Political Issues In Globalization

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It is undeniable that globalization has generally played an important role in the world economy as it has been supposed to enhance global economic growth by free trade, as well as solve some deep-seated issues like poverty and unemployment, which was analyzed in the previous reflections. Despite the fact that open markets have been expanded, many firms must still follow local rules and regulations of the countries in which they are operating. In other words, this fact highlights that the importance of understanding the political context should be treated as a key to any companies’ success.
Political risks are defined as the impact of politics on markets by all factors that may politically stabilize or destabilize a country, such as taxes, trade
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The influence of these risks is clearly dependent on the level of the investment decision. However, instead of paying more attention to mitigate the risks, there was a common misconception about the politics’ role, as some argued that the importance of public policy and its intervention in the international marketplace can be underestimated because of the trend of belittling role of government in the economy. This argument, however, ignored other aspects of the interaction between policy and international business. For instance, even though the politicians have decreased their roles in domestic economies, global problems in the financial sector and new transformation in European economy such as Brexit may reverse this trend. It is also necessary to mention that governments at all levels are more interested in several aspects of international trade that are important for economic, competitive or ethical reasons. Such misconception, as a result, led to the lack…show more content…
Therefore, it is crucial to gain more knowledge in terms of that philosophy. Specifically, there is a huge difference between autocratic governments and democratic governments, as all control is centralized in one leader or a small group of leaders with the individual rights is limited in autocratic countries while democratic governments, which is known as the most common form of government today, derive their power from the citizens. As a result, it is clearly to state that businesses likely operate in open, democratic countries as they usually offer a high level of political stability, such as the U.S, Canada and Nordic countries. At the national level, these democratic countries also have free market capitalism and a comprehensive welfare state at enhancing individual autonomy. However, history demonstrates that some global firms have chosen to conduct business with countries where the government control the industry. The complexity in doing business with that countries is obviously extensive, but also offers new opportunities for that firms to meet their high demand of scare resources like oil. Even that countries, in spite of political instability, recently have become an attractive destination for many global firms thanks to their internal strength. For instance, although the Saudi
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