Flashcards in Economic Environments and International Business Deck (12):
What kinds of economic systems are there?
What is a command system?
- Government owns most or all resources
- Visible hand of the state, central planning and collectivism
- Bias toward large scale capital intensive production
- Philosophical anchor: communism
What is a mixed economic system?
- Goal of balancing economic efficiency but protecting against the excess of greed and self-interest
- Philosophical anchor: Socialism
What is a market system?
- Mostly private ownership of resources
- Invisible hand, laissez faire, property rights and individualism
- Bias towards enteeprenturial innvoation
- Philisophical anchor: Capitalism
What conditions hamper the development of a universal set of indicators for country evaluation?
- Difficulty in stipulating a definitive set of indicators to estimate the performance and potential of a country’s economy
- Today’s set of perfect measures may prove imperfect tomorrow
- Interdependence complicate interpreting the relationship among elements of the economic environment
How do the measures of economic development indicate?
- Level indicates
- Current market potential
- Current market conditions
- Rate of change indicates
- Future market potential
- Future market conditions
- Possible first-mover advantages
How does the activity of private firms drive economic development?
- Short term
- Firms mobilise productive resources
- Long term
- Firms generate technological change (products and services, processes, strategies, organisations, management practices)
What is necessary for private firms to drive economic development?
- Firms need conducive business environment to develop innovations and deploy entrepreneurship
- Market economy, price mechanism
- Strong property rights
- Key government role
- To create conducive preconditions, although preventing excesses of market economic
- Economic, political and legal systems
- Attractiveness of a country and market/production site
What are the means of economic transition?
- Liberalising economic activity
- Reforming business activity
- Establishing legal and institutional framework
Success in economic transition is linked to how well the government deals with...
- Property right protection
- Fiscal and monetary reform
- Antitrust legalisation and competition policy
What are the shortcoming of GDP as a measure?
- Per capita average takes no account of income inequality, country may have sizeable middle class
- GDP takes no account of non-market household procution
- No account of quality of life
- Does not measure informal market acitivties
- Don’t consider differences in the cost of living