Page 86 - DMGT401Business Environment

Unit 3: Economic Environment of Business

Whether political interests precede or follow economic interest is a debatable issue. A change in Notes
the government or change in the system can change the fate of an organization. Behind every
political decision there may be economics and behind every economic decision, politics may be
factor.
It is difficult to say whether the Iraq war is a political issue or an economic one because of the oil
factor. It is also equally difficult to say with certainty that China is coming closer to India
because it realizes India's political importance or because of our growing economy. If we look
at world politics and economics, we find that they are two sides of the same coin and at any
given point it is very difficult to determine which affects the other.
If we see a look at the events in the erstwhile USSR, we notice a close-knit relationship between
politics and economics. Because of pathetic economic conditions and prevailing starvation among
the common people, Russia rose in revolt. Thus, economic conditions resulted in a political
revolt and a change in government. The new government believe in an entirely different ideology
of communism imposed a communist economic system there. Therefore, because of political
changes the entire economy of the USSR underwent a change. So in order to understand economics,
one should first understand the political systems of world.

3.1 Economic Trends

From the late 1940s, many countries started a new beginning towards growth and development,
but almost all of them followed different paths to achieve the goal of welfare of their people.
These countries include erstwhile rich countries, Britain, France, West Germany, Japan,
Switzerland, Australia, etc., which were ravaged in the Second World War and fell under a debt
trap. Their industries were wiped out and a whole generation of human resources was ruined.
Along with them, newly independent countries like India, and newly formed countries like
North and South Korea also began their journey towards growth and development in this
decade. But as stated, they chose different paths. On the one hand, countries like Japan, South
Korea, West Germany, Britain and France followed a mixed capital economy, while countries
like China, Cuba, East Germany, North Korea, etc., followed a socialist pattern. India while
under the guidance of its late Prime Minister Shri Jawaharlal Nehru, choose a Mixed Socialist
Economy. During World War II the US supported India's independence by exerting pressure on
Britain to free India after the war. But after independence though India tried to forge close
economic and political ties with both communist China and Russia, China treacherously attacked
us in 1962, and the USSR denied us help when as kedo.
We thus see that different countries began their journey towards welfare, growth and
development in late 1940s by adopting different routes. The countries that adopted mixed capitalist
structure had a remarkable rise.

Example: South Korea, could not even manufacture a tyre of car in 1945 is now one of the
largest exporters of automobiles in the world. And India, which was manufacturing and exporting
automobiles in 1945, was producing same car in 1991.
South Korean companies are now teaching Indians to produce world-class cars. India that was
still producing world-class steel, that too the cheapest in the world in 1945, was later importing
steel from countries like Japan who produce steel after importing iron ore from India.
If we go by the parameters of development – per capita income, standard of living, rate of
unemployment, availability of basic amenities, etc., we will find that these capitalist mixed
economies have outstripped all the socialist economies and even the mixed socialist economies,
including India, in every sector.

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