THE INVESTMENT CLIMATE AND MONOPOLY

The investment climate and Monopoly



The investment climate and Monopoly

Part 1

The first part of this paper will cover three areas. The first section will seek to elaborate on the concept that the market system is the best mechanism for allocating scarce resources and thereby encouraging a positive investment climate. In the process of doing so, the paper will also present a justification of the reasoning. The second section will elaborate on the reasons because of which some people believe that not everything can be left to the free market, but that governments also have a role to play in encouraging a positive investment climate/ This section will also be supplemented with a rationale for the reasoning. Finally, the third part of the paper will suggest some actual government policies that might be used in a country to improve the investment climate.

The market system as the best mechanism for allocating scarce resources

To begin with, modern Western societies are characterized by the differentiation of market, state and civil society as separate spheres of action. Each of these spheres has its own logic at the action and the system level, its own coordinating mechanisms and its own institutions. For example, "exchange" is the dominant mechanism for coordinating actions in the market. Institutions that distinguish the market from other spheres include "competition" and "limited liability." The dominant rationality of the market at system level can be described as the decentralized pursuit of profit (Chen, Chou and Chou 2009). The dominant rationality at action level is the self-interested pursuit of profit. Modern Western societies are also characterized by the specific relationship between market, state and civil society. Civil society and the market are the primary spheres when seen from a normative perspective.

They provide the necessary context for the liberal-democratic "good life" and therefore have a valuable contribution to make in this respect. The state mainly derives its value from its functionality. From a power perspective, the market and the state are primary. These two fundamental institutions are the most powerful. Given the importance of the market from both perspectives many typify modern society as a "market system society." An alternative concept would be "capitalism". In my view, however, this concept is too contentious and carries too many connotations. At first glance, the market system, with all its typical characteristics of private ownership, competition and maximization of profit, is given the benefit of the doubt by thinkers on CSR (Mukherji 2011). In principle, the market is looked upon as legitimate and desirable. Insofar as advocates of CSR criticize practices like monopolization and corruption, they can even be regarded as staunch defenders of the market. In this sense CSR advocates differ markedly from Marxists or protagonists of radical-democracy who completely reject the notion of the market system. However, this should not lead us to conclude that thinking about CSR is therefore compatible with the dominant political theory of the market system.

From this definition, it is clear that the market system represents an ...