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.