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(Essay 1) Explain capitalism’s distinctive attitudes, and why they are important to make capitalism work well
- Individualism
- Entrepreneurship
- Protestant work ethic
- Consumer sovereignty
- Flexible cooperation and non discrimination
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(Essay 1) Individualism
- Belief in individual freedom and achievement
- We make successful economic individuals into heroes: Steve Jobs & Warren Buffet
- For capitalism to work, people must believe that it’s right to take individual responsibility for their lives
- Can not always rely on gov’t to solve problems
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(Essay 1) Entrepreneurship
Capitalism needs some people to be willing to innovate and take risks
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(Essay 1) Protestant Work Ethic
People ought to work hard and do a good job even if the work is unpleasant
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(Essay 1) Consumer Sovereignty
- Sovereign is a ruler
- In capitalism, consumers rule
- System tends to serve consumer desires
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(Essay 1) Flexible cooperation and non discrimination
- Make contracts to cooperate, but have an attitude that no contract is forever
- High willingness to adapt
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(Essay 2) Why does the U.S. invent so much new technology compared to other countries?
- US consumers like new things and can afford to buy them
- Businesses want to cut costs- more profit oriented than other countries
- Business environment supports invention- emphasis on individual creativity
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(Essay 2) Why do U.S. businesses adopt new technology (innovate) faster than other countries?
- More competitive free market than elsewhere- if your rival adopts a profitable technology or a new offering for customers, you need to do it too
- Slow acting managers can be removed from power more easily- hostile takeovers are easier and more socially tolerated in US
- US managers are more willing to be ruthless
- US managers are willing ot learn ideas from other countries
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(Essay 3) What is social capital? Explain why high-social-capital (high-trust) economies may be more successful than low-trust economies.
- Social capital- people’s capability and knowledge of how to work together successfully in building economic relationships
- Hypothesis 1: cultures that have relatively high
- amounts of social capital and trust will be more economically successful
- Hypothesis 2: US social capital has been falling
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(Essay 3) Low-trust economies
- Most businesses are family owned
- Trust is natural within families
- Punishment for non-cooperative behavior is easier inside a family because of emotional ties
- Face potential limitations- lack of skills in the family, “I’m family, they can’t fire me”
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(Essay 3) High-trust economies
- More chance for economic success
- Bigger talent pool- even if started by family, it hires whoever is most talented
- Access to more financial resources- large and vibrant stock markets. Investors are less afraid that you will steal their money so they are more likely to buy stock
- Better government- good job providing public goods/services. Work harder to treat everyone equally. More resources for infrastructure
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(Essay 4) Discuss how Europe’s unemployment can be explained in terms of job creation problems
- Employers believe wages are too high:
- § Companies do not wish to create jobs if a worker’s ware is higher thanthe revenue he or she would generate
- § Wages are high because of unions
- § Businesses also have to pay high employer taxes per employee to fund social welfare plans
- Firing restrictions:
- § Reluctant to hire if they can’t fire
- More difficult to create service sector jobs:
- § Restrictions on store hours
- § Restrictions on self employment
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(Essay 4) Attitude problems
- Geographic immobility- European workers are less likely to move for a new job than US workers
- § Language barriers
- § Hard to become socially accepted
- § Expensive housing
- § Lack international connections
- Anti-Work-Ethic Attitudes§ Refused to take low paying jobs because it would hurt their status
- § Preference for leisure
- § High unemployment compensation- lowered incentive to find new job
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(Essay 4) World Changes
- Technology change- computerization and automation destroyed low skilled jobs
- Globalization- companies spread to knew markets for more profit
- Aging populations- worry about pension crisis
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(Essay 4) Europe’s Policy Options
- Keep the same system but create more jobs through gov action
- Coverage to the US model, create jobs the way the US does
- Accelerate unification of Europe
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(Essay 5) Japanese Management Style
Lifetime jobs-
- 25% of Japanese men are promied lifetime employment.
- Must retire at age 55 or 60 (keiretsu).
- Encourage employees to quit
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(Essay 5) Japanese Management Style
Lifetime jobs-
- 25% of Japanese men are promied lifetime employment.
- Must retire at age 55 or 60 (keiretsu).
- Encourage employees to quit
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(Essay 5) Japanese Management Style
The firm is seen as a family-
- People hired based on education and skill
- Hire males over females
- Hire few married women
- Hire few overweight people
- Manager is seen as father figure
- Managers ask about personal life
- After hours drinking to bond
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(Essay 5) Japanese Management Style
Training Practices-
- On the job training and rotation
- Job challenges (no clear instructions)
- More criticism than praise
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(Essay 5) Japanese Management Style
Status Issues-
- Wages and promotions- everyone on management track till age 30
- Equality/inquality- everyone on same level
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