IBM Lecture 2
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Transcript of IBM Lecture 2
Lecture II: Country Factors
Political Systems: Collectivism
• Collectivisim: refers to a political system that stresses the primacy of collective goals over individual goals.o Socialism: State owns means of production so that it can fully
compensate workers for their labor
• Communists vs. Social Democratso Communists: socialism can be achieved only through violent revolution
and totalitarian dictatorshipo Social democrats: socialism can be achieved by democratic means
Political Systems: Individualism
Individualism: Philosophy that an individual should have freedom in his or her economic and political pursuits
• Tenets of individualism:o Guaranteed individual freedom and self-expressiono Welfare of society is best served by letting people pursue their own
economic self interest
Democracy and Totalitarianism
Democracy: a political system in which government is by the people, exercised either directly or through elected representatives
Totalitarianism: form of government in which one person or political party exercises absolute control over all spheres of human life and prohibits opposing political parties
Elements of Representative Democracy
Representative Democracy’s elements:1. An individual’s right to freedom of expression, opinion and
organization• A free media• Regular elections in which all citizens are allowed to vote• Universal adult suffrage• Limited terms for elected representatives• A fair court system that is independent from the political system• A nonpolitical bureaucracy• A nonpolitical police force and armed service• Relatively free access to state informatioin
4 forms of Totalitarianism
1.Communist Totalitarianism2.Theocratic Totalitarianism3.Tribal Totalitarianism4.Right-wing Totalitarianism
Economic Systems Comparison: Market, Command, Mixed
Market Economy: • All productive activities are privately owned, as opposed to
being owned by the state. • Goods and services produced by the country are not
planned by anyone• Production is determined by the interaction of supply and
demand
Economic Systems Comparison: Market, Command, Mixed
Command Economy: • The goods and services, their quantity and prices are all
planned by the government• Objective of the command economy: to allocate resources
for ‘the good of society’.
Economic Systems Comparison: Market, Command, Mixed
Mixed Economy: • Certain sectors of the economy are left to private
ownership and free market mechanisms while other sectors have significant state ownership
• Countries with mixed economies often take up ownership of industries that are troubled. Example: France taking over Renault as it felt social costs of large unemployment undesirable
Legal Systems: Property Rights
Legal System: refers to the rules, or laws, that regulate behavior along with the processes by which the laws are enforced and through which redress for grievances is obtained
Different Legal Systems
Common Law: Based on tradition (legal history), precedent (prior cases), and custom (ways in which laws are applied in specific situations)
Civil Law: based on very detailed set of laws organized into codes. Theocratic Law: Law based on religious teachings
Country Focus: 40 Years of Corruption in Nigeria
• Despite tremendous oil reserves, people are poor. o 300 billion in 30 years from oil
$30 billion debtLife expectancy 50 years
Contract law
• Contract law: body of law that governs contract enforcements
• Property rights: refer to the bundle of legal rights over the use to which a resource is put and over the use made of any income that may be derived from that resource
Lecture II: Determinants of Economic Development
Differences in Economic Development
• GNP vs. PPP (Purchasing power parity)o GNP: measures total annual income received by
residents in a countryo PPP: allows for a more direct comparison in
living standards between countries depending on whether the cost of living is lower or higher as compared to the USA
Broader Conceptions of Development
Noble Prize winner Amartya Sen argues that development should be assessed less by material output measures like GNP or PPP and more by capabilities and opportunities people enjoy• HDI is used –
1.Life Expectancy (function of health care)• Educational attainment (adult literacy, levels of
education)• If average incomes sufficient to meet basic
requirements
Political Economy and Economic Progress
1.Innovation and Entrepreneurship are engines of growth
2.Innovation and entrepreneurship require a market economy
3.I and E require strong property rights4.Stable Political system
States in Transition
• Spread of democracy
Evolution of Commercial Institutions
• Evolution of societies – • Why are individual groups better at
business than others?• The gender gap• Property rights• Evolution of religions• Evolution of economic groups
The New World Order
• Huntington’s thesis vs. Fukayama’s ideas
Nature of Economic Transformation
• Deregulation: involves removing of legal restrictions to the free play of markets, the establishment of private enterprises, and the manner in which private enterprises operate
• Privatization: transfers the ownership of state property into the hands of private individuals frequently by sale of state assets through auctions.
Article Review
Return of Economic Nationalism:
1. What is economic nationalism?• How does trade benefit? (see next slide)• What fear does the article raise?• Why would raising tariffs result in greater chaos?• Why does the article say that “Buy American” label be
erased?• What are the three principles it suggests Obama should
follow?
Spread of Market-Based Systems
Why is trade a good thing? • Trade encourages specialisation, which brings
prosperity; • global
capital markets, for all their problems, allocate money moreefficiently than local ones;
• economic co-operation encouragesconfidence and enhances security.
Article Review
Anatomy of an Idea:
1. What does the word ‘liberal’ mean in Europe?• What does it mean in America?