5.2 Political Responses to Global Market Forces

4 min read•march 13, 2023

Isabela Padilha Vilela

AP Comparative Government 🗳️

90 resources

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We learned in the previous topic guide that the market holds great force in determining nations' economic and political policies. These policies have a significant impact on the nation-states, and the way that they deal with it has several implications. After reading this guide you should hopefully be able to, not only compare the handling of the different nations, but also notice how different political systems and institutions can lead to different responses.

Response to Market Forces in the Course Countries

In the table below you will read examples of different policies the course countries have adopted. It is important to keep in mind that these nations are still experimenting with different policies, and they might have different economic goals depending on the time period. 🕰 Before you go over the table, it is important to remember the following concepts:

Privatization refers to the process of transferring state-owned enterprises to private owners. This policy is usually adopted to increase efficiency and cut government spending

Nationalization refers to the process of transferring ownership from a private organization to the government. This policy is usually adopted to increase social welfare, protect national interests and regulate the economy.

Country	Regime	Handling of Market Forces
UK 🇬🇧	Democracy	Although the UK has a mixed economy, the private sector plays a vital role in the nation's economy. In contrast to other course countries, the UK is the country that most privatizes its national resources although there is a certain level of regulation.
China 🇨🇳	Authoritarian	In comparison to other nation, China is the country that least privatizes its natural resources. In China there are Special Economic Zones (SEZs) which are regions along its east coast that have a more "liberal" handling of the economy. That means that government regulations in those areas are looser because the government wants to promote growth there.
Mexico 🇲🇽	Illiberal Democracy	Mexico's economy relies on its abundance of oil. One of the largest companies of the country is the oil company PEXEM, which stands for Petróleos Mexicanos. In recent years the government has made efforts to privatize sectors of the company to increase competition within the Mexican oil and natural gas market.
Nigeria 🇳🇬	Illiberal Democracy	In the 1970s a great amount of oil was found in Nigeria leading to the creation of the Nigerian National Petroleum Corporation (NNPC). This is a state-owned company and it is crucial for Nigeria's economy. Although it is controlled by the government, the NNPC has engaged in joint activities with other nations to extract and produce oil. There is still space for the Nigerian government to fulfill its national goals, but contributing with other countries has also led to economic growth.
Russia 🇷🇺	Authoritarian	Under the government of Vladmir Putin there have been some instances of nationalization or re-nationalization. For instance, Yukos, an oil company, was integrated into the state-owned company Rosneft, after the company's founder was accused of fraud and corruption. Putin has also limited foreign direct investment in the country.
Iran 🇮🇷	Authoritarian	The lack of transparency of state-owned enterprises in Iran is detrimental to its economy. The country is still reliant on oil as its main economic activity, but it its trying to stray away from it. Nevertheless, its struggle to integrate in the International market after the imposition of sanctions only furthers its economic challenged.

Purpose of Government Response to Market Forces

The different approaches adopted by the government of different countries to respond to market forces depends on their goals and objectives. For example:

Improve domestic economic conditions 💪
- Example: The Nigerian government applies protections to its oil industry to ensure that its economic growth is benefitting itself and not only all the other nationa interested in its oil. By integrating some government control in its mixed economy, the Nigerian government is attempting to preserve its domestic industry.
Respond to domestic demands 🗣
- Example: As a strong advocate of neoliberalism, in the UK the British population expects the government to fulfill this expectation and adopt policies such as privatization. This also allows for more competition and diversity of industries in the nation.
Control or influence on domestic political debates to maintain or increase power 👑
- Example: The Iranian government's control over industries is a good example of how the nation wants to tightly control its economy. Its lack of concessions and conversations with other nations draws focus to their domestic economy, which is used to keep its authoritarian regime intact.
Extend national influence internationally and/or domestically 🤑
- Example: Mexico's attempt to make PEMEX more competitive is a direct way of increasing its predominance in the International market.