The Changing Political Environment: National, Regional and International Forces THE INTERNATIONAL...

The Changing Political Environment: National, Regional and International Forces

THE INTERNATIONAL BUSINESS ENVIRONMENT

DR(PROF) M AMBASHANKAR 1

HOW POLITICAL FACTORS AFFECT BUSINESS

• Monetary and fiscal policies, e.g. taxation• Environmental policies• Regional development schemes• Welfare state measures, including health, social

security, pensions, education• Agricultural support• Immigration policies• Employment protection and regulation of working

conditionsDR(PROF) M AMBASHANKAR 2

THE NATION STATE• Defining characteristics: geographical territory,

sovereignty, monopoly of coercive power; continuity despite changes of government

• Government – the institutions through which the state is run. These may change over time.

• What do we expect of the state?

- national security, system of laws, protection from invasion, effective policing to maintain order


POLITICAL RISKS FOR INTERNATIONAL BUSINESS

• Unstable country environment, where government forces struggle to maintain law and order

• Disaffected groups in society

• External threats, such as from terrorists

• Armed groups in society, who have a political or regional base

• Countries run by military governments


SOURCES OF AUTHORITY IN STATES• Traditional sources such as monarchy or theocracy

(religious rule)

• Constitution – set of basic rules which underpin institutions of government (may be written or unwritten)

• Democracy – legitimacy rests on accountability to the people through elections, contrasted with -

• Authoritarian rule – rule by a single leader or small group


Executive: Government President Government ministries Prime Minister ministries Foreign Affairs_ Treasury Home Affairs _ Agriculture Justice Trade Defence Environment Legislative: Judiciary: Upper house Court system Lower house

Functional framework of government: Checks and balances between executive, legislative and judiciary


DEMOCRACY: BASIC PRINCIPLES

• Rule of law

• Free and fair elections – includes choice of candidates and right to stand for office

• Universal right to vote for all adults

• Freedoms of expression, speech and association


ELECTIONS AND POLITICAL PARTIES• Proportional representation systems (PR) vs first-past-the-post

systems – PR systems are more advantageous for small parties

• Political parties – may be leftist (closer to socialist principles); rightist (closer to conservative principles); or centrist (hoping to appeal to the widest possible range of voters)

• Political parties may also be based on religion, economic interests (such as agriculture) or environmental concerns (‘green’ parties)


Country Percentage of

women members, 2001

Percentage of women members, 2004

Sweden 42.7 45.3 Denmark 37.4 38.0 Finland 36.5 37.5 Netherlands 36.0 36.7 Germany 30.9 32.2 Spain 28.3 36.0 Austria 26.8 33.9 Belgium 23.3 35.3 Portugal 18.7 19.1 UK 17.9 19.3 (2005)

Luxembourg 16.7 20.0 Ireland 12.0 13.3 France 10.9 12.2 Italy 9.8 11.5 Greece 8.7 14.0 Hungary 8.3 9.8

Source: Inter-Parliamentary Union (2004) at http://www.ipu.org

Women in national legislatures in selected EU countries

(lower or single house)


TRANSITIONAL DEMOCRACIES• The consolidated democracy has settled institutions and values,

contributing to political stability

• Democratization - introducing democratic reforms

- introduction of elections, but often with limited political rights (limited right to form political parties and restrictions on free speech)

- legislative assembly in place, but weak in relation to strong executive

• Democratization often goes hand in hand with economic liberalization, offering opportunities to international business, but with risks stemming from weak institutions


GLOBAL POLITICS

• Interdependence of nation states

• Most independent states are members of the United Nations (UN)

• Through the UN, numerous treaties and other conventions promote inter-governmental co-operation

• Role of non-governmental organizations (NGOs) – work with both UN agencies and businesses, e.g. in environmental and human rights areas


THE EUROPEAN UNION

• Major institutions – Council, Commission, European Parliament, European Court of Justice

• A new Constitution for Europe? Are existing institutions in need of reform following enlargement in 2004, with further enlargement to come?

• Euro-sceptic parties and weak voter turnout in EU parliamentary elections suggest doubt over future political reforms


CONCLUDING SUMMARY AND QUESTIONS

• Nation states have become more interdependent: to what extent has sovereignty been eroded through globalization?

• A stable political environment is conducive to international business, but many industries are concentrated in unstable areas, posing risks for businesses.

• The EU seems to be at a turning point in terms of institutional structure, but what sort of structural reforms are likely to occur?


The Changing Political Environment: National, Regional and International Forces THE INTERNATIONAL...

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