Anglo Saxon. EU.Asia – Flashcards

The concept is greatly different the Anglo Saxon model has its historical origin in Great Britain and is patterned after the classical liberal idea of Adam Smith and the classical precepts of classical liberalism. The European model uses economic idea enunciated in France and Germany in 10th century that place less faith in the invisible hand and call for more state intervention in economic affairs. "It is legal foundation is based on what James Buchanan in terms the constitutional order of socialism" Asian model focus on high rate of capital foundation and an either devices, often supported by the state. The patter of ownership has different characteristics. For example, The Anglo-Saxon model is widely held corporation dominate. European and Asian model are state-owned and family owned corporation are common. Especially Medium-sized companies. Apart from Japan, most of countries are family owned. How they raise capital is different. Anglo-Saxon model gain from through stock and bonds market. But in Asia and European model. Capital are coming from the bank. They are more dependent on the credit. The role of government is also different. The size of government is measured by its spending and taxation. Anglo-Saxon model is relatively small but European is relatively large. The European countries have uniformly high share of the state in overall economic activities. The economic of freedom is also different. Main questions can be asked such as Are business free to invest as they wish? Are they overburdened by taxes? Are their property right secure etc? Anglo-Saxon model countries tend to have a stronger economic freedom score than that of EU and Asian The Legal System The European model use civil law which is a legal system in which law are written and codified and are not determined by judges based on custom or precedents originally from France. The Anglo Saxon model use common law which is a system based on custom and precedent rather than a written legal code. In USA, high labor mobility and short tenure Labor union play an important role in EU

The Anglo Saxon model is a benchmark in neoclassical economics well developed product and factor market. It is done by on the spot transaction. Unlike Eu and Asia. In Anglo Saxon model county they use common law which is system based on custom and precedent rather than a written legal code. In US legal system superior appeals court ensure that common law produces consistent law even-thought different judges may rule differently in their own jurisdictions. Hayke notion of spontaneous order, if a legal system lead no inefficient, outcomes, it will appraiser over time as more efficient rule show it to be inferior. The more importantly, business organization and cooperate governance is different from Europe. Firm objects is for short run is profit maximization and for long term market maximization of market capitalization. Share is largely owned by individual and institutional investors. The US especially tends to be run in the interest of shareholders more than in other countries. Managers have the job of maximization shareholder values. Firms are easily to obtain external funds by issuing new shares and bonds. Corporate motivate managers and executive members by a stock option, golden parachute and matching employee contribution to their 401 K retirement account invested in corporation market stock. Venture capital is the US capital market promotes dynamic change by moving capital around quickly. In Anglo Saxon, the government does not define clear priorities in economic affairs. The government sees itself as watching-dog for private excesses. The government intends to correct market and imperfection. The weakness of the US system, weak regulation and decentralization of decision making result in high cost and poor outcomes in the presence of market failure. For example, medical care, primary and secondary education/ In the 1960s and 1970s, the high cost and inefficient regulation promoted a management toward deregulation. It can leads to lower price for most but all customers and the diversity of choice and more freedom of choice. American trade unions are more decentralized than their counterpart in EU. More authority rests with local unions. US labor union does not bargain at national level. The labor market in Anglo Saxon model if flexible labor market. especially in US. employee freedom to hire and fire employees and change condition of work and pay with free restrictions. It is a liquid labor market, unlike EU, Long term unemployment was rare. Labor turnover is high, Labor trade is mobile, unemployment rate fluctuated widely.

The Basic characteristic of Europe model is that it viwed that relatively strong state is necessary to promote the general welfare. The European welfare state replace families private saving and charity with the state program for economic security and welfare Marxism and socialism were accepted as legitimate alternative. Social mobility was low, lefties parties and social intellectual advocated a stronger government role in economic development. For example, Germany Inc, cross holding is common. ownership of signification block of share by one company in other companies. a fewer insider restriction, unlike US. Co-determination is district characteristic of European model because it formally gives non owners of companies ( employee) some of the same right. The Work Council Law The Work council law make it cumbersome for a company to fire or lay off workers and is source of the labor inflexibility, that may raise workers loyalty and enthusiasm and reduce turn over. The Labor Market is more regulated, meaning that they have high employee protection, long paid holidays and maternity leaves, relatively short-work hoping that with fewer hours worked, there would be more job, Employment protection law have resulted in a two tier labor market. High taxes on labor, social insurance contribution. High labor costs promoted corporations to substitute capital for labor, weakening demand for labor. Union strong and more centralized union. Generally high unemployment rate, long term unemployment is common. Labor turn over is low compared to U.S Income Distribution Protection, European countries have higher percentage of taxation and government spending than in Anglo Saxon, or Asian model. The government social welfare spending is the highest in European model. Citizen of Europe have come to rely more and more on receiving pension, health care and social insurance from the state rather that from private saving. Public enterprise are public utilities such as telecommunications, power generation, broadcasting station, coal, oil, railroads, airlines, shipping, automobile. Nationalization for its own sake. Many public enterprise were privatized by issuing share in the 1980s and 1990s. The government typically remained minority shareholders. In France, public enterprise performance was generally not inferior to large private enterprise. The government appointed good managers. Last nationalization spell: France in the e early 1980s under President Mitterrand. Privatization from the 1980s in major European counties.

In Europe the prevailing pattern is a mixed economy with the public enterprises operating side by side with private corporations. In Great Britain during the early years of the 20th century, the post office, utilities, armaments, and the Port of London belonged to the public sector; to them were later added various forms of public transport, thus markedly widening the role of the state sector. Under the 1946-50 Labour government, a massive nationalization program was effected embracing coal mining, the iron and steel industry, the gas industry, railways, and long-distance road transport. During the Conservative regime of Prime Minister Margaret Thatcher (1979-90), many public enterprises were privatized. The postwar French government undertook a similar extensive nationalization program that included banks, insurance companies, finance houses, and manufacturing concerns. Many were subsequently privatized. in the United States private companies are generally allowed to provide such services subject to strict legal regulations. In some countries industries such as railways, coal mining, steel, banking, and insurance have been nationalized for ideological reasons, while another group, such as armaments and aircraft manufacture, have been brought into the public sector for strategic reasons. In communist countries most forms of production, commerce, and finance belong to the state; in many newly independent and less-developed countries, there is a very large public-enterprise sector.

The European debt crisis is the shorthand term for Europe's struggle to pay the debts it has built up in recent decades. Five of the region's countries - Greece, Portugal, Ireland, Italy, and Spain - have, to varying degrees, failed to generate enough economic growth to make their ability to pay back bondholders the guarantee The global economy has experienced slow growth since the U.S. financial crisis of 2008-2009, which has exposed the unsustainable fiscal policies of countries in Europe and around the globe. Greece, which spent heartily for years and failed to undertake fiscal reforms, was one of the first to feel the pinch of weaker growth. When growth slows, so do tax revenues - making high budget deficits unsustainable. The result was that the new Prime Minister George Papandreou, in late 2009, was forced to announce that previous governments had failed to reveal the size of the nation's deficits. In truth, Greece's debts were so large that they actually exceed the size of the nation's entire economy, and the country could no longer hide the problem. Why? Investors responded by demanding higher yields on Greece's bonds, which raised the cost of the country's debt burden and necessitated a series of bailouts by the European Union and European Central Bank (ECB). The markets also began driving up bond yields in the other heavily indebted countries in the region, anticipating problems similar to what occurred in Greece.

The The global economy has experienced slow growth since the U.S. financial crisis of 2008-2009, which has exposed the unsustainable fiscal policies of countries in Europe and around the globe. Greece, which spent heartily for years and failed to undertake fiscal reforms, was one of the first to feel the pinch of weaker growth. When growth slows, so do tax revenues - making high budget deficits unsustainable. The result was that the new Prime Minister George Papandreou, in late 2009, was forced to announce that previous governments had failed to reveal the size of the nation's deficits. In truth, Greece's debts were so large that they actually exceed the size of the nation's entire economy, and the country could no longer hide the problem. Investors responded by demanding higher yields on Greece's bonds, which raised the cost of the country's debt burden and necessitated a series of bailouts by the European Union and European Central Bank (ECB). The markets also began driving up bond yields in the other heavily indebted countries in the region, anticipating problems similar to what occurred in Greece.

The Swedish Model aimed at providing economic security, including full employment, and egalitarianism, which included both reducing income differences and eliminating poverty. The institution created to carry out the Swedish model were a large public sector founded by high tax rate; strong stabilization policies, including active labor market intervention and centralized wage bargaining. Also, income equities was due to government income redistribution. The Swedish welfare system provides an extreme microcosm of welfare program in other part of Europe. In Germany, France, Italy, transfer for pensions, unemployment, maternity leaves, and other benefits are paid out of general revenues on a pay as you go basis.

Indicative planning in France plans from 1947 to the 1980s. The plan played an important role until the fist half of the 1960s when there were clear national goals.

Strong demand for public goods and government service. Risk Aversion --> social insurance and income protection program. Choice over the efficiency-equity trade-off under low social mobility. Intellectual tradition, strong unions, and socialist and labor parties.

The Asian, model it experienced a rapid economic growth and catch up and four common characteristics. The first, there is a strong role of government in economic development: building the framework of a modern economy in a short period to begin industrialization such as the factory system, roads, railroads, ports, post and telecommunications, banking and education. The second, The gerschenkron effect, A later comer shorten the process of industrialization by adopting modern technology and institutions from advanced economies. The third is Industrialization through resource mobilization, rapid growth in labor and capital. The high rate of investment in human and physical capital are common to the Asian model. The forth is outward orientation, Export promotion and low import barriers which is exposing domestic industries to the world market. The Lewis model Pre-modern agricultural economy is Monsoon Asia, there was high population density, low income and labor surplus in agricultural sector. Industrialization trade and growth: Comparative advantage in labor intensive manufactures, industrialization starting from light industry, investment in human capital as well as physical capital, industrial transition to heavy industry.

Just like European model, Asian model is common to finance bank loans rather than capital market (share ad bonds) Shareholding and conglomerates are common. Zaibatu system is used in Japanese market before world war 2 which were vertical or horizontal conglomerates that dominated Japanese industry. The keiretu were take place in postwar. The keiretu are horizontal vertical conglomerates with large banks at their center. It was boom from the 1950s-1980s, and it was furthermore Asia etc, In Asia families own the largest business. The confusion family ideology is reflected in East Asia. Asian firm usually deal with other firms on the basis of personal agreements, informal enforcement, or existing trust relationship. The positive element is that it reduce the principal agent program but cross holding creates a further risk of expropriation of minotry shareholders. The family owner of a number of companies can divert asset from one company to another. The problem is that the family run chaebol can be described as poor corporate governance, because it is more likely the authority of the company is past to the son and it is high possibility that company use asset for the benefit of the family members place Korean.

The Japanese company model. Japan is a society of long term commitment. Face to Face communication social relations rather than impersonal on the spot market transaction of atomicstic individuals. Four characteristics are The lifetime employment system, rational contracting ( between the core firm and suppliers), the close government business relationships. Unlike in Europe and with the clear exception of South Korea, Union and employment protection have been weak in Asia. In Japan, Labor union tend to be enterprise union. In Asia it varies from country to country. For example Singapore has the least amount of protection in its labor market. but Thailand has the most flexible of democratic labor market. In Asia, percent labor agreement covered by collective bargaining and percent labor unionized The lack of collective bargaining means that workers bargain individual with employers. Without collective bargaining and its threat of strike, we suspect that Asian workers have less bargain power

The characteristic of Japanese economy is that a share economy. A share economy is one in which employee share the risk of he company by having bonuses, based on profits, as a substantial component of their compensation. The earning wage profile in Japan is a lot more steeper than in the IS. Steeper as the firm size expands. What happening here is that the worker get pay more as the time elapsed. The Worker become productivity. Rising MPL through extensive training and experience. ( human capital then increased or embed into individual. Blue collar workers also have steep profiles. Companies want employees stay at the company and that lead to firm specific skill based in the market. Ins there an intrinsic seniority element? Wage for the old workers Firms are systematically underpaying younger works. Young workers are accumulating intangible saving; Workers do not shrink, because they do not wish to lose the wage premium later in their working life.

This system facilitates firms investment in human capital (worker training) because the return on investment for firms become high when workers stay with the firm long. Workers wages grow as they stay with the firm long. So they choose to stay long. Low turnover saves labor costs for employees. It also has been regarded both as a plus for the system, increased loyalty and better trained workers) and as minus (companies are unable to shed workers during economic downturn) Also it requires lower motioning costs and this is best suited to manufacturing firms that rely heavily on skilled blue-collar workers. But it should be emphasized that this system is may not be suitable for the new economy; innovations rather than skill formation of production workers is critical.

Policy to encourage production, investment, research and development, modernization and reorganization in certain industries and discourage such activities in others. Economist Patrick claimed that it has certain characteristic of microeconomics policy, incentive to save, invest and engage in R&D which increase the productivity capacity of economy in the long run.

1) Capability of the government to draft and implement policies. 2)Broad consensus on goals 3)Compliance by the industry 4)Availability of policy tools

Ministry of Finance, Ministry of Economy, Trade and Industry, the bank of Japan were in charge of industry policy. 1)Protection was that high traffits and imports quotas. 2)Subsides loans and tax incentive: low interest rate export credits, accelerated depreciation allowance, tax credit for investment expenditures, research grants, loans form government. 3)exemption of antitrust regulations 4)Administrative guidance: non-legally-binding recommendation made by government ministries to private companies for moral suasion 5)Industry with comparative advantage 6)Industry producing goods with income elastic demand 7) Industry whose productivity growth is rapid

Private corporations became stronger and more independent Reorientation of industry policy: more emphasis on the assistance for declining industries.