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Is Democracy Good for Business?

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Democracy is good for the industry since it promotes inclusive and open governance processes founded on respect for the rule of law and human rights, providing a favorable atmosphere for business operations.
Democracy is perhaps the safest political mechanism for industry. Any of the world's leading nations, such as the United Kingdom, the United States, France and Germany, run under representative political regimes. These countries encourage private companies to work on free markets without government interference. Democratic regimes in different countries enable foreign firms to join the market and increase competition, which contributes to quality and productivity in manufacturing. On the other hand, countries that control their markets tend to limit business opportunities. They encourage monopolies create inefficiencies in the market. However, the economic growth of China in the recent past despite non-democratic political system has caused questions on whether democracy is really necessary for the success of business. Nonetheless, most democratic nations top the Forbes’ rankings of the most attractive countries for capitalism. Democracies such as Denmark and Sweden are among the best countries to do business.

The Factual evidence that will be used in the essay includes:

The U.S. is one of the leading democracies and is the biggest economies in the world

Most top 100 companies in Forbes are from democratic countries

Regulations in China have increased costs of about $70 billion

Democratization accounts for approximately 0.5% to 1% increase in GDP

U.S. foreign direct investment in democratic countries is about $250 billion compared to only $20 billion in non-democratic countries.

Essay Plan and Issues to be discussed

The essay will explore the benefits of democracy for businesses. To defend the thesis, this essay will identify evidence of democratic countries that have prospered in business, especially the U.S. The essay will identify the theoretical and practical contributions of democracy to businesses. We will compare various sources and find a common ground on the topic to identify points that seem to be agreeable among most authors and scholars about the benefits of democracy for business. The essay will also give counterarguments, especially about China and Russia whose economies are improving despite having autocratic political systems. the essay will argue that these economies would have already overtaken the U.S. economically, but autocracies minimize their potential. The essay will look at how autocratic systems are likely to perform more poorly in the near future.

Questions to be answered

Is democracy good for Business?

How does democracy affect the private sector?

Why is China’s economy growing despite being autocratic?

Why are most successful enterprises come from democratic countries?

What are the costs of non-democratic systems?

Key Terms and References

Democracy: A system of government which involves the rule of law and respect for human rights, and implementation of representative government through voting.

Autocracy: A system of government in which the people do not have a say in the leadership and governance of the country; the government controls economic, social and political issues of the country without involving citizens.

GDP: Gross Domestic Product refers to the amount of output produced within a country; its growth determines the strength and sustainability of a country’s general economy.

Regulations: The requirements and methods of control that people in authority exercise over their subjects.

Free Markets: these are markets in which the forces of demand and supply are allowed to take place without government control or interference.

Multinational Companies: Companies operating in more than one country.

Foreign Direct Investment: this is an investment made by a company from one country in another country by establishing business operations or acquiring an existing business in the host country.

Subject Matter Experts

Forbes: Forbes is a global business media company with many business analysts and scholars. They are qualified and have the experience to provide commentaries and research on business issues.

Business Insider: this is a media company with trusted articles on business issues. Its articles and magazines give reliable information for the topic.

Bloomberg: Bloomberg is also a media company focusing on business issues. It has experienced business writers and editors such as Noah Smith who can post facts and evidence on business matters.

Annotated Bibliography

Smith, Noah. Democracy Is Good for Business. Bloomberg, January 22, 2015.

Smith suggests that China and Russia have grown economically without democracy, against the belief that democracy is good for business. However, the author notes that there are several other economies such as the U.S., UK and Japan which thrive on democracy, freedom diplomacy, and respect for the rules of law. Therefore, China and Russia are just exceptions which may still suffer in future for lack of democracy. This article is important for the essay because it gives a clear perspective of the counterargument of the current debate. It is good to see the issue from both sides in order to arrive at an objective conclusion. However, the article has a weakness in terms bias. The author does not recognize the weaknesses of democratic systems in terms of business operations.

Rampell, Catherine. Good for Business: Democracy and Economic Growth. The New York Times, October 27, 2008.

This article provides information from a reliable study carried out between 2000 and 2005. The study found that democracies are good for business, and suggested that trying to compare China with the U.S. is erroneous. Rampell uses data from the study to show that democracy contributes approximately 0.5% to 1% of GDP growth. in this regard, democratic systems promote economic growth and development; hence providing a good marketing and business opportunity for businesses. This source is important for the essay because it has researched data that provides evidence for the position of the paper.

Badenhausen, Kurt. The Best Countries for Business 2015. Forbes, Dec 16, 2015.

This article provides examples of countries that have provided the best environments for business in 2015. This information will be important for the researcher to find out whether the countries suggested by Forbes are democratic countries or not. If they are, then we prove our thesis that democracy is good for business. Denmark was the leading country for business in 2015, and Sweden was topped the list of 2017. The U.S. is dropping in the rankings due to its increased regulations. Since 2009, the U.S. has enforced over 150 new regulations. Therefore, it is clear that there is a negative correlation between regulations and ease of doing business. It becomes more difficult to do business with increasing regulations, bureaucracies and red tape in less democratic environments.

Stroker, Frank. Democracy Rules: Why Business Thrives in Democratic Societies. CIPE, 27 June, 2012.

Stroker (2012) provides reasons why businesses thrive in democratic countries. The author suggests that countries that have become free politically are prospering economically. He then provides reasons why that is the case. This article also provides reasons why the counterpoint of China is not strong enough to dispute the importance of democracy to businesses across the world. Stroker (2012) also suggests that over 90,000 protests are experienced in China annually as people show their discontent with corruption and poor governance. The police also arrest suspects without following due process of law. Due to these factors coupled with several labor strikes, many businesses may be concerned about their investments in China.

Repucci, Sarah. Democracy is Good for Business. Freedom House, August 3, 2015.

This article uses data from World bank to show that the most democratic countries are good for business. According to Repucci, stable and transparent governments provide the best environments for business to thrive. Democracy provides such opportunities. The article highlights the top performing countries according to Worldbank. The best countries for business are free and partly free economies. Repucci (2015) also suggests that undemocratic countries impose red tape, obstruct business contracts, and create barriers to trade. Such barriers prevent multinational corporations from establishing their businesses in the country. This article is important for the essay because it provides evidence for the success of business in democratic democracies.

Works Cited

Badenhausen, Kurt. The Best Countries for Business 2015. Forbes, Dec 16, 2015.

Rampell, Catherine. Good for Business: Democracy and Economic Growth. The New York Times, October 27, 2008.

Repucci, Sarah. Democracy is Good for Business. Freedom House, August 3, 2015.

Smith, Noah. Democracy Is Good for Business. Bloomberg, January 22, 2015.

Stroker, Frank. Democracy Rules: Why Business Thrives in Democratic Societies. CIPE, 27 June, 2012.

July 24, 2021
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