Chapter 2 International Business
Chapter 2 Assignments
1. Free market economies stimulate greater economic growth, whereas state-directed economies stifle growth. Discuss.
In a free market economy, individuals/corporations are allowed to own property and other assets. Ownership provides incentive for people to work hard, be innovative and creative; all while hoping to attain additional wealth. Sequentially, the desire from individuals/corporations to accumulate wealth enhances the whole economy and generates economic growth. In contrast, in a state-directed economy, individuals/corporations are not allowed to own substantial quantities of property and other assets. The objective of a state-directed economy is for everyone to work for “the good of the society.” Although this seems like an honorable ideal, a system that asks individuals to work for “the good of the society” rather than allowing individuals to gain wealth does not provide a great incentive for people to work hard, be innovative and creative. This leads to state-directed economies typically generating less innovation and less efficiency than free market economies.
2. A democratic political system is an essential condition for sustained economic progress. Discuss.
Even though totalitarian regimes have achieved rapid economic growth, it seems that sustained, decades-long periods of economic growth are not common under totalitarianism and democratic principles are more conducive to long-term economic growth than are totalitarian ones. A contributing aspect is that democratic systems permit for the steady transfer of power through elections, and thus imparts political constancy; which is an essential prerequisite for rapid economic growth. 3. What is the relationship between corruption in a country (i.e., government officials taking bribes) and economic growth? Is corruption always bad?
The United States shows public contempt for bribery although evidence proposes that bribery is not uncommon in the United States.
1. Free market economies stimulate greater economic growth, whereas state-directed economies stifle growth. Discuss.
In a free market economy, individuals/corporations are allowed to own property and other assets. Ownership provides incentive for people to work hard, be innovative and creative; all while hoping to attain additional wealth. Sequentially, the desire from individuals/corporations to accumulate wealth enhances the whole economy and generates economic growth. In contrast, in a state-directed economy, individuals/corporations are not allowed to own substantial quantities of property and other assets. The objective of a state-directed economy is for everyone to work for “the good of the society.” Although this seems like an honorable ideal, a system that asks individuals to work for “the good of the society” rather than allowing individuals to gain wealth does not provide a great incentive for people to work hard, be innovative and creative. This leads to state-directed economies typically generating less innovation and less efficiency than free market economies.
2. A democratic political system is an essential condition for sustained economic progress. Discuss.
Even though totalitarian regimes have achieved rapid economic growth, it seems that sustained, decades-long periods of economic growth are not common under totalitarianism and democratic principles are more conducive to long-term economic growth than are totalitarian ones. A contributing aspect is that democratic systems permit for the steady transfer of power through elections, and thus imparts political constancy; which is an essential prerequisite for rapid economic growth. 3. What is the relationship between corruption in a country (i.e., government officials taking bribes) and economic growth? Is corruption always bad?
The United States shows public contempt for bribery although evidence proposes that bribery is not uncommon in the United States.