Political Systems in International Business

The basic role of a political system is to integrate the parts of a society into a viable functioning unit, bringing together people of different ethnic or other backgrounds and allow them to work together to govern themselves. Consequentially, the ultimate test of any political system is its ability to hold a society together despite pressures from foreign ideologies (such was the reason for the failure of the USSR and Yugoslavia). Political systems are founded upon political policies, which are established by combining different points of view that are articulated by key constituencies, such as politicians, businesses, or other special-interest groups. Other process functions include policy making, implementation, and adjucation.

The political policies implemented are often influenced by MNE managements, who are greatly affected by such policies. This is often done in the interest articulation stage through the CEO of an MNE and their employees; however MNEs are generally able to influence policy throughout the entire implementation process, so long as they do not influence laws inappropriately or are perceived as doing such.

The body of constructs, theories, and aims that constitute a sociopolitical program is know as a political ideology, such as liberalism, communism, or socialism. Most modern societies are pluralistic, holding two or more ideologies simultaneously. This is often due to the coexistence of multiple languages, ethnic backgrounds, tribal groups, or religions within a country.

The two extreme ideologies are democracy and totalitarianism. Democratic ideology is based on the notion of wide participation by citizens in the decision-making process. However, most democratic nations today (the US included) are representative democracies, in which citizens elect representatives to make decisions, rather than vote on every decision themselves. The basic tenants of democracy include the freedom of opinion, expression, press, and organization, elections, limited terms for elected officials, an independent court system, respect for personal property, nonpolitical bureaucracy and defense infrastructure, and accessibility to the decision-making process.

Democracy is also based on the ideas of political rights and civil liberties. Indicators of political rights include the degree to which fair and competitive elections occur, the ability of voters to endow representatives with real power, the ability to organize political parties, and the existence of safeguards on the rights of minorities. Indicators of civil liberties include the existence of the freedom of the press, equality under law for all individuals, the extent of personal social freedoms, and the degree of freedom from extreme governmental indifference or corruption. Democracies emerging since the 1970s, however, are posing an issue to international business managers due to their instability. This instability is the result of internal division, corruption, militaries and oligarchies, and destabilization from abroad. Additionally, democracies not only vary in the individual countries' amount of citizen participation in decision making, but also in the degree of centralized control. While confidence in democracies in general is waning, particularly due to the presence of lobbying groups, however people in democratic countries still believe democracy to be the best form of government.

Conversely, totalitarianism takes the power in the decision making process away from the people and gives it to a few individuals. Totalitarianism can be theocratic, as is the case with Islamic countries such as Iran, in which religious leaders are also the political leaders. Secular totalitarianism also exists, in which control is enforced through military power, such as was the case in Iraq while under Saddam Hussein's rule. Totalitarianist ideologies include fascism, authoritarianism, and communism. Fascism, much like the reign of Benito Mussolini, is simply defined as the complete rule over people, whereas authoritarianism not only seeks to rule people, but also seeks to rule their religion. Communism is a form of secular totalitarianism in which political and economic systems are inseparable. Since the fall of the Berlin wall and breakup of the Soviet Union, however, many totalitarian governments have been dissolving or, at the very least, liberalizing. As these countries move away from totalitarian to democratic states, their instability increases, creating problems for potential FDIs.