to maintain their reputation through ethical conduct - Losing face due to unethical behavior or public failure can significantly damage business prospects  - Negotiations and business deals often include consideration of truth and moral conduct beyond just financial incentives Culture and dinner - Dinner and eating is highly cultural event especially in biz - There is etiquette involved and often not following etiquette can have long lasting effects on culture - Let's see what im talking bout from the words of anthony bourdain Companies adjusting to chinese market - In addition to food certain things are considered bad omens in china as well as auspicious - For example numbers - 6 often stands for good business, 9 stands for long lasting, 8 wealth and prosperity, 4 stands for death Localization - When companies change their pacjaging to embrace or avoid certain numbers or change their product to meet certain needs of a specific market - Localization - adjusting a product or service to meet the linguistic or cultural and regulatory needs of a specific market or region (packaging, ingredients, advertising) Culture in the workplace - We've all heard about workplace culture - Whether it's dramatized in shows or passed down through universities or work cultures in north america and many parts of the world, are a reflection of culture Culture in the workplace - Cultures all over the world view work differently. Whether this involves more hours at work, less, low benefits or many, employers have to wrestle with the cultural dynamics of the countries that they operate in. - Denmark for example, operates much like North America. EXCEPT, they believe in a shortened workday. If you stay at work late in Denmark, you will likely have to have a conversation with your employer because it is thought that you did not use your time efficiently. - This is obviously much different in many places around the world. Economic and Political Systems Affecting Business Politics, Ideology and Economics - Politics, ideology and economics are intrinsically linked. - As business is real and tangible, it often needs to negotiate the real world complications of ideology, the changing nature of political systems and how both of these interact with the economy. Political ideoigies - There are a variety of political ideologies which are important to understand to unpack and dissect how they interact with business. Understanding these ideologies and how they interact with policy, geopolitics and business is an important element of understanding world markets. - There are many ideologies, we will only be discussing the most relevant to international business:  - 1) Liberalism - 2) Conservatism - 3) Socialism - 4) Communism - 5) Naziism Political Ideologies - For the purposes of this class, I won’t go into extreme detail on all of the elements of these ideologies. - I’ll look at a more general version of what these ideologies are and how they view money and economics. LiberalismClassic Liberalism - Classic liberalism is different from forms of liberalism you might be used to. - Classic liberalism was originally designed as an economic theory. Classical Liberalism - History - The foundations of classical liberalism have their roots in many places, but most point to the Industrial Revolution. The Industrial Revolution - During this time, the world was changing from a world of empires, to a world of industry. - Instead of countries owning monopolies over industry, one man, Adam Smith, postulates that it is in the best interest of countries to allow for competition. Adam Smith’s Wealth of Nations - In his ground breaking book, “The Wealth of Nations” Adam smith says that competition needs to be created for the best thing to be produced. - Governments need to encourage competition, and thus need to step away from interfering in any way - They should “leave the economy alone”, (Laissez-faire economics) Locke and Classic Liberalism - John Locke, considered the “father of liberalism” argued that people need to be left alone to be free individuals (social). - Individualism is of immense importance (let people be who they want to be, pray to who they want to pray to etc) - Taxation should be limited, as the government can’t be trusted - Rule of Law (everyone obeys the same laws) is important. - ”special laws” should not be provided. Everyone gets the same. The Challenge to Classic Liberalism - As the Industrial Revolution continued throughout the 19th century, governments started embracing the ideas of classical liberalism. - The individual was left to their own devices, industries were severely unregulated, and things started to get out of control. - There were no social systems, available, thus no public school, so kids worked. - No public health care, so the poor died on masse.  - No limitations on working hours, so workers worked for 70+ hours a week - No guaranteed vacation - The rich had everything, the poor had nothing. - No middle class The Worker - During this time, Karl Marx and Frederic Engels publish their famous treatise “The Communist Manifesto” and his ideas spread. - Workers begin striking and lobbying the government for fair wages, fair working hours, and certain protections and services Modern Liberalism (much like the form we know today) - Keeps some original elements of classical liberalism such as freedom to the individual and rule of law. - Individuals should be able to practice any religion they want, act how they want, and marry who they want, as long as they obey the rule of law - Keeps some original elements of classical liberalism such as freedom to the individual and rule of law. - Individuals should be able to practice any religion they want, act how they want, and marry who they want, as long as they obey the rule of law - Prioritizes government paid services like schools and medical care - Taxes should be raised, especially on the rich and businesses to pay for government services. - According to this ideology “Laissez-faire” economics doesn’t work, as it leads to huge highs and lows. The government should intervene in interest rates to ensure that regular people and regular services can be provided (see Keynesianism) Modern Liberalism! - Prioritizes government paid services. Classical Liberalism - This ideology is based largely around the ideas of John Locke and Adam Smith. Classical Liberalism - This ideology loves laissez-faire economics. Classical Liberalism! - Which ideology was heavily challenged by the Industrial Revolution? Modern Liberalism - John Maynard Keynes would likely have supported this type of liberalism. Conservatism - Essentially, as modern liberalism and classical liberalism split, classic liberalism transforms into conservatism. - Values Adam Smith’s claims about the absence of government intervention. - Free market capitalism is ideal. - Government services should not be limited, ”why should I pay for what I don’t use?” A Conservative Would Likely Say: - “Public schools? Why? I don’t have kids, why should I pay for a service which I am not using?” - “Socialized medicine (free medicine for all)? Why do I need that? I am not sick, why should I pay for others if they are sick?” - “The road needs repair? I’ll pay to fix it along with my neighbors, why should I be taxed to pay for something I can pay for myself?” Conservatism – Edmund Burke Economically, the origins of conservatism is Adam Smith, socially and politically, the origins are Edmund Burke - Edmund Burke believed that change is difficult and should be taken very very slowly. - “If it ain’t broke, don’t fix it!” Edmund Burke – Social Elements of Conservatism - Changing social policies and political landscapes takes time. Traditions have been in place for centuries, too much change, too quickly leads to anarchy and lawlessness - This is one of the enduring elements of conservatism, that too much change, too quickly is a bad thing. Relevance - In the modern world, these ideologies have taken many forms, and in many cases have become extremes. - We have seen this through the emergence of modern republicanism (a departure from the old) and the emergence of Trumpism. Nationalism - In order to understand fascism, there are a couple of concepts that you need to understand. - Is the feeling of love or passion for your nation. - How might you express your happiness, love, or passion for your nation? - Nationalism is a political ideology and movement that emphasizes the pride, loyalty, and identity of a nation, often prioritizing its interests and culture over others. Extreme Nationalism - Extreme nationalism is different from nationalism. - It is not only love, or passion for your nation, it is also belief that your nation is better than others. So much so, that extreme nationalists believe that they should dominate others who do not belong to their nation. The Nature of Extreme Nationalism and Reactionism - Extreme or ultra nationalism is often a reaction to what is happening both at home and throughout the world. \ - Ultranationalists believe that they must react and bind together to fight against perceived injustices. - This binding together, created strength, and strength should be valued above all else. Fascism and The Nature of Extreme Nationalism - Fascism’s roots are in extreme nationhood - Originating in Italy under Benito Mussolini, Fascism was born in the belief that nation is  more important than self. - Since the nation is so great, any needs of individual citizens are irrelevant. Only the needs of the nation are considered and valued. Fascism and Leadership - Given that the nation is perceived as superior to others, their leader must reflect this superiority. - Fascist regimes are ruled by dictators with extreme power - Leaders have the power to crush opposition, since opposition is the enemy of the state. - Criticism of the government is tantamount to treason Fascism and Opponents - As fascism is far-right, it is a reaction to Marxism, Communism, Socialism and Liberalism. - Seeing as liberalism values the individual, it is the enemy of fascism - Marxism, Communism and Socialism are also enemies of fascism because they suggest that the “worker” (thus the individual), has the power. - Since the worker is simply part of the state, their voices do not matter, nor do their rights and freedoms. - The same thing can be said for religion and God. - Though practically, and historically this never took place, the ideology is opposed to God or religion because both distract people from the state. Fascism and “Purity” - Fascism suggests that the nation itself is “pure” and is “racially superior” to others. - In Nazi Germany, this meant “the pure Aryan race”. - Any who were not pure, needed to be eliminated. This included: - Slavic People - Jews - Romani (often referred to as gypsies) - Any nonwhite person “A Drain on the State’s Resources” - One particularly gruesome element of fascism is its notion of “drained resources - Those who were mentally or physically “unable” to ”serve” the state, needed to be ”liquidated”. - This included: - The elderly - People with physical disabilities - People with mental disabilities - In practice, hundreds of thousands (roughly 200,000) were murdered by euthanasia Fascism and Gender Roles - Individuality in any form is prohibited in fascism, thus any form of deviation from traditional gender norms is also prohibited - According to fascism women are sacred, as they create the future of the country. But they are primarily “child bearers” - Woman are not to work as this would “unnecessarily burden” them. - Men are to be warriors or workers - Any form of homosexuality was considered sexual deviancy, and thus homosexuals were  “enemies of the state” and murdered. Fascism and The Youth - The Youth are idealized under fascism - They are seen as the ”strong future” of the fascist country - The youth should learn about the country’s greatness, study and make the country great - Under Nazi Germany, Hitler formed the “Hitler Youth” bands of children who were fiercely patriotic. They were instructed to spy on anyone and everyone, and if they heard any dissent, they were to tell the secret police (gestapo) Fascism and The Power of Symbols - There’s a reason why I asked you to discuss symbols at the beginning of class. - Fascism firmly believed that symbols unite people - Symbols have meaning and value. Some symbols can be used to demonize, others to unite. Fascists use their symbols to project strength and power. - The Swastika - The Eagle - These symbols, in their origin mean something different than what the fascists in Italy and in Germany made them to be. Communism – What it is and What it is not - IS - Communism is a far-left political ideology based on the teachings of Karl Marx. - IS - Similar to Leninism (which won’t be explored due to time constraints - IS – An extreme form of Socialism (which we’ll get to) - IS – Considered the political opposite of Fascism and the economic opposite of Capitalist - IS NOT – Work camps and Gulags (as many far-right advocates will suggest - IS NOT – Authoritarian by nature, though practice suggests otherwise - IS – AN IDEOLOGY! Communism basics - Communism advocates for complete equality between classes THROUGH REVOLUTION - Derived from Karl Marx, Communism believes that classes and classism is the cause of the world’s suffering. - Bans private ownership and any collaboration with private entities. - All entities including, farms, factories, stores, schools, hospitals are ALL owned and run BY THE PEOPLE and thus, operate with public money. They call this, “collectivization”. Communism – Basics - Economy - Given the ban on private ownership, economically speaking, the opposite of Communism is Capitalism. - Where Capitalism advocates for things like private property, competition and free market, Communism advocates for collective ownership and a centrally planned economy. Communism Basics - Religion - Since it is based on Marxist beliefs, Communism does not value God or religion. - According to Communist beliefs, religion is the “opiate of the masses”, thus, Communist ideology argues for an atheistic state free of “religious oppression. - Religious symbols, religious ideologies and religious leaders should be banned and outlawed according to communist ideology. Communism and Gender Roles - Since everyone is a “comrade” or an “equal brother/sister”, according to Communism, men and women are valued equally. - While both have certain roles to play, women are not “banned” or “prohibited” from certain work like Fascism. Communism and Leadership - A leader should be someone who reflects the needs and values of the Communist system. - A true believer, the leader should be someone who religiously embraces Communist doctrine. The way in which this leader is chosen is debated, however, practice has dictated that one party should hold this choice and this power. Communism in Practice - Remember, Communism is an ideology and like all ideologies, practice and theory end up working much differently. - The most famous example of a communist society in history is the U.S.S.R. Though admittedly, it was never truly communist. Communism in Practice – The U.S.S.R - Otherwise known as the Soviet Union, the U.S.S.R. was created with the intention of uniting Communist republics and spreading a ”new world order”. - The Soviet Union operated between 1922 and 1991 The Undoing of the USSR and Departure from Ideology - Secrecy and lie - Arms race with USA - Massive corruption from all levels - Secret police and spies - “The dream unfulfilled Socialism is NOT Communism - Many confuse the two, ESPECIALLY IN MEDIA - Important distinctions between the two are often left out, and this often leads to a misrepresentation of the two. Socialism – The Basics - Socialism is also built on the tenets of Karl Marx and Fredrich Engel’s Communist Manifesto. - Socialism suggests that power should be brought to the people through gradual “socialization” of certain services considered to be essential. - To socialize in this case, means, make free (or easily affordable and available) for all Socialism – The Basics - Certain services believed to be “essential” and should be ”socialized” - Education - Health Care and Medicine - Transportation\ - Legal services - Parks and Public Spaces - Certain essential industries (like fire and police) Socialism – The Difference - Socialism argues that there is room for capitalism and private industry.  - According to Socialism SOME services should be FOR PROFIT as they ensure that the government can compete on an international level. - Socialism believes that this gradual movement towards a more equal and cooperative society lessens class warfare and results in happier people and more democratically sound principles. KEY TAKEAWAYS - Communism and socialism are political and economic systems that share certain ideologies, including greater equality in the distribution of income. - Both are rejections of capitalism, instead giving economic power to the working class - One way communism differs from socialism historically is that the former calls for the transfer of power to the working class through revolutionary rather than gradual means. - Both communism and socialism advocate public control of the means of production, although socialism allows for the continued existence of capitalism in some parts of the economy. - In reality, communist systems have not been very successful to date. The Problem with Communism and Socialism - Both require trust in the social contract - Both require a significant social contract between citizens. There needs to be a belief embedded in the society that people are genuinely equal - Both require genuine care and high degrees of empathy between citizens. Critics of Socialism and Communism - Critics argue that both are unsustainable, because ”inequality is natural” - Critics also argue that humankind has been built to value the “needs of the few over the needs of the many”. Thus, people will always seek to take advantage of the system. The global market and demand Capitalism’s Origins - The modern economic system that we have today, Capitalism, has it’s origins in the age of empires. - Before the development of the economic system that we recognize today, the world relied on MERCANTALISM. - Mercantilism took the raw goods that existed in the colonies around the world, sent those raw goods back to Europe to be refined, and then were sold back to the colonists and other nations around the world for a profit. Hudson bay - For a long time, this worked, but it relied heavily on those raw resources being FREE or VERY CHEAP. - Since these colonies were technically owned by nations like England or Spain, they used their power and influence to take the resources by force. - Sometimes, companies like the East India Trading company or Hudson’s Bay had negotiated contracts with these nations to have a monopoly. Mercantilism and Adam Smith - As you know from Unit 1, these monopolies flourished, but they did not allow for independent businesses to open up the market and increase competition. - Adam Smith saw a problem with this, and wrote down his ideas in the famous book  Wealth of Nations. In it, he suggested that modern industry would eliminate the need for the mercantilist system, and that self interest rather that national interest should be prioritized. - Of course, it was in this book that ideas like the Invisible Hand of the market and the Free Market. Modern Economics - Capitalism has adjusted since Adam Smith first published his ideas. - The modern economy that we recognize today is built on a few core principles that we need to understand if we’re to dig deeper into economics. Modern Economics - Remember: Economics is the study of scarcity. - Because the world’s resources are finite (they are not unlimited), countries need to make decisions how how best to allocate resources. - They must balance their wants and their needs to determine what is the best course of action. Supply and Demand: The Mother Concept - Wants, needs and desires require decisions, both at the nation level (governments) and the citizen level (consumers). - This dance between wants, needs, decisions and scarcity creates supply and demand. - In simple terms: - SUPPLY: is the amount of product or service available - DEMAND: The need want or desire for that good/service. - Both nations and consumers EXCHANGE MONEY for these products and services. This is the bedrock of modern capitalism. Supply and Demand: The Mother Concept - If you’re taking my economics class next semester, we go much deeper into the concept of pricing, consumer demand, and the market equilibrium, but it’s quite complicated… - In the most basic terms, the PRICE determines how much MONEY that good or service costs. Price: Supply and Demand - That PRICE is generated from a variety of factors including how much: - DEMAND exists for that good or service - What the SUPPLY of that good or service is and - What it COSTS to purchase or produce that good or service Kicker: Human Psychology - Often the cost and/price of a good/service are quite different because of human psychology. This is the concept of value. - The VALUE of a good or service depends on several factors, but most importantly what people are willing and able to pay for it. Example: Brazilian Manicures - Brazilians love their fashion and everything beauty related. - Entire industries are built upon the psychology, demand and supply of this service being readily provided. - But Brazilians are not willing to pay 100 USD for a manicure, nor are they willing to pay 50 USD. - The cost of the service is quite low because services are not expensive in Brazil where minimum wage is quite low.  - The cost of the products used in the service are also quite low - This has resulted in manicures being priced at around 10 USD. Comparison: Switzerland - Here in Neuchatel, beauty is no less important, however, the cost of the service is wildly different. - Research how much it costs for a manicure in Neuchatel or in Zürich. Why might the price for this service be so different than in Brazil? AFFECTING GLOBAL DEMAND - All of the theory of supply and demand economics also assumes that the market will regulate and that no major problems get in the way. - As we know, however, major problems DO often get in the way. - One of the most recent: the disaster in the Suez Canal The Suez Canal Disaster - In 2021, a large container ship travelling from Malaysia to the Netherlands ran a ground while inside the Suez Canal in Egypt. - For those who don’t know, the Suez Canal is a major innovation to trade which essentially allows ships to cut through the Middle East and North Africa, instead of sailing around all of Africa to reach Europe Suez Location - Approximately fifty ships per day travel through the canal, which was about 12 percent of total global trade at the time. - For much of its length, however, the canal is not wide enough to allow two ships to pass each other; convoys of ships must take turns transiting these segments of the waterway Effect on Markets - On 28 March, at least 369 ships were queuing to pass through the canal, stranding an estimated US$9.6 billion worth of trade. - The disaster took 6 days to clean up costing the world billions. - In addition, it also affected the supply chain, this make goods and/or services either not available or made the existence of them scarce. - This drove up prices due to scarcity Factors Influencing Success: Economic Models Refresher - The last classes we’ve looked at how political ideologies shape governments. - The shaping of these governments have changed policies aimed at businesses and the extent to which they can grow domestically or internationally - Historic ideological political models like Naziism influenced the business ventures of German industrialists in the 1930s and 40s, the same for British classic liberal industrialists in the 1800s. Economic Systems - Throughout history, economic systems have been established to try and answer three fundamental questions: - 1) What to produce?  - 2) How to produce it? - 3) For whom to produce? Economic Systems - Although every. Economy seeks to answer these questions, the way that each question is answered will help identify the type of economic system that operates in each given state. - Over time, these questions have developed into questions that can be answered: - 1) BY tradition - 2) BY command - 3) BY Market Forces Ideologies and Economic Models - We learned that ideologies impact economic models to a certain extent in previous classes. We’ll be looking deeper today. - Specifically at: - 1) Command Economy (by command) - 2) The Traditional Economy (by tradition) - 3) The Market Economy (by market forces) - 4) Canada’s Economy Command Economy - In a pure command economy, all production decisions are made by a small group of political leaders who have the power to enforce their decisions throughout the entire economy. - This is also known as a centrally planned economy. The Command Economy - Given that there is no market or marketplace, this economy is and was historically employed in authoritarian Communist states where one party rules, and authoritarian governments thrive. - There is no private property - No private enterprise - No competition Command Economy - The questions of what to produce, how to produce it and for who they produce it are all answered by the state. - The individuals serve the state, and their labour serves the state. - The state authorities, in turn, provide the individuals with all of their essential needs like food, shelter, medicine and health care. The Command Economy: Privileges and Quotas - The state awards individuals who exceed their quotas by providing them with additional shares of goods and services OR special privileges (like more comfortable homes, or better goods). - Those who do not, are often penalized by the removal of privileges. The Command Economy: State Needs over The Individual - As the state is more concerned with NEEDS than WANTS, consumers are often left with few luxuries and few choices in their goods. Benefits - The obvious benefit to this system is that basic needs are covered by the state. - Typically, nations who have employed this type of system have excellent public services like good doctors, and access to universities. - If managed properly, it can result in the lessening of burden on the poor Drawbacks - There are, obviously drawbacks.  - 1) It doesn’t provide much freedom to individuals in their choices. This could lead many to feel repressed and a lack of self-expression. - 2) It doesn’t take into consideration the fact that most people don’t just want to have their needs met, they want things to be good. - 3) Corruption is often rife - Only really been implemented in China and Cuba, though historically the Soviet Union attempted it. Traditional Economy - In a pure traditional economy, the practices of the past determine the answer to the production questions (what, how, who). - The goods and services produced are the same as they have been in the past, and the manner of production has not changed. - Traditional practices and skills are passed on from generation to generation, usually within the same family. The Family Unit - In this system, the goal of each family is to be self-sufficient. - The question of “what to produce” is therefore determined by the needs of the family, whose members produce goods for its own use. - Any surplus is bartered or traded. Traditional Economy - For centuries this was the predominant from of economy, it was only until population growth, scientific and technological advancements reached a certain point that this began to change. - It should be noted that true pure forms of traditional economies are hard to find today, as even the most traditional have somewhat embraced technology. Traditional Economy Examples - The best examples today would be: - The Bedouin of the Sahara Desert - The Mongols of the Gobi Desert - The Lapps of the Scandinavian Tundra - The Mbuti of the African rainforest - Many other indigenous groups Benefits - Often embraces circular economic models of sustainability. - Allows for tradition to thrive - Embraces adaptation Drawbacks - Relies heavily on family labour, if families cannot create a sustainable large family, it becomes hard to thrive and survive. - Individual choices are based on needs not wants, limiting choices - Does not allow for free choice outside of duty to tradition and family. The Market Economy - In a pure market economy, economic activity is coordinated by many individuals who make independent decisions in a free marketplace. - Since people act for themselves, often out of self-interest, this system is also called free-enterprise, since resources are privately owned. It is also sometimes referred to as private enterprise. The Market Economy - Individual buyers and seller sin the marketplace answer the three questions (how, what, who).  - What is determined by consumer demand - How is defined by the quest for profit. Consumers prefer low prices, producer can maximize their profits by using the least costly and most efficient methods of production. - The who is determined by income. Since labour and income go hand-in-hand, those who work, gain income, to consume. Market Economy: The Basics - The basics elements of a market economy are - 1) Private property - 2) Freedom of enterprise - 3) Profit maximization - 4) Competition. Market Economy: The Government - Unlike command economies, the government in a market economy is to allow for freedom and protect the private property of both individuals and corporations. - It is also there to allow competition to flourish and assist in economic development. The Market Economy: Examples - Very few examples exist today, but the best examples that we can think of are: 1) The USA (primarily in the 1920s) - 2) Hong Kong under British rule Canada’s System - Canada’s system is a mixed system. It is a system that combines both command and market economies. - This system allows for private enterprise to operate freely in many sectors, but with significant government intervention to ensure economic stability, provide public services, and regulate certain industries Canada’s System - This mixed system combines elements of the free market, allowing for free enterprise, private property and economic stability, while providing public services (like free health care and public education), regulations, and social welfare programs for the needy. - Allows for public and private industries to compete.