Political and Legal Systems

• political systems include legislative bodies, parties, lobbying groups, and trade unions
• principal functions of political systems:

  1. provide protection from external threats
  2. ensure stability based on laws
  3. govern allocation of resources among societal members
  4. define how societal members interact
• each country's political system is unique
• political systems are constantly evolving
• constituents: people and organizations that support a political system and receive government resources
• legal system includes procedures that:

  1. ensure order
  2. resolve disputes
  3. tax economic output
  4. provide protections
• political and legal systems are interdependent, meaning changes in one affect the other
• legal systems include laws, regulations, and rules
• 3 major types of political systems:

  1. authoritarianism
  2. socialism
  3. democracy
• political system categories are not mutually exclusive
• many democracies also include some elements of socialism
• many former authoritarian regimes now embrace a mix of socialism and democracy
• governments in Europe have implemented relatively socialist policies
• China has applied some democratic approaches to stimulate commercial activities
• Afghanistan, Iran, North Korea, Venezuela, and several African countries are Authoritarian
• Bolivia, China, Egypt, India, Romania, Russia, and Tanzania are Socialist
• Australia, Canada, Japan, New Zealand, US, EU, Latin America are Democratic
• under authoritarianism, the state attempts to regulate most aspects of public and private behavior
• well known authoritarian states from the past include China from 1949 - 1980s and the Soviet Union from 1918 - 1991
• authoritarianism centralizes power in the government
• authoritarian states are generally either theocratic (religion based) or secular (non religion based)
• socialism's fundamental principle is that capital and wealth should be vested in the state and used primarily as means for production rather than profit
• socialism is based on collectivist ideology
• socialism argues that the government should control the basic means for production, distribution, and commercial activity
• socialism takes the form of social democracy in much of the world
• social democracy is an ideology that supports economic and social interventions to promote social justice through democratic means, incorporating both capitalist and socialist practices
• social democracy has been most successful in Western Europe and also plays a major role in political systems of several large countries such as Brazil and India
• social democratic governments frequently intervene in the private sector and in business activities as in Italy and Norway
• in social democracy, corporate income tax rates are often relatively high as in France and Sweden
• Germany has experienced net outflows of FDI as businesses seek to scape extensive regulation
• democracy is a government in which people choose leaders by voting
• democracy is characterized by 2 major features:

  1. private property rights
  2. limited governments
• private property rights: individuals can own property and assets and increase one's asset base by accumulating private wealth
• private property rights in democracy encourage individual initiative, ambition, and innovation
• in a limited government, the government performs essential functions that serve all citizens
• in a limited government, state control and intervention in economic activities of private individuals or firms is minimal
• limited governments allowing market forces to determine economic activity ensures resources are allocated with maximal efficiency
• socialism emerges because of negative externalities that occur in purely democratic or capitalistic systems
• for the past two decades, Japan has been striving to achieve the right balance between democracy and socialism
• Australia, Canada, the US, and EU are best described as having a mixed political system