POLI 3001 – Short Essay
Within all nation-states, a political regime is imposed which attempts to protect the individual interests of that country, however, it can also have the potential to limit that countries economic development and the United States and China are no exception to this rule. This essay will discuss, analyse and contrast the distinct regimes of each nation with regard to their positive and negative aspects from the viewpoint of a potential foreign investor wishing to do business in either of these states. Each political regime creates opportunities and threats for potential businesses and a thorough understanding of these characteristics is increasingly important for any organisation wishing to become successful in a global market. This essay will begin by defining, discussing and comparing the essential features of the two disparate regimes, followed by considering several elements of each including government controls, social economic figures, taxation systems and political stability before concluding on which businesses would be strategically preferred in each of these two powerful economic nations.
According to Kitschelt (1992, 1028), political regimes are “rules and basic political resource allocations according to which actors exercise authority by imposing and enforcing collective decisions on a bounded constituency”. The united states is a constitutional republic which subscribes to the ideologies of a liberal democratic nation characterised by “free and fair elections” and a “competitive political process” Walecki (2003, 1), with its market operating on a capitalistic, neo-liberal level that favours de-regulated government controls and according to (Campbell and Pederson 2001, 5) “free-market solutions to economic problems, rather than bargaining or indicative planning…”. Such a society is marked by features such as freedom of speech, investment from the domestic and international market, a generally high standard of living and high personal income tax. In contrast the Peoples Republic of China (PRC) which was traditionally a communist nation until the economic reforms in 1978 onwards attempted to ‘modernise socialism’ to capture the effectiveness of the market and reform the economy. They are currently a single party socialist republic with the official term for their mixed economy known as ‘socialism with Chinese characteristics’ which was described by Gabriel (2006) as a:
new economic strategy based upon decentralisation of control over the state owned enterprise sector, expanded market transactions to replace command and control allocation, dismantling of the rural commune system (completed in 1985), increased use of material incentives in workplaces, and ultimately, upon the modernisation of the Chinese economic infrastructure (as well as military infrastructure).
Rather than being rigidly hierarchical and authoritarian, which is often the assumption, political power in China is now diffuse, complex and at times highly competitive (Martin 2010). Since 2002, the PRC has actively sought out private entrepreneurs and accepted ‘Wholly Owned Foreign Enterprises’ (Klaric 2009) albeit with some restrictions into its market.
Political stability is an important consideration when operating any business, the last thing a company wants is to have its profits marginalised or completely removed by new regulations from the state. While the United states as a liberal democracy allows for the benefit of conflicting ideas, strategies and competitive markets, its competitive nature of political pluralism also means that a company operating within a politically sensitive industry (such as timber harvesting) may quickly find itself under new...