Social Issues / Eonomic Growth

Eonomic Growth

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Autor:  anton  26 November 2010
Tags:  Eonomic,  Growth
Words: 703   |   Pages: 3
Views: 252

The political, economic, cultural, and legal systems of a country all have a significant impact on the level of economic development; and therefore, on the attractiveness of a country for firms, domestic and international. These systems are interdependent; it is important to realize that the interplay between the political, economic, legal, and cultural structures of a country greatly affect the level of economic well-being. In addition to these systems, it is important for a country to work toward the globalization of its economy.

The political system shapes the economic and legal systems of a country. There are two key dimensions of a beneficial political system that advocates free market economics: a philosophy based on individualism and a representative democratic government. Individualism urges that the individual economic and political freedoms are the foundation on which a society is built. It is important to emphasize that the U.S. government guarantees individual freedom and self-expression; furthermore, people pursing their own economic self-interest best serves the overall welfare of a society. In a representative democracy, there are nine safeguards preserved into law that guarantee elected representatives are held accountable: freedom of expression, opinion, and organization; free media; regular elections in which all eligible voters can participate; universal adult suffrage; limited terms for politicians; fair judicial system (separate from political system); nonpolitical state bureaucracy; nonpolitical police force and armed service; and relatively free access to state information.

The economic system, which is closely connected to the political ideology of a nation, must be a market economy in order to foster any lasting economic growth. A market economy’s supply and demand determines the quantity in which goods and services are produced. The role of the nation’s government must be to encourage competition between private producers. The government can do so by ensuring private ownership, outlawing monopolies, and regulating business practices (antitrust laws). A market economy encourages innovation and entrepreneurial activity.

The legal system of a county has an immense impact on its international business; and further, its ability to foster economic growth. A civil law system is the least adversarial in terms of interpretation. This system’s detailed laws, codes, and regulations are stated in “black and white”; giving the country more stability and a better understanding of how the system operates. The government needs to put in place strong laws against private and public action to protect its entrepreneurs. It is also important to protect intellectual property; in the high-technology economy of the 21st century, intellectual property has become a critical source of economic value. Laws protecting intellectual property actually stimulate innovation and creativity.

While a country’s political and economic system is the largest driver of economic development, other factors also play an important role. In order for a country to sustain long-run economic growth, the business environment must be conducive to innovation and entrepreneurial activity. These “engines” of growth require a free market economy and strong property rights. Even factors such as geography and education impact economic growth. Although a nation cannot change or improve upon its geography, its government should have a high investment in education. Governments that make higher investments in education will have a higher growth rate because an educated nation is a more productive one.

With regard to a nation’s social culture, there are many variables because culture evolves. It is critical that the U.S. and it people have an understanding of how cultural differences across and within nations can impact the business world. Our value system in the U.S. emphasizes individualism, which fosters a great deal of entrepreneurship and dynamism. Our country’s class system has more flexibility than Britain or India; and, class membership is primarily determined by the individual’s economic achievements. Therefore, an individual can gain mobility in social standing by his/her own merit and economic achievement.

The key systems in a nation (political, legal, economic, and cultural) all work together to create a nation’s economic environment. In fostering growth, there are certain dimensions of each of these systems that create a positive affect. It is crucial to follow this “guidelines.”

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