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Political Forces

Political Forces. Chapter 9. Ideological Forces. Communism Who controls factors of production? Expropriation Confiscation Why did it fail? Capitalism Are any organizations government-owned? Socialism European socialism Developing countries. Conservative v. Liberal. Conservative

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Political Forces

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  1. Political Forces Chapter 9

  2. Ideological Forces • Communism • Who controls factors of production? • Expropriation • Confiscation • Why did it fail? • Capitalism • Are any organizations government-owned? • Socialism • European socialism • Developing countries

  3. Conservative v. Liberal • Conservative • Right wing • Liberal • Left wing • Political advocacy groups

  4. Government Ownership • Why? • Five reasons • Unfair Competition? • Can lower prices • Cheaper financing • Government contracts • Export assistance • Can hold wages down

  5. Privatization • “Transfer of public-sector assets to private sector, the transfer of management of state activities through contracts and leases and the contracting out of activities previously conducted by the state.” • Examples • 1985-2002: $525 billion assets privatized • US privatizing? • Example: Water in the UK

  6. Government Protection • Gulf War • Terrorism • Italy • September 11 • Department of Homeland Security • Other changes • Other groups

  7. Government Protection • Terrorism (cont’d) • Kidnapping • Columbia & Peru • Pay the ransom? • Countermeasures • Cassidy & Davis • International Training, Inc. • Other terrorism • Ethnocentrism • Nuclear terrorism • Chemical and biological terrorism • Islamic fundamentalism

  8. Government Stability • Government is stable if • Maintains itself in power, or • Its fiscal, monetary, and political policies are predictable and not subject to sudden, radical changes • Unstable • Lebanon • Zimbabwe

  9. Traditional Hostilities • Arab Countries – Israel • Hutus & Tutsis • Massacre • Retribution • Zaire • Tamils – Sinhalese • Sri Lanka • Albanians, Bosnians, Croats, and Serbs • Ethnic cleansing • United Nations & NATO • South Africa

  10. International Organizations • United Nations • Main functions • Transnational Corporation Division • UN Conference on Trade & Development • IMF • GATT/WTO • OPEC • EU • OECD

  11. Country Risk Assessment • “Bank or business having an asset in or payable from a foreign country or considering a loan or an investment there, evaluates that country’s economic situation and policies and its politics to determine how much risk exists of losing the asset or not being paid.”

  12. Country Risk Analysis • Five Types of Risk • Information Content • Nature of Business • Length of Tome Required • Who does a CRA? • Lessons of International Debt Crises • External shocks occur to developing countries • Economic policies impact default • Need substantial growth • Social and potential political costs of development • Ripple effects

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