International Business, Corruption - Assignment Example

International Business International Business Question In my view, corruption is any form of dishonest behavior exhibited by people in positions of power and which typically involves bribery. Corruption is not a novel concept in society; it has been practiced and fought for centuries, with some notable examples occurring in ancient civilizations. Corruption is defined the same way in all countries, with the only difference being the manner in which they legislate against it. Different nations have different laws to define and fight corruption. For example, in some Asian countries like China, corruption is classified as a capital offense that could be punishable by death. In some countries it attracts long sentences, while in others it is seen as an ethical crime that warrants moderate punishment commensurate with the degree and moral standing of the guilty parties. The differences in how corruption is legislated against are inspired by various factors, including societal practices and beliefs and legal precedents. In a majority of Asian countries, corruption is considered to be a violation of both legal and moral standards. More often than not, the latter dictates the type and degree of punishment meted out on guilty individuals. In western countries, corruption is also a legal and ethical violation, but the legal dimension tends to carry the most weight (unlike in Asian countries that are more conservative). Interestingly, these contrasts are not just limited to corruption. Other crimes are also often legislated against differently depending on how they are perceived by the societies in which they occur. Some countries are more corrupt than others. Nowadays it is common for indices and rankings to be released that show the extent of corruption in individual countries. Based on these rankings, it is obvious that some countries are more corrupt than others. Although they have been criticized in some quarters as tools of western dominance and neo-colonialism, their variety makes them credible indicators of the level of corruption in different countries. Respected institutions such as the International Monetary Fund (IMF) and the World Bank often release (either independently or in conjunction with other entities) regular assessments of the status of corruption in different nations. Developing countries usually occupy the highest positions in rankings of the most corrupt nations in the world, while developed countries rank much lower in such reports. There are many measures of corruption that employ a variety of strategies to mitigate or eliminate the practice. In some countries, especially those in the west, members of the public and public officials (including politicians) are sensitized on the importance of avoiding corrupt practices. The reason for targeting the public and public officials is that corruption is propagated and practiced in the public domain more than the private sector. On average, government officials and members of the public engage in more corrupt practices than private industry entities. Awareness campaigns are supplemented with legal measures to increase the effectiveness of anticorruption initiatives. In other countries, the government encourages parents and teachers to educate their children on the ills of corruption and how they can avoid them. The logic behind this approach is that corruption starts with an individual. The assumption, which is true in most cases, is that people of good moral standing are more averse to corruption than those with weak moral backgrounds. This is why good parenting is required, because children who are taught to steer clear of corruption are more likely to avoid it compared to those who are left to their own devices. It is true that some sectors of the economy are more vulnerable to corruption than others. This is explained using the money theory, which holds that the corruption is more likely to occur in sectors where huge financial resources are invested in projects or where a lot of money flows through financial institutions or changes hands among individuals on a regular basis. This theory has been proven by studies which have examined relative levels of corruption in different sectors. Findings show that the energy, financial services, and import/export sectors are more prone to corruption compared to health, tourism, and media sectors. The higher the amount of funds circulating in a particular industry, the higher the likelihood of corruption because organizations and individuals will want to influence one another in order to win tenders, contracts, and government favors. The United States has outlawed all forms of corrupt business practices by using active and proactive measures. Some of these strategies include anticorruption (antifraud) legislations, which usually target private and public officials and organizations that engage in or contemplate engaging in corrupt practices. Examples of laws used to fight corruption in the US include the Foreign Corrupt Practices Act of 1977, which deals with accounting transparency standards under the Securities Exchange Act of 1934 and the bribery of foreign entities. In the past ten years, numerous business organizations and individuals have been convicted of engaging in corrupt practices through bribery, unlawful access to and use of financial information, and intentional misinformation with the intent of profit. Reputable organizations such as Enron have crumbled due to corruption and the US government’s stern measures against the crime. From an individual level, investors like Bernard Madoff have received long sentences for their involvement in corruption. In general, it is safe to say that the US government has a zero-tolerance policy on corruption that is aided by effective active and proactive measures used to fight the vice. Question 4 Governments intervene in trade in order to create favorable conditions for their imports and exports. Without intervening in trade, governments run the risk of exposing their citizens to unfair terms by foreign entities. Governments also intervene in trade to build cordial relations with other countries. This approach is justified by the fact that trade is a vital strategic and diplomatic tool that can be used to a country’s advantage, and nations that are more effective in practicing this policy tend to enjoy better conditions in regional and international trade. Trade dependency is a situation where a country relies on international trade to drive its economy. Trade dependency is part of the modernization theory, which holds that developing countries tend to over rely on developed countries to purchase their exports in order to support their economies, while developed countries do not rely on the exports of developing nations to grow their economies. In cases where developed nations import a lot of products from developing nations, the balance of trade still heavily favors developed nations. Trade dependency has played a major role in the stunted growth of developing countries’ economies. Due to limited industrialization, developing nations depend on exports to generate a large percentage of their GDP. On the other hand, developed nations often demand more (raw materials, labor, etc.) in return for their imports and are also averse to exporting manufactured products to developing countries. This creates a high level of dependency on the part of developing countries and initiates a cycle of poverty that never seems to end until developing nations can industrialize and dictate the terms of trade with their developed counterparts. In The biggest beneficiaries of tariffs, quotas, and other trade-related initiatives are governments, private industries, and consumers. Tariffs are highly beneficial to governments because they generate revenues that are ploughed back into the economy. In developed countries, tariffs generate billions of dollars per year in revenue. Governments also benefit from tariffs because they do not have to invest to earn taxes; all they do is set the amounts of tariffs to impose on specific products and trade activities and then collect and reinvent the resources into the economy. Consumers benefit from tariffs because when the government generates significant revenues from tariffs and reinvests them in the economy, the level of liquidity rises and more money becomes available. Quotas are beneficial to consumers, private investors, and governments. For governments, especially in the import/export segment, quotas provide a way of bargaining for favorable trading conditions for investors. For example, Russia uses its monopoly of gas generation to set quotas that are, in turn, used as diplomatic and political leverage when dealing with other countries. Quotas are more beneficial to consumers than governments because they are protected against manipulation by local and foreign businesses that may otherwise set their own terms when producing, importing, or exporting goods. Finally, quotas, when used strategically, are highly beneficial to a country’s local investors and local industries. In this case, quotas work by giving local industries and investors more bargaining power in terms of the amounts of a particular product they can produce and export. For example, the United States uses quotas to protect local farmers from big businesses by limiting the amount of imports they can sell in the country. This has two broad advantages for local producers. Firstly, it creates an opportunity for local farmers to produce without being locked out of their own domestic markets or being constrained when they need to export their produce abroad. Secondly, the strategy gives local industries the room and motivation to expand and grow into big businesses, since their growth paths are not blocked by foreign multinational firms that only want to flood the market with imports. Read More