-------------------------------------------------
Week 4, Term Paper cHAPTER 2 National Differences in Political Economy By: Roberta Gandy National University
November 30, 2014

There are many differences between business in the United States and other countries with the way the political, economic and legal systems are setup. Cultural practices have an influence with the growth of business to include the size of the population, education and the skills learned and practiced for business. Cost, risks, and benefits will help international businesses decide if they want to do business in other countries. The two differences in communist and democratic political systems have a big difference to how some organizations could run and can affect the business even more. I will focus on the political economy which talks about the political, economic and legal systems in the forefront for discussion.
Poland grew 1.5% during the 2008-09 financial crisis while others contracted. 1989 Poland became a democracy after four decades of communist rule. 2004 Poland joined European Union giving access to the large consumer markets. Poland embraced market-based economic policies and exports 40% GDP making it a major exporter. Poland kept public debt in check by not allowing it to expand, like other countries did, during a recession. Poland achieved investor confidence and was able to prevent large outflow of funds during economic turmoil. Other countries had their investor pull money out of these economies causing growing government debt, dropping currency values and forcing them to require IMF and EU help. Poland also had a tight monetary squeeze to curb inflation and make joining the European Union easier during the early 2000’s. Though criticized for tight monetary policy, it helped prevent an economic crisis. Poland also benefited from the economic stimulus in Germany, by using a program called cash for clunkers to boost the demand for German cars because they have many car plants.
To understand the political system we need to understand that it means it is a system of the government. The degree’s by which it emphasizes its growth is the individualism and also the democratic or totalitarian governments. These degrees are interrelated as collectivism leans toward totalitarian and democratic leans more toward individualism. A collectivism system stresses a collective goal over the individual goals to aim at supporting the society that would be that society is more important than the individual and restricting the freedoms of the individual. Socialists make it easier for the individuals to make profits over society and profits are not to benefit anyone except the individual. Communists believe that violence and totalitarian dictatorship is the only way for the people to grow. Social democracy is more enduring than communism and has a higher potential for growth because it is more for the people than it is for the individual or the government.
China has a population of more than 482 million people and a growing economy to match in growth with most of these people living on less than two dollars a day. Eighty-five percent of the poor people live in rural areas and have been forced by the country to work in the areas that they live due to laws preventing them from going to urban areas to seek employment. Most of the workers are denied state benefits and protection due to status and end up having to endure working conditions that are bad. “They are forced to work overtime, denied contracts and social security rights and have to work in conditions that pose a severe health risk. The majority of these workers are women who have to endure working as much as seventy hours a week, no maternity leave, no child care, and cramped living conditions that have up to six people sharing a small dormitory. The ones who have children end up sending their children to relatives to take care of them so that they can work. They have no freedom to start labor or trade unions, and the government has a labor board to keep them from having the ability to start one. They suffer from occupational diseases and injuries with no compensation for these problems, and the workers are not given time for injury or sickness. The state trade union has not taken any action to fix this and allows the companies to exploit the loopholes in the law to keep operating and not pay for any of the injuries or illnesses” (Sweatshops in China).
Poland’s unemployment rate has hit 11% due to migrant worker returning from other countries in Western Europe. Their tax system is still bad, being complex and archaic. Ranking 151st out of 183 different countries surveyed for their tax systems. Doing business with Poland is hard do to because of its extensive regulations. Poland is trying to simplify their tax system. In March 2009 entrepreneurship law was passed, reducing health, tax, and labor to make it easy to start a business. Privatized, state-owned enterprises has the GDP accounting for 0.6% in 2009 and 2.5% in 2010.
Individualism gives the individual the ability to make their own decisions for their own growth which meets their own interests with no regulation. Individualism is built on the tenets that guaranteeing individual freedom and self-expression are important and letting people pursue their own economic self-interest is best for the welfare of society. This opposes the concept of the government dictating what they think is best for the society. The central message that is transmitted is society should be based on individualism and not controlled by the government. The cold was based on these concepts of collectivism that was supported by the Soviet Union and individualism that the United States supported. From the late 1980’s until about 2005, the waning of collectivism was matched by the ascendancy of individualism. Democratic ideals and market economics replaced socialism and communism in many states (Hill, 2013).
Democracy and totalitarianism are the common ways that societies are governed with them being totally different. Democracy is a government of the people by the people where it is exercised by officials either directly or elected. It is a belief that dates back to ancient Greece that citizens should be involved in the decision-making and it larger societies it is by representative democracy. Totalitarianism denies the citizens the ability to have a say what is good for the society and restricts a lot of the freedoms. There are four types of totalitarianism in existence today, and they are communist, theocratic, tribal and right-wing. Communist is the control with violence and is on the decline with only a handful of countries still in existence today. Theocratic is the political power being monopolized by a party or group governing by religious principles. Tribal is the influence of power for a certain tribe and is mostly in Africa. Right-wing gives an individual economic freedom but not political freedom.
Germany was a totalitarian government for an amount of time and a group called the Extreme Socialists encouraged the success of the Russian Revolution setting up worker and soldiers councils in industrial cities. The moderate socialists also demonstrated against the rule of the Kaiser. The Kaiser abducted, and the chancellor stepped down and opened the seat for a moderate socialist to allow progress for the government. The social democrats had to act quickly to prevent the extreme socialists from seizing power. To gain support from the people an election was announced for the National Assembly and a revolution was started against the extreme socialists to regain control of the cities. The extreme socialists were divided into two parties, and they wanted a revolution to create temporary dictatorship based upon the will of the majority of the people. One group wanted a full parliamentary government while the other group wanted a communist Germany through a series of revolutions (Totalitarianism).
One of the most important, but under-researched and least well understood, instruments of the Chinese Communist Party (CCP) is the extensive national network of Party schools (approximately 2,700). They serve as the key institution of mid-career training and indoctrination for all Party cadres, many government cadres, some military officers and selected businessmen. In addition to its training and indoctrination functions, the Party school system (particularly the Central Party School in Beijing) is also an important generator of policy initiatives. Not all Party schools are stalwart institutions, with some being involved in corruption scandals, but on the whole they have come to play an increasingly important role in the CCP's rebuilding efforts in recent years. (Shambaugh, 2009).

There are three types of economic systems in use, and they are the Market, Command, and mixed economies. The market economy has privately owned businesses that are not owned or controlled by the state. For the market system to work, supplies must be limited which puts a restriction on the goods. This gives the organization the ability to raise prices to make a profit and keep the supply limited to make it demanded more. The government should be involved to make the market more free and fair for the competitors allowing the consumers a better price. Command economy allows the government to decide what is produced, the quantity to be available and the price for which it is sold. This gives the government to ability to decide what is better for the society and dictates what the society will do. It also makes it where the enterprise can not go out of business and can make the economy go stagnate. Mixed economy gives some areas the ability to have private ownership while the other areas have government ownership and planning.
Legal systems refer to the laws that are applied to the control of the economy, how they are regulated and enforced and any process for retribution. The laws are made by the political system and are usually influenced by historical events and practices. It allows for the government to define how companies will do business and the laws that regulate the businesses. Legal systems do vary and can be the things that will determine if a business will do good and thrive or if they will not want to do business at all. The three different types of legal systems are common law, civil law, and theocratic law.
Common law is based on tradition, precedent, and custom (Hill, 2013). Common law gives flexibility in judging that other systems do not where the judge can interpret the laws for unique circumstances. Civil law is organized by codes for the laws that judge’s use to determine the outcome of cases without interpretation. There is less flexibility with civil law compared to common law where judges can only apply the laws. Theocratic law is based on religious beliefs and teaching. It is used to govern all aspects of life instead of applying or interpreting laws. It hinges on moral behavior and morals that are followed by religious societies like the Islamic, Hindu or Jewish.
Contract law is the difference between common law and civil law with the contract being a binding document that outlines the conditions on how business will be conducted. It gives the body of enforcement the ability to take action with anyone that feels that the other party has violated the contract. In common law, contracts will spell out all contingencies in detail where civil law contracts are short and not as specific but follow the law codes. With international businesses, it can be very complicating if the contract is written in one law and the other country uses the other law to dispute it. The United Nations Convention on Contracts for the International Sale of Goods (CIGS) helps with establishing uniformed rules for making contracts for international businesses for a smoother interpretation on disputes.
Property rights are the legal rights over the resource that used to make an income for the corporation from that resource. It can be patent, copyright, and trademark for a product that the company has granted to them for their resources. Property rights can be violated through private and public action. Private action is theft, piracy, blackmail and such from private individuals or groups. Weak legal systems can give criminals a better chance of doing this and them be able to get away with it and even continue to do it. Public action is when government officials, politicians, or government bureaucrats take money, resources or property from property holders. This can be accomplished from taking property or giving property without compensating the owner, applying taxes or requiring expensive licenses or permits for property owners. Corruption is seen and treated as illegal, and when discovered, violators are punished by the full force of the law (Hill, 2013).
Intellectual property is property produced like computer software, a screenplay, music score, or a chemical formula for a new drug. Patents are to give the inventor exclusive rights for the product for a defined period to continue to manufacture, use or sell the product. Copyright is the exclusive legal right of authors, composers, playwrights, artists, and publishers to do with their work what they want to. Trademarks are a design and or name that a company uses to officially register their product and differentiate it from other similar products. Intellectual property has become an important source of income for businesses, and it has become harder to protect particularly with the ability to copy and even share via the internet. Intellectual property laws have paved the way for people to get rewarded for the creativity and to stimulate ideas and efforts.
World Intellectual Property Organization has become an organization to protect intellectual property in 183 countries because the law from the countries have become laze and often not enforced. It has been noted that all countries have laws to protect intellectual property and with the ability for people to share it over the internet and around the world it made it impossible to police without this organization. Organizations that deal internationally keep pushing for laws to govern intellectual property protection around the world in all countries and to ensure laws will protect the property.
Product safety laws set standards for the produce to adhere to make sure it is safe for consumers to use. Product liability holds firms responsible for product that can cause severe injury, damage or death. Liability is much greater when products do not meet the standards, and there are civil and criminal laws governing this. Civil is monetary gain for damages and criminal is fines or imprisonment. The liability laws are not the same in all countries that can cause the organizations to have to get liability insurance that can be costly and make them less popular in the world market. This can bring up ethical issues about products from other countries and make people more cautious with doing business with other countries. The standards at what things are built to are not the same in all the countries and maybe there should be laws that govern the standards to fit all countries.
Political economy and legal system apply to the politics, economy and legal systems of all countries and should be the talks for future business. The systems are different for all the countries, and it needs to be looked at for everyone to work together. Business growth is impacted by the differences in culture, and some countries do things that they think are correct for their culture. Doing business in other countries will always be based on the costs, the risk involved and what benefits it will get from the merger. Communist and democratic political systems are very different and can affect the way business is conducted and will also dictate how some organizations will run.

References: Hill, C. (2013). International business: Competing in the global marketplace (9th ed.).
New York, N.Y: McGraw-Hill.

HR Corruption in IT companies - exposed. (n.d.). Retrieved November 27, 2014, from http://psenthilraja.wordpress.com/2012/11/07/hr-corruption-in-it-companies-exposed/ Shambaugh, D. (2009). The China Quarterly. Cambridge Journals Online, Volume 196, Pp 827-
844. Retrieved November 27, 2014.

Sweatshops in China. (n.d.). Retrieved November 27, 2014, from http://www.waronwant.org/overseas-work/sweatshops-and-plantations/china-sweatshops. Totalitarianism. (n.d.). Retrieved November 28, 2014, from http://www.funfront.net/hist/total/n-german.htm.