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Business Ethics ­MGT610
VU
LESSON 19
FREE MARKET ECONOMY
Mixed Economy
Economic system in which land, factories, and other economic resources are more equally split
between private and government ownership. Government controls economic sectors important
to national security and long-term stability. Generous welfare system supports unemployed and
provides health care.
1.
Origins of the Mixed Economy
a. Successful economy must be efficient and innovative, but also protect society.
Goals are low unemployment, low poverty, steady economic growth, and an
equitable distribution of wealth.
b. Many mixed economies today are modernizing to become more competitive.
2.
Decline of Mixed Economies
Mixed economies are converting to market-based systems. Government
ownership means less efficiency, innovation, responsibility and accountability;
higher costs; slower growth; and higher taxes and prices.
a. Move Toward Privatization
i.
Selling government-owned economic resources to private companies and
individuals.
ii.
Increases efficiency, cuts subsidies to state-owned firms, curtails appointment
of managers for political reasons.
3. Market Economy
Majority of a nation's land, factories, and other economic resources are privately
owned, either by individuals or businesses. Price mechanism determines:
o Supply: The quantity of a good or service that producers are willing to provide
at a specific selling price.
o Demand: The quantity of a good or service that buyers are willing to purchase
at a specific selling price.
1.
Origins of the Market Economy
Individual concerns are above group concerns. The group benefits when individuals
receive incentives and rewards to act in certain ways.
a.
Laissez-Faire Economics
French: "allow them to do [without interference]." Individualism fosters
democracy as well as a market economy.
2.
Features of a Market Economy
o Free choice: individuals have purchase options.
o Free enterprise: companies can decide what to produce and which markets to
compete in.
o Price flexibility: prices rise/fall reflecting supply and demand.
o Focus on China
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Business Ethics ­MGT610
VU
China's theme is "Socialism with Chinese characteristics," and the nation has undergone great
economic reform over the past two decades.
a.
Early Years
i.
1949: communes planned all agricultural and industrial production and
schedules. Rural families owned their homes and land and produced
particular crops.
ii.
1979: government reforms allowed families to grow crops they chose
and sell produce at market prices.
iii.
Township and village enterprises (TVEs) obtained materials, labor, and
capital on open market and used a private distribution system. Legalized
in 1984, TVEs laid the groundwork for a market economy.
iv.
Outside companies were allowed to form joint ventures with Chinese
partners in the mid-1980s.
b.
Challenges Ahead
i.
Political and social problems loom. Skirmishes between secular and
Muslim Chinese, and democracy restricted.
ii.
Unemployment, slow economic progress in rural areas, and misery of
migrant workers.
iii.
China's one country, two systems policy must preserve order, as Taiwan
is watching closely.
Bottom Line for Business
Ongoing market reforms in formerly centrally planned and mixed economies have a
profound effect on international business. Freer markets are spurring major shifts in
manufacturing activity. Lured by low wages and growing markets, international
companies are forging ties in newly industrialized countries and exploring opportunities
in developing nations. Global capital markets make it easier to set up factories abroad,
and some newly industrialized countries produce world-class competitors of their own.
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Table of Contents:
  1. INTRODUCTION:Business Issues
  2. INTRODUCTION (CONTD.)
  3. THEORY OF ETHICAL RELATIVISM
  4. MORAL DEVELOPMENTS AND MORAL REASONING
  5. MORAL REASONING:Arguments For and Against Business Ethics
  6. MORAL RESPONSIBILITY AND BLAME
  7. UTILITARIANISM:Utilitarianism: Weighing Social Costs and Benefits
  8. UTILITARIANISM (CONTD.):rule utilitarianism, Rights and Duties
  9. UNIVERSALIZABILITY & REVERSIBILITY:Justice and Fairness
  10. EGALITARIANS’ VIEW
  11. JOHN RAWLS' THEORY OF JUSTICE:The Ethics of Care
  12. THE ETHICS OF CARE:Integrating Utility, Rights, Justice, and Caring
  13. THE ETHICS OF CARE (CONTD.):Morality in International Contexts
  14. MORALITY IN INTERNATIONAL CONTEXTS:Free Markets and Rights: John Locke
  15. FREE MARKET & PLANNED ECONOMY:FREE TRADE THEORIES
  16. LAW OF NATURE:Theory of Absolute Advantage, Comparative Advantage
  17. FREE MARKETS AND UTILITY: ADAM SMITH:Free Trade and Utility: David Ricardo
  18. RICARDO & GLOBALIZATION:Ricardo’s Assumptions, Conclusion
  19. FREE MARKET ECONOMY:Mixed Economy, Bottom Line for Business
  20. COMPETITION AND THE MARKET:Perfect Competition
  21. PERFECT COMPETITION
  22. MONOPOLY COMPETITION:Oligopolistic Competition
  23. OLIGOPOLISTIC COMPETITION:Crowded and Mature Market
  24. OLIGOPOLIES AND PUBLIC POLICY:Ethic & Environment, Ozone depletion
  25. WORLDWATCH FIGURES:Population Year, Agriculture, Food and Land Use
  26. FORESTS AND BIODIVERSITY:The Ethics of Pollution Control
  27. THE ETHICS OF POLLUTION CONTROL:Toxic Chemicals in Teflon
  28. THE ETHICS OF POLLUTION CONTROL
  29. THE ETHICS OF POLLUTION CONTROL:Recommendations to Managers
  30. COST AND BENEFITS:Basis of social audit, Objectives of social audit
  31. COST AND BENEFITS:The Ethics of Conserving Depletable Resources
  32. COST AND BENEFITS:The Club of Rome
  33. THE ETHICS OF CONSUMER PRODUCTION AND MARKETING:DSA Comments
  34. THE ETHICS OF CONSUMER PRODUCTION AND MARKETING:Should Consumers Bear More Responsibility?
  35. THE CONTRACT VIEW OF BUSINESS' DUTIES TO CONSUMERS
  36. THE CONTRACT VIEW OF BUSINESS' DUTIES TO CONSUMERS:The Due Care Theory
  37. THE SOCIAL COSTS VIEW OF THE MANUFACTURER’S DUTIES
  38. ADVERTISING ETHICS:The Benefits of Advertising, The harm done by advertising
  39. ADVERTISING ETHICS:Basic Principles, Evidence, Remedies, Puffery
  40. ADVERTISING IN TODAY’S SOCIETY:Psychological tricks
  41. ADVERTISING IN TODAY’S SOCIETY:Criticism of Galbraith's Work
  42. ADVERTISING IN TODAY’S SOCIETY:Medal of Freedom
  43. ADVERTISING IN TODAY’S SOCIETY:GENERAL RULES, Substantiation
  44. ADVERTISING IN TODAY’S SOCIETY:Consumer Privacy, Accuracy
  45. THE ETHICS OF JOB DISCRIMINATION:Job Discrimination: Its Nature