Different Political Philosophies and their Impact on Business

Political philosophy, in simple terms, means the modus operandi of the government while running its nation. The political philosophy a country follows helps shape the country’s economy, the standard of living of the people, the mindset of individuals, and others. Big thinkers and economists like Chanakya, Ambedkar, and Aristotle have helped us develop different political philosophies that will help kings rule their kingdoms efficiently. The political philosophy of a nation also impacts and rules how businesses, merchandise, and trade are going to operate and flourish in that particular nation. It is time for us to understand the different political philosophies that countries follow and how these philosophies help shape the economic, social, cultural, and humanitarian parameters.

Various Political Philosophies

There are numerous political philosophies that have been developed over hundreds of years of human existence and modified as per the economy and the development of the human race. In this article, we will only be diving deep into the major political philosophies practiced around the world that are known to us. This will help us better understand why businesses flourish in some nations and stagnate in others.

The Top Five Nations Adhering to the Major Three Political Philosophies of 2022 are −

• Capitalism or a capitalistic economy: The top most capitalistic economies of 2022 are Singapore, New Zealand, Australia, Switzerland, Ireland, Taiwan, the United Kingdom, Estonia, Canada, and Denmark.

• Socialism or a socialistic economy: The top most socialistic economies of 2022 are Bangladesh, Eritrea, India, Guyana, Nepal, Sri Lanka, Portugal, Tanzania, and Nicaragua.

• Communist or a communist economy: The top most communist economies of 2022 are China, Cuba, the Lao People’s Democratic Republic (Laos), North Korea, and Vietnam.

Capitalistic Economy

In a capitalistic economy, traders and business owners fuel and run the economy. The major power lies in the hands of the business owners or the few rich people in the economy. Here, the capital resources are owned by individuals. For a better understanding, the capitalistic economy can be divided into three levels −

• The business or trade here is owned and fueled by individuals. It is a major characteristic of having a free market or economy. The market determines the price of a good by comparing the demand and supply of goods. There is no government intervention in terms of setting the minimum price or the maximum price of goods.

• The business owners have now started getting involved in publicly shared services, for example, transportation services, healthcare services, education platforms, and others that were earlier owned by the government. Now business owners have entered the segment as well, giving them a market to serve their interest in profits.

• This is the most extreme form of capitalism, where the business owners or the few rich people help run the economy as well. The owners have a huge influence on the working and running of the country as well.

The Benefits of having a Capitalistic Economy for the Business are

• A capitalist economy helps the economy and business in flourishing. Since now the business is owned and run by individuals with self-serving interests, they ensure that there is maximum production of quality goods and services for the consumers.

• It helps determine a fair price for the goods and services offered. There is no monopoly, resulting in happy customers and suppliers.

• It helps in increasing the standard of living for individuals. Because resources are now in the hands of individuals, we are seeing a red ocean of goods and services available to consumers at reasonable prices.

The Drawbacks of a Capitalistic Economy for the Business are

• There are huge income inequalities. The rich are getting richer while the poor are getting poorer. This leads to negative feelings and helplessness and dissatisfied consumers and individuals.

• In a capitalistic economy, the amount of corruption and crime increases because the main goal is to earn as much money as possible. Hence it gets difficult for the business to run.

Socialistic Economy

A socialist economy is a type of economy where all the resources are owned by the state and utilized by the public as a whole. Here, there is no individual ownership, and all the capital is owned by the state. Citizens of this type of nation just work as laborers to produce goods and services for the consumption of the larger economy.

The Benefits of a Socialistic Economy for Business are

• It is like a welfare system where individuals can get all the basic necessities and more at very affordable prices.

• All the profits that are earned by the state-run institutions are given back to the state, which is further utilized in providing top-class healthcare, education, social security, and other facilities to its citizens.

• There is harmony among the citizens of the nation and no income inequality in the nation.

The Drawbacks of a Socialistic Economy for the Business are

• Socialist economy challenges the ability of humans to grow economically. There is no free trade in the market and hence deteriorated economic growth. There is no growth of private business.

• State governments can become authoritarian because of their immense power and the accumulated wealth of the nation. The public enterprises flourish.

• There is huge corruption and bureaucracy in the nation because the larger public is dependent on the state, and they do not raise their voice against injustice. Difficulty in free trade.

• It gets very difficult to sustain a globe that is developing at an enormous rate because of the capitalistic structure and growing global business.

Communist Economy

This is a type of society trying to fight the evils of both the socialistic structure and the capitalistic economy. All resources or capital are owned by the public, as are the people who work for them. The aim of this structure is to develop an economy free from a government or dictator. In the very beginning, there is a dictator setting the prices of goods and the wage rate for employees and others in order to provide guidance to the citizens, but in the end, the citizens overpower the dictator and lead to a happy society.

The benefits of a Communist Economy on Business are

• The capital or the resources are owned by the citizens of the nation.

• There is harmony among the citizens because of zero income inequality. All the profits earned through hard work are distributed among the citizens in terms of basic amenities like education, health care, social services, parks, etc.

• Society toils as a whole and grows as a whole.

• There are only public enterprises.

The drawbacks of a Communist Economy on Business are

• The dictator ruling over the nation may take drastic turns and lead to destruction. World War II is the most tragic failure of a communist society.

• There is no free trade and private institutions cannot flourish.

• It is difficult for societies to be independent as a whole and free from the rule of dictators and governments.

All three types of economies are followed by one or more of the top nations on the globe. Nations are succeeding and have their own set of negatives. It is difficult for us to pinpoint which economy might be best suited because the whole focus behind the running of these economies differs. If we have to conclude from the business point of view, one has to choose a capitalist economy structure because it helps in the growth of individuals, which leads to the growth of businesses, leading to higher gross domestic products and economic growth.