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Chapter 2
National Differences
in Political Economy
Introduction
2-3
Political Systems
2-4
Classroom Performance System
2-5
Collectivism and Individualism
2-6
Collectivism and Individualism
Socialism
Modern socialists trace their roots to Karl
Marx who advocated state ownership of
the basic means of production,
distribution, and exchange
The state then manages the enterprises
for the benefit of society as whole
2-7
Collectivism and Individualism
2-8
Collectivism and Individualism
Individualism
Individualism is a political philosophy that
suggests individuals should have freedom over
their economic and political pursuits
It can be traced to Aristotle who argued that
individual diversity and private ownership are
desirable
Individualism stresses
individual freedom and self-expression
letting people pursue their own self-interests
to achieve the best overall good for society
democratic systems and free markets
2-9
Classroom Performance System
2-10
Democracy and Totalitarianism
2-12
Democracy and Totalitarianism
2-13
Democracy and Totalitarianism
2-14
Classroom Performance System
2-15
Economic Systems
2-17
Command Economy
2-19
Classroom Performance System
2-20
Legal Systems
2-21
Different Legal Systems
2-24
Classroom Performance System
2-25
Property Rights and Corruption
2-27
Property Rights and Corruption
2-28
Foreign Corrupt Practices Act
2-29
The Protection of
Intellectual Property
2-30
The Protection of
Intellectual Property
2-31
The Protection of
Intellectual Property
2-33
The Determinants
of Economic Development
2-34
Differences in
Economic Development
2-36
Differences in
Economic Development
2-37
Differences in
Economic Development
2-38
Broader Conceptions of
Development: Amartya Sen
2-39
Broader Conceptions of
Development: Amartya Sen
2-40
Political Economy
and Economic Progress
2-42
Geography, Education,
and Economic Development
2-44
The Spread of Democracy
2-45
The Spread of Democracy
2-46
The New World Order
and Global Terrorism
2-47
The Spread of
Market-Based Systems
2-49
The Nature of
Economic Transformation
2-50
Deregulation
1. Deregulation
Involves removing legal restrictions on
the free play of markets, the establishment
of private enterprises, and the manner in
which private enterprises operate
2-51
Privatization
2. Privatization
Transfers the ownership of state property
into the hands of private investors
Because private investors are motivated
by potential profits to increase
productivity, privatization should increase
economic efficiency
2-52
Legal System
2-55
Benefits
2-56
Costs
2-60
Critical Discussion Question
2-61
Critical Discussion Question
2-62
Critical Discussion Question
2-63
Critical Discussion Question
2-64
Critical Discussion Question
2-65
Critical Discussion Question
6. Read the Opening Case on India in this chapter and answer the following questions:
a. What kind of economic system did India operate during 1947-1990? What kind of
system is it moving towards today? What are the impediments to completing this
transformation?
b. How might widespread public ownership of businesses and extensive government
regulations have impacted (i) the efficiency of state and private businesses, and (ii)
the rate of new business formation in India during the 1947-1990 time frame? How
do you think these factors affected the rate of economic growth in India during this
time frame?
c. How would privatization, deregulation, and the removal of barriers to foreign direct
investment affect the efficiency of business, new business formation, and the rate
of economic growth in India during the post-1990 time period?
d. India now has pockets of strengths in key high technology industries such as
software and pharmaceuticals. Why do you think India is developing strength in
these areas? How might success in these industries help to generate growth in
other sectors of the Indian economy?
e. Given what is now occurring in the Indian economy, do you think that the country
represents an attractive target for inward investment by foreign multinationals
selling consumer products? Why?
2-66