To examine the determinants of FDI in China and India and the causes for their difference. The WritePass Journal

To examine the determinants of FDI in China and India and the causes for their difference. Abstract: To examine the determinants of FDI in China and India and the causes for their difference. Abstract:1. Introduction:2. Literature review:2.1. China:2.1.1. National determinants:2.1.2. Regional determinants:2.2. India:3. Theoretical model of FDI determinants:Market size and growth prospects:Natural and human resource endowments:Physical, financial and technological infrastructure:Trade openness and access to international markets:The regulatory, policy framework and policy coherence:4. Data and methodology:4.1. Data:  4.2. Methodology:4.2.1.Determinants of FDI in China and India:4.2.2. The difference in inward FDI between China and India:5. Empirical results:5.1. Individual country models:5.1.1. China:5.1.2. India:5.1.3. China and India:6. Policy implications:Conclusion:Related Abstract: This study aims to examine the determinants of FDI in China and India and the causes for their difference. Ordinary least squares models were first applied to analyse separately FDI determinants in China and India and then a panel data model was developed to explore the causes of the differences. It was found that China’s FDI was determined by inflation while India’s FDI was influenced by infrastructure and trade openness. Infrastructure was the main reason why India was lagging behind China. The results suggest that India needs to upgrade its infrastructure and create effective trade policies in order to attract FDI. Key words: FDI, China, India, inflation, trade openness, infrastructure. 1. Introduction: Multinational Enterprises (MNEs), comprising 82,000 parent companies, 810,000 foreign subsidiaries and an excess of inter-firm arrangements worldwide, have played an important and growing role in today’s global economy (UNCTAD, 2009). The world’s top MNEs are the prominent driver of international production. In 2008, they accounted for around 4% of world GDP[1] and had combined assets of $ 10.7 trillion, combined foreign sales of $ 5.2 trillion and employed 8.9 million people (Table 1-1). Table 1-1:Snapshot of the World’s top 100 TNCs, 2006-07/08 Variable 2006 2007 2006-2007 % change 2008 2007-2008 % change    Assets ($billion)    Foreign Total 5,245 9,239 6,116 10,702 16.6 15.8 6,094 10,687 -0.4 -0.1 Sales ($billion)    Foreign Total 4,078 7,088 4,936 8,078 21.0 14.0 5,208 8,518 5.5 5.5 Employment (thousands)    Foreign Total 8,582 15,388 8,440 14,870 -1.66 -3.4 8,898 15,302 5.4 2.9 Source: UNCTAD (2009), p.19, Table I.17 (based on UNCTAD/Erasmus University database). The key measure of MNEs’ activities is foreign direct investment (FDI), defined as â€Å"an equity investment outside of the parent corporation’s home country, it implies some control over economic activity, usually a greater than 10% stake† (Baker et al., 1998). In line with the increasing importance of MNEs, global FDI inflows have grown significantly in the last 20 years (UNCTAD, 2010): average annual inflow between 1990-2000 was 492.86 $ billion, which reached a peak of $ 2,099.97 billion in 2007 before declining to $1,114.2 billion in 2009, reflecting the effects of the global crisis. However, FDI inflows are expected to increase further to $1.3 $1.5 trillion in 2011 (Figure 1-1). Figure 1-1: Global FDI inflows and projections, 1990-2011 Source: UNCTAD (2010). FDI inflows have been shifted noticeably to developing and transition economies owing to their economic growth and reforms as well as their progressive liberalisation of foreign investment regimes (UNCTAD, 2010). As a result, developing and transition economies attracted nearly half of global FDI inflows in 2009 (Figure 1-2). Among the largest FDI recipients from these economies, China and India have emerged as the second and third world most popular FDI destinations (UNCTAD, 2010). Figure 1-2: Shares of developing and transition economies in global FDI inflows and outflows, 2000-2009 (%). Source: UNCTADstat, calculated based on data of inward and outward FDI. China opened up its economy to foreign investment in 1979 and since then inward FDI in China has risen appreciably. By 2009, the absolute value of FDI inflows was $95 billion compared to only $0.057 billion in 1980 (UNCTAD, 2010). Over 10 years after China, India too liberalised its economic policies, replacing the existing for more relaxed and open policies towards foreign investment. The reforms have resulted in considerable increased inflows of FDI during the past decade: inflow in 2009 rose to $34.61 billion from only $2-3 billion during the 1990s (UNCTAD, 2010). Even so, the amount of FDI in India is still lagging behind most other emerging economies, especially China. On the global competitiveness scale, China ranked higher than India in all criteria of economic competitiveness (Table 1-2). Table 1-2: The global competitiveness index, 2010-2011    Pillars    Basic requirements Institutions Infrastructure Macroeconomic environment Health primary education Country Rank Rank Rank Rank Rank China 30 49 50 4 37 India 81 58 86 73 104    Efficiency enhancers Higher education training Goods market efficiency Labour market efficiency Financial market development Country Rank Rank Rank Rank Rank China 29 60 43 38 57 India 38 85 71 92 17    Innovation sophistication Technological readiness Market size Business sophistication Innovation Country Rank Rank Rank Rank Rank China 31 78 2 41 26 India 42 86 4 44 39 Source: World Economic Forum (2010). The differences in FDI inflows between these two countries suggest an intriguing area for further research. If China, with its â€Å"new-found† belief in capitalism[2] can attract significant amounts of FDI, why India which is endowed with Western-type institutions and capitalist organizations cannot? What causes the gap in volumes of FDI between the two? This paper is going to address these questions by evaluating factors determining FDI based on current literature on FDI in general and FDI in China and India in particular. The study is structured as follows: part 2 reviews the literature on FDI determinants in China and India. Part 3 presents the eclectic theory and empirical studies. Part 4 describes data and methods for analysis. Part 5 analyses FDI determinants in the two countries. Part 6 suggests policy implications and part 7 concludes. 2. Literature review: The emergence of China and India as the two most favoured hosts of FDI among developing economies has generated various numbers of empirical studies on the major determinants of FDI in each country as well as the two countries combined. 2.1. China: Studies on factors shaping FDI in China can be broadly categorized into two groups: studies at the national level and those at regional level. 2.1.1. National determinants: The empirical results from Chen (1996), Henley et al. (1999), Zhang (2001), Dees (1998), Hong and Chen (2001) and Liu et al. (2001) all concluded that market size and preferential policies, along with others, were primary factors for China’s FDI. Wei (2005) explored the determinants of FDI from OECD to China for the period from 1987 to 2000. The analysis found significant relationship between FDI and market size, real exchange rate and trade openness. Among these determinants, market size, measured by GDP[3] per capita, appeared as the major driving force for outward FDI from OECD countries to China. This seems to be convincing as China has a huge domestic market with a mass-production system, which considerably reduces production costs. This factor coupled with â€Å"FDI friendly† policies creates business opportunities for foreign investment and hence increase the attractiveness of China to multinationals. The analysis provides reasonable explanations for FDI inflows in China, however, it should be taken into account that the source of FDI from OECD countries only account for a small proportion of China’s inward FDI. Therefore, the results should be assimilated with caution. Mathew et al. (2009) provided evidence that corruption, as an indicator of political risk, determined the location decision of MNEs. In particular, the finding suggested that provinces with effective local governments and better efforts to tackle corruption tended to attract more FDI. The study indicated that if provinces could improve their â€Å"anti-corruption efforts† to the average level, they would be able to receive more FDI. For example, FDI would be boosted to more than $ 40 million in the following year as a result of a 10 % increase in the anti-corruption efforts. 2.1.2. Regional determinants: Some studies have investigated the determinants of FDI in China at a regional level. For instance, Xing et al. (2008), focusing on the Eastern Chinese area, found that FDI was positively related to market size and labour quality, whereas, education and infrastructure were statistically insignificant in explaining FDI. Wei et al. (2010) analyzed the location factors and â€Å"network relations† of MNEs in Nanjing, China. This study confirmed the importance of infrastructure and government policy in the location decision of MNEs. Government intervention through investment policies was one of the key factors determining FDI since it indicated the significant role of government in expanding FDI. 2.2. India: The growth of FDI in India over the last decade since its economic reforms has raised the interest for further investigation. However, there are only a nominal number of empirical studies trying to indentify major determinants of FDI in India. One of those studies is that by Pradhan (2010), examining the role of trade liberalisation on FDI inflows in India between 1980 and 2007. The results found that trade openness had a positive correlation with FDI and that this relationship was stronger after the economic reforms since 1991. This implies the necessity of maintaining an â€Å"open door† policy to attract more FDI into the Indian economy. Other factors were also found significant in the study including real exchange rate and terms of trade. In a current study of FDI determinants in India, Resende (2010) found the evidence supporting the positive impacts of technology growth, trade openness and market size on FDI. In particular, market size and market attractiveness appeared to be the most significant factors determining the inflows of FDI into India. Poor infrastructure, on the other hand, deterred MNEs from investing in the country. Green (2005) explored FDI in a specific Indian industry sector: telecommunications from 1993 to 2003. The results showed that FDI would gain more traction if the government could reduce the limits on investment, maintain transparent regulations and improve physical infrastructure in the telecommunication sector. This conclusion seems to be appropriate as the evidence of FDI performance in this sector during the chosen period suggested that foreign firms entering the telecommunication industry did not stay in the business for a long time. The reasons behind this were that FDI had long suffered from inadequate infrastructure, opaque regulatory and legal environment. Among infrequent macro-level studies on FDI in India, Mukim and Nunnenkamp (2010) investigated determining factors of MNEs’ location decision in 447 districts of India. The analysis indicated that infrastructure and skilled workforce influenced the location choice of MNEs. However, the study suffered from data limitations with regards to FDI determinants at district-level. This may reduce the reliability of its results and hence cannot be applied generally. There seems to be a few studies considering FDI in India such as those by Green (2005), Pradhan (2010) and Resende (2010) investigating FDI determinants in India. However, their studies only focus on a particular industrial sector or factors instead of looking at different industries or various factors. Mukim and Nunnenkamp (2010) attempted to examine the determinants of FDI at a macro-scale level. Nevertheless, their research suffers from data limitations and hence cannot always apply. In comparison, FDI in China is well-documented: there is a range of studies from regional level such as those by Xi et al. (2008) and Wei et al. (2010) to national level including those by Chen (1996), Zhang (2001) and Wei (2005). Furthermore, there are not many studies concerning FDI in China and India to eventually compare and justify the differences in total FDI between two countries. For example, except a study by Sinha (2007) that gives adequate attention to India, other studies such as Wei (2000) and Wei (2005) centre predominantly on China. There is not enough focus on India in terms of FDI determinants. This study will attempt to fill the gap indentified in current knowledge. In particular, two homogeneous models of FDI determinants in China and India will be developed to identify important factors in each country and then a final model for both countries will be included to ultimately compare and explain the gap between China and India’s FDI inflows. 3. Theoretical model of FDI determinants: The theoretical framework for this study is based on the location advantages of â€Å"ownership, location, internalization† (OLI) paradigm proposed by Dunning (1973). The OLI model demonstrates reasons for firms that successfully operate abroad and their mode of entry (Table 3-1). In the theory, FDI is explained by identifying three main elements which guide the investment decision process of MNEs. They include: ownership (O), location (L) and internalization (I). Ownership advantages refer to the firms’ production process which allows it to have a competitive advantage in overseas markets. Location advantages are benefits that a host country can offer a foreign firm. Internalization refers to transaction costs and the ability of multinationals to exploit ownership and location advantages through FDI. While ownership and internalization advantages vary among investing firms, location advantages are specific to the host country. This latter advantage provides a strong grounding for further research on the determinants of FDI. Table 3-1: Relationship between OLI-advantages and mode of entry    Advantages Mode of entry    Ownership Location Internalization FDI Yes Yes Yes Exports Yes Yes No Licensing Yes No No Source: Perlitz (1997) There is a vast number of studies on the location advantages of FDI such as those by Culem (1988), Estrin et al. (1997), Butler and Joaquin (1998), Wei (2000), Razafimahefa and Hamori (2005), Ang (2007), Sinha (2007) and Pradhan (2008). The organisation for economic co-operation and development (OECD, 2002) summarizes the main FDI determinants as follows: Market size and growth prospects: Countries with large market sizes (measured by GDP per capita) and sustainable economic growth (measured by the growth rates of GDP) offer better opportunities for MNEs to access the market, develop economies of scale and explore profitability. As an example, Ang (2007) confirmed that a large domestic market resulted in more FDI inflows, owing to the benefits of economies of scale. Natural and human resource endowments: These are factors of importance in MNEs’ location decision process. Export-oriented FDI in particular seeks to take advantage of those factors related to low labour costs and abundant natural resources. Moreover, the quality of human capital in a country is crucial for technology transfer, managerial techniques and spill-over effects of FDI. Sinha (2007) suggested that the recent â€Å"business process outsourcing† boom in India occurred thanks to the qualified workforce well-skilled in English and technologically educated in â€Å"IT enabled services†. Physical, financial and technological infrastructure:   Infrastructure comprising transport, electricity, communication networks, education, health facilities and other forms are significant determinants of FDI. MNEs are more likely to be attracted to areas with good infrastructure. For example, Sinha (2007) found the significant impacts of port based infrastructure and its proximity on FDI as it lessens inland transportation and reduce costs. Lack of investment in infrastructure, on the other hand, deters FDI. Trade openness and access to international markets: Trade reforms, the degree of openness to trade (measured by the proportion of exports and imports to GDP) and access to regional and global markets are important factors in determining FDI. In particular, openness makes the transfer of goods and capital in and out of the host country easier in the absence of restrictions and thus stimulates production and reduces costs. In realisation of the importance of trade openness, the World Bank has been requiring developing economies to open up their markets so that free trade can help boost growth in these countries (IMF, 2006). The regulatory, policy framework and policy coherence: Macroeconomic stability (indicated by exchange rate stability and low inflation) and political stability (signified by transparent regulatory, legal framework and business environment) are essential for attracting FDI. For instance, Wei (2000) concluded that if China and India could reduce red tape and corruption to a level comparable to Singapore, FDI inflows would be 218% and 348% higher respectively for these countries. 4. Data and methodology: 4.1. Data: Based on the theoretical model and empirical studies discussed previously, five location indicators were chosen to reflect the factors that are most likely to affect FDI. The explanatory variables comprise of infrastructure, trade openness, political risk, inflation and exchange rate. An overview of these variables and their predicted signs is presented in table 4-1: Table 4-1: Determinants of FDI according to theory and empirical studies Variables Predicted sign Empirical studies Physical, financial and technological infrastructure: Infrastructure (+) (+):   Green (2005), Mukim and Nunnenkamp (2010), Wei et al. (2010), Sinha (2007).(-):   Ã‚  Pradhan (2008).No effect: Xi et al. (2008) Trade openness and access to international markets: Trade openness (+) (+): Culem (1988), Wei (2005), Pradhan (2010), Resende (2010). The regulatory, policy framework and policy coherence: Political risk (-) (-):   Green (2005), Mathew et al. (2008), Butler and Joaquin (1998). Inflation (-) (-):   Estrin et al. (1997), Razafimahefa and Hamori (2005). Exchange rate (-) (-):   Wei (2005), Pradhan (2010).(+): Resende (2010). A regression analysis was carried out in order to investigate the links and trends of the presented indicators, specific to FDI in China and India. The regression analysis consists of data from 1984 to 2008 for both countries. FDI net inflows per capita in current US dollars are used; this allows us to take into account the relative country size. The data on FDI was drawn from the World Bank database (IMF, 2010). The period choice of this analysis was partly determined by the availability of variables’ data and is thus somewhat restricted. For example, investigation prior to1979 for China could not be applied due to the unavailability of several independent variables. This limits the number of observations and makes it difficult to justify the effects of economic reforms on net FDI inflows in China. Therefore, this data limitation potentially leads to the study missing a key turning point in China’s policy and regulatory regime following its economic reforms in 1979. ‘Human resources’ was identified as an important determinant of FDI in the theoretical framework. However, the data for possible indicators of human capital, such as secondary school enrolment and literacy rates, was insufficient. For example, some figures for the years studied were unavailable. As a result, human resources was not included in the regression. Busse and Hefeker (2007) used 12 indicators of political risk which could have been applied to this analysis. However, due to budgetary constraints these were not available. Furthermore, dummy and slope dummies (INDIA=1if India, otherwise China) were used to assess if FDI inflows and the chosen factors’ effects on FDI were significantly different between two countries. FDI was specified as a function of the following form: fdi = f ( infra, trade, pol, infla, exc) Where the variables are listed and defined as below: Table 4-2: Determinants of FDI in China and India Variable name Proxy for variable Measures fdi FDI inflows Net inflows of FDI as a percentage of real GDP infra Infrastructure Telephone lines per 100 people trade Trade openness Sum of exports and imports as a percentage of GDP pol Political risk Scale 0-1 (0=unstable, 1= stable) infla Inflation Annual growth rate of the GDP implicit deflator. Exc Exchange rate Official exchange rate (local currency units per US $) Data sources and Summary statistics, time series plots: see appendix table A-1, A-2 and figure A-1, A-2.   4.2. Methodology: 4.2.1.Determinants of FDI in China and India: Having considered all the variables that are used in the analysis, this paper applies time series regression models and the least squares method to examine FDI determinants in China and India. As in other studies (Wei, 2005; Busse and Hefeker, 2006) the log-linear model was adopted to adjust for heteroscedasticity. Furthermore, by taking the log-linear form, any expected non-linear relationship between FDI and the explanatory variables could be transformed into a linear one. Therefore, the estimated equation is: A unit root test was conducted to test whether the independent variables were stationary. The results of the tests are presented in appendix table A-3. It appears that in the case of India, most of the variables were non-stationary with an exception of lnexct. The data for China also resulted in most of the explanatory variables being non-stationary apart from lninfrat. Since the use of non-stationary variables can lead to spurious regression problem, making the analysis wholly unreliable, those variables were made stationary by using finite differences. Hence the new estimated model is: Although taking the differences could remove the unit root, it would reduce the number of observations by one for each variable. This, in turn, may weaken the explanatory power of the models. 4.2.2. The difference in inward FDI between China and India: In order to assess whether there is any difference in FDI inflows between China and India, a joint model of both countries during the period from 1984 to 2008 was conducted in the analysis. This would also assess whether the chosen explanatory factors affected FDI differently between China and India in the same period. Dummy and slope dummies were added to complete the model and panel data method was used. The estimated model is as follows: 5. Empirical results: 5.1. Individual country models: Table 5-1 shows the results obtained for China’s and India’s models. For both China’s and India’s models, the hypotheses of non-autocorrelation and normality were not rejected at 5 % critical value. Therefore, the parameter estimates could be concluded as being unbiased and consistent. Although, RESET tests suggested that the functional forms were mis-specified, the models were the best results to be found. The original form (1) increased the model fit and did not fail the RESET tests, however, this would lead to spurious regression problem as discussed above. In addition, possible interactions between variables were examined. A statistical interaction occurs when the effect of one explanatory variable depends on another explanatory variable, which makes the simultaneous impacts of these variables on the dependent variable non-additive. This may cause the estimated model to be incorrectly specified. As a result, variable interactions were explored through a two-way effect experiment, however, no sensible interactions between variables were found. Parameter stability was tested using the N-step Chow tests and the hypothesis of parameter stability was not rejected at 1% critical value for both China’s and India’s models (test results are displayed in appendix figure A-3). Table 5-1: FDI determinant modelDependent variable: fdi China: Model 1 Colinearity diagnostics (VIF) 2 Colinearity diagnostics (VIF) Constant -0.236 -0.186 Δlninfra 1.776 1.118 1.747 1.117 Δlntrad 1.084 1.298 Δlnpol 0.574 1.174 0.713 1.159 Δinfla 0.083 1.450 0.094* 1.207 Δlnex -0.911 1.209 -0.918 1.209 N 24 Mean VIF: 1.25 Mean VIF: 1.17 R-squared 0.238 0.229 F 1.125 1.408 RESET 9.2866** 11.174** Autocorrelation 0.96802 1.0143 Normality (Chi^2) 5.4895 5.5462 India: Model 1 Colinearity diagnostics (VIF) 2 Colinearity diagnostics (VIF) Constant 0.185 Δlninfra -1.708* 1.345 Δlntrad 1.584* 1.104 Δlnpol 0.020 1.136 Δinfla 0.007 1.211 Δlnex 0.433 1.235 N 24 Mean VIF: 1.251    R-squared 0.412 F 2.521* RESET 36.691** Autocorrelation 0.17512 Normality (Chi^2) 0.15490 Note: *** significant at 1% level; ** significant at 5% level, * significant at 10% level.For more details of the test results, see appendix table-A-4, A-5, Figure A-3. The possibility of multi-collinearity was also taken into account since the introduction of closely related variables in the model may cause serious multi-collinearity problem. This could result in an unexpected increase in the standard error of the coefficients and therefore renders the t-statistics unreliable. Multi-collinearity diagnosis was hence conducted and the results were shown in appendix table A-4. Variation inflation factors (VIF) were reported for each specification. In all models, multi-collinearity did not seem to be serious as mean VIFs were not substantially greater than 1. Having evaluated the models, it was generally concluded that the models were satisfactory. The estimated results for individual country are analysed below: 5.1.1. China: Interestingly most of the factors did not have the expected signs except trade openness and exchange rate. However, apart from inflation, the other variables did not prove to be statistically significant. Inflation, in particular, had a significantlypositive impact on FDI inflows in China. The result is somehow surprising given that many empirical analyses such as those shown in table 4-1 have concluded that MNE’s investment decision is adversely affected by price volatility as it raises the costs of doing business. However, according to Foad (2007), inflation may affect FDI through two ways. The first is that a rise in host country’s price level would make local produce more expensive in local export-markets. As a result, export behaviour would be reduced and hence discourages direct foreign investment. The second suggests that inflation in the host country gives MNEs a competitive advantage over domestic firms. In particular, since foreign firms can have access to resources from home parent companies; they are more protected from domestic inflation. Therefore, host country inflation may generate greater volumes of FDI. The second effect appears to be dominant in the case of China as the trends in FDI inflows and inflation over the period 1984-2008 shows that there were a few years, for example the early 90s and late 2000s, when the changes in FDI and inflation moved in the same patterns (Figure 5-1). Figure 5-1: FDI and inflation in China 1984-2008. Source: based on UNCTAD (2010). 5.1.2. India: The explanatory power for India’s models is fairly higher than that for China’s (41.2% compared to 23.8% and 22.9% respectively). However, only infrastructure and trade openness were found to be significant. Infrastructure was negatively correlated with FDI inflows in India. This is in line with the study by Pradhan (2008), however, contrasts with other findings by Green (2005) and Mukim and Nunnenkamp (2010). The negative effect of infrastructure is most likely due to sluggish investment in infrastructural facilities in India. Badale (1998) indicates that the regional differences in infrastructure have become an important location determinant for foreign investors. However, despite the efforts of Indian government to upgrade its infrastructural facilities in recent years, more work is still required to reach the levels comparable to other developing countries. State-controlled physical infrastructure has long been considered as the weakest link in the Indian economy (Steel, 2001). This bottleneck in the form of inadequate infrastructure may discourage FDI flows into the country. According to the world economic forum, backwardness of infrastructure is the most concern for foreign investors while conducting business in India (Figure 5-2). In particular, one of the biggest infrastructure problems is electricity supply (Yallapragda, 2010). Since the state power supply is so uncertain that most businesses have started to use their own power generators. These evidences combined with the model result reinforce the suggestion that poor infrastructure could deter potential foreign investment into the Indian economy. Figure 5-2: The most problematic for doing business in India Source: World Economic Forum (2010). The trends of FDI inflows and trade openness in India during 1984 and 2008 seem to suggest a positive association between openness and FDI (figure 5-3). Figure 5-3: FDI and trade openness in India 1984-2008. Source: based on UNCTAD (2010). The results have verified this relationship: trade openness was found significant and had the predicted positive sign. Its positive impact on FDI inflows confirms the success of India’s policy reforms since 1991. Prior to the reforms, India followed an â€Å"inward-looking import-substituting† regime with â€Å"one of the most complicated and protectionist regime in the world† (IMF, 1998). In particular, the government imposed high import restrictions with quantitative restrictions on 90% of value-added of manufacturing, maximum tariff rate of 400% and significant export controls (Rajan and Sen, 2000). However, following the economic liberalisation in 1991, India has made drastic changes in its trade policy in order to integrate itself with the global economy. India’s average imported weighted rate declined to 27% in 1999, effective protection rate came down to 72% in 1995, export controls were removed and emphasis was placed on promoting exports (Rajan and Sen, 2000). As a result, trade liberalisation has made the transfer of goods and capital into and out of the country easier with lower restrictions, thus stimulating production and reducing costs. Trade openness is, therefore, seen as a major catalyst for inward FDI in India. 5.1.3. China and India: Table 5-2 shows the results for joint model of FDI determinants in China and India. Overall the models passed the auto-correlation tests; however, the R-squared obtained is not very high: the independent variables explain about over 23 % of the variation in the change in FDI inflows in both models. Table 5-2: FDI determinants in China and India INDIA = 1 if India, otherwise 0 Model  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   1 2 Constant -0.236 -0.186 Δlninfra 1.776 1.747 Δlntrad 1.084 Δlnpol 0.574 0.713 Δinfla 0.083* 0.094** Δlnex -0.911 -0.918 INDIA 0.421 0.486 ΔlninfraINDIA -3.485 -3.965* ΔlntradINDIA 0.501 ΔlnpolINDIA -0.554 -0.446 ΔinflaINDIA -0.076 -0.094 ΔlnexINDIA 1.345 1.565 N 48 48 R-squared 0.265 0.235 F 1.179 1.298 Autocorrelation (1) 0.2297 -0.02330 Autocorrelation (2) -1.483 -1.610 Note: *** significant at 1% level, ** significant at 5% level, * significant at 10% level. It is expected that there is a considerable difference between China’s and India’s volumes of FDI as illustrated in figure 5-4: generally, FDI inflows in two countries fluctuate over the estimated period. However, China’s FDI seems to follow a downward trend while the trend for India’s seems to move upwards. Figure 5-4 a: Changes in FDI inflows in China, 1984-2008 Source: World Bank (2010).    Figure 5-4b: Changes in FDI inflows in India, 1984-2008 Source: World Bank (2010). The dummy variable used to estimate these differences between the two countries’ FDI, nevertheless, was not statistically significant. Furthermore, the findings show that apart from infrastructure, other factors did not have any significant different effects on FDI inflows in China and India. India’s poor infrastructure is a deterrent for its attraction towards FDI as compared to China. More precisely, the lack of infrastructure reduced the volumes of FDI received by India to around 3.965% less than China. Infrastructure inadequacy is therefore one of the reasons why India is lagging behind China in attracting potential FDI. China has been ahead of India in developing its infrastructure to desirable levels for foreign investment. This can be demonstrated in the case of Chinese special economic zone (SEZ) model. Following the reforms in 1979, SEZs were created and the first one was based in Shenzhen. It used to be a small fishing village and was successfully transformed into one of the most modern cities in the world with 120,000 MNEs in operation, contributing $40 billion to the total GDP and was recently the world’s sixth largest port (Sinha, 2007). India, in comparison, has adopted the Chinese SEZs strategy only over the last decade. However, most of the SEZs are relatively small in size and not reach their full potential. In addition, many Indian ports are undersized, with a high density of traffic and inflicted with poor management (Sinha, 2007). The results also suggest that for both countries, inflation is the determinant of inward FDI but it has unexpected signs. In particular, inflation positively influences FDI. Possible explanations for the positive effect of inflation are the same as discussed in section 5.1.1. 6. Policy implications: Based on the individual country models and the findings from Chinese-Indian joint model, policy suggestions are made to create a more friendly business environment for foreign investment in India. India’s infrastructural bottlenecks have been proved as a major deterrent of FDI flows. India should therefore take a more balanced focus on developing desirable infrastructure throughout the whole country. In particular, Sinha (2007) suggests that India needs to invest at least $300 billion in infrastructure and it could be funded by foreign exchange reserves and public sector equity off-loading (PSU-offloading). Specifically, India has foreign exchange reserves worth more than $150, together with offloading PSU, which can be funded for upgrading infrastructure. Power and electricity is another concern that Indian authority needs to resolve immediately. Power sector has given a return of 26% on government equity in state electricity boards (SEBs) (Economic survey, 2006). Privatizing power distribution companies and SEBs is necessary to improve the efficiency and tackle the long-term problems in inadequate power supply. Furthermore, India should develop high standard transportation and telecommunication networks to better serve the economy. In the telecommunications sector, for example, the penetration of mobiles and telephones has been widely successful and it should continue to benefit all people in the country. In addition, Indian railway is highly below efficiency which should be privatized like Chinese railway. India should also replicate successful stories in the infrastructural efforts it has made. For instance, expressway networks should be established in all metro cities and link all parts of the country. Another infrastructure concern is the creation of SEZs. Although India has adopted the Chinese SEZ model, it has not been really successful. The size and development of those SEZs do not fully reflect the potential of the Indian economy. It is thus crucial that Indian government should consider developing larger SEZs combined with world-class infrastructure, human resources and good management. This would consequently attract MNEs to invest in these SEZs. Moreover, India should build larger ports equipped with good facilities which would help develop â€Å"state of the art† ports that can receive larger ships. Additionally, developing strategic ports in major states could help improve trade and linkage between India and other parts of the world. The second factor determining FDI in India that has been discussed in this study is trade openness. Liberalization of foreign trade policy has brought in substantial benefits for India in terms of trade integration and foreign investment. Trade liberalisation, according to Balasubramanyam and Mahambare (2001), does not means an export promotion strategy being totally favoured. But a neutral regime which neither favour export-oriented industries nor import-substituting industries is appropriate since it provides a comparative advantage to determine the investment distribution between the two groups. Such a neutral regime is likely to attract larger volumes of FDI and promote its efficiency. Creation of export processing zones (EPZs) is another recommended policy to promote exports and attract FDI (Balasubramanyam et al., 1996). Within these EPZs, no restriction on exports of final goods is imposed and duty-free of imports is permitted. It is considered as a small free-trade area and is well provided with infrastructure facilities and telecommunications. In summary, evidence and results from this study have suggested fundamental policies, focusing on infrastructure and trade reforms, to provide congenial investment climate in India for attracting FDI and promote its position comparable to China as a FDI destination. Conclusion: The phenomenon of FDI inflows in developing and transition economies has attracted a significant number of analyses looking into the determinants of FDI in these countries. Based on previous literature and research, this study has attempted to examine important factors shaping FDI in two emerging markets: China and India. India and China are the most favourite FDI destination among developing countries. China was a highly closed economy completely isolating itself from the global economy before 1979. Its closed economic policy almost limited China’s potential development. Eventually, the Chinese government began to liberalise its economic regime and opened its domestic market to the rest of the world. As a result, remarkable volumes of FDI have been attracted into the country. The same picture has been drawn for India since its reforms in 1991: FDI inflows into India have increased rapidly which places it to the second most popular FDI host after China. However, as compared to its neighbour in the East, India is still far behind in terms of volumes of FDI received. India, despite being the world largest democracy with a huge promising market is still overlooked by foreign investors. The study tried to explore this paradox and to investigate the factors driving FDI in China and India. For these purposes, two separate models were developed to identify the determinants of FDI in each country and then a joint model was conducted to compare and explain the difference in FDI between two countries. The individual model suggested that inflation, though concluded with an unexpected sign (coefficient was found to be positive), had significant impact on China’s inward FDI. On the other hand, trade openness and infrastructure proved to be major determinants of FDI in India. The model for both countries indicated that among factors examined, inflation was important for FDI inflows in the two countries. Furthermore, the analysis resulted in no significant difference between China’s and India’s FDI. Infrastructure appeared to be one of the main reasons why India was falling behind China in attracting FDI. Based on those results, policy recommendations have been made to create a congenial business climate in India for improving its attractiveness towards foreign investors. Firstly, Indian government should take immediate actions to resolve the infrastructure bottleneck. This can be achieved by developing strategic infrastructure, popularizing telecommunication and transportation networks, establishing large SEZs and ensuring efficient power supply. Secondly, India needs to create an appropriate trade policy which balances export promotion and import substitution. In addition, growing EPZs with low trade barriers are desirable for attracting MNEs. This study has provided decent explanation for the determinants of FDI in China and India. It has, to some extent, been able to answer the research question on why India is falling behind China in attracting foreign investment. The research, however, has some limitations which need to be addressed in further study. First of all, it was difficult to obtain sufficient data on FDI determinants for India and China over the last twenty five years and hence the number of chosen factors was restricted. This may explain for the low models’ explanatory power and insignificant F-statistics. Also, industry wise study can be conducted to identify which industry is the main contributor to FDI growth in China and India. Finally, this analysis only compares India with China and does not include other emerging economies such as Brazil and Russia. A study on FDI determinants in BRIC countries[4] thus would complete the comparative picture between India and other emerging countries.

Financial ratio analysis Assignment Example | Topics and Well Written Essays - 750 words

Financial ratio analysis - Assignment Example However, the intention of the ratio computation in this case is for the investment viability and this implies that the relevant explanation of the ratios will be offered. We consider the current ratio, which helps in determining the financial position or ability of an organization to meet its short term obligation. The following formula is used to compute the current ratio A current ratio of 2:1 is considered to be most adequate for numerous organizations in testing the liquidity ratio. In this case, the two organizations are considered to be relatively able to meet their short term obligations. The profit margins indicates that the DOHA Bank is more profitable compared to the Commercial Banks of Qatar. In 2013, the DOHA Bank recorded 0.54 while the CBQ recorded 0.467. On the other hand, in 2012, the DOHA Bank recorded 0.85 while CBQ recorded 0.674 (Chesnick & United States, 2000). This is clear that the DOHA Bank is more viable for investment compared to the Commercial Banks of Qatar. From the debit ratio figures, the two companies seem to be spending nearly the same amount of debts to finance their organizations’ growth and development. This has an impact of creating volatile earnings (Chesnick & United States, 2000). However, DOHA Bank appears to be spending a little bit more in its operations and this explains that, it is able to generate more earnings, which are spread to the shareholders in terms of dividends. These ratios help the business to know whether it is meeting its goals of generating profits and satisfying the clients. In this case the total assets turn over will be computed using the following formula. These ratios indicate that the market viability of the two organizations is sound and they can thrive well, since their book value is almost the same as the market values of the shares (Chesnick & United States, 2000). From the above ratio analysis, it can be concluded that the DOHA Banks has more

Argument Essay Example | Topics and Well Written Essays - 1000 words - 11

Argument - Essay Example ts: one from the USA Today (Australian gun control holds lessons for U.S.) and the other published online in Denver Post (Gun rights and gun control arent necessarily exclusive). The discourse would present a separate examination of each article’s arguments including supporting contentions. A concluding portion would then assess which editorial was deemed most effective. The editorial article entitled â€Å"Australian gun control holds lessons for U.S.† published online in the USA Today on December 18, 2012 proffered issues that apparently compared the measures taken by Australia in terms of gun control. As an editorial article, the author comes from the Editorial Board, but was not specifically identified. The article’s main thesis was despite sharing similarities between the United States and Australia in terms of having previously experienced violent deaths due to indiscriminate firing of guns, Australia’s gun control policy which was enforced after a 1996 shooting eventually solved the dilemma. According to the discourse, Australian law on gun control necessitated categorizing firearms into five distinct classifications, where â€Å"some of the deadliest assault-style weapons and large ammunition clips are now all but impossible for individuals to lawfully own. (Further), firearms are subject to a strict permitting process, and dealers are required to record sales, which are tracked by the national and territorial governments†¦ (In addition,) the law encouraged people to sell their firearms back to the government, which purchased and destroyed about 700,000 of them† (Australian gun control holds lessons for U.S. pars. 4 & 5). Due to the passing of this law, the report disclosed that evident result was no violent gun-related incidents ever occurred. The author used logical arguments through the support of evidential historical records and citing credible findings that apparently revealed the effectiveness of gun control through the law enforced by

Advantages and Disadvantages of Technology Essay Example for Free

Advantages and Disadvantages of Technology Essay Technology began when man started to control and modify nature to meet his needs.   Prior to the 20th Century, technology was identified with skilled men and women who passed their expertise and know-how from one generation to another.   Back then technology was associated with new techniques, new processes and new methods of doing things.   With the scientific revolution in the 20th Century, the concept of technology changed.   It is now closely associated with gadgets, products and innovative scientific inventions. This essay examines the advantages and disadvantages of two simple technological innovations: the stun gun and the police car video surveillance.    Their impact, advantages and disadvantages to the society will be evaluated for purpose of deeper appreciation of their use. Advantages and Disadvantages of Stun Guns and Police Car Video Surveillance Technology is closely tied with the concept of innovation.   There was a time when law enforcement officers utilized the wooden batons as their only weapons against violent individuals who resisted arrest (Scott Oldham, 2005, p.1).   In view of the lack of effective weapons that they can use to apprehend and subdue suspects, encounters between law enforcement officers and suspects often lead to a bloody fight.   As a result either the police officer or the suspect ends up getting seriously hurt or killed. Read more:  Technology Advantages and Disadvantages Essay There was also a time when law enforcement officers had to rely on their recollection of the events during dangerous situations.   They had to record the license number of the suspect’s getaway vehicle, remember their faces and the kind of weapons used.   If they were able to arrest the suspects after a dangerous situation, suspects often filed suits against law enforcement officers alleging brutality and violence they experienced in the hands of the police officers.   There being no other witnesses, the police officer had always been placed in jeopardy of being maliciously sued by a suspect he had arrested in his line of duty. With the use of technology, man was able to control and modify nature for the purpose of satisfying his own needs. Law enforcement officers have found simple solutions to their everyday problems.   With the use of stun guns police officers were able to harness the power of electricity.   They were able to control the volt and use it to apprehend violent suspects by incapacitating them temporarily. With the discovery of stun guns, police officers no longer have to worry about getting hurt or hurting anybody in the course of the arrest.   In case a suspect resists arrest and becomes really violent, the law enforcement officer only has to press this gun against the body of the suspect.   It will release an electronic charge that is high in voltage that can disable the suspect for 20 to 30minutes enough time for them to place handcuff on the suspect. Police officers no longer have to worry about the possibility of them forgetting the suspect’s face or the license number of the vehicle or the kind of weapon used.   He also need not fear that suits for excessive violence and brutality may be filed against him because there is physical evidence that can be presented before the court.   Law enforcement officers only have to produce the recording of his patrol car video surveillance and present it in court to disprove the false and malicious accusations against him. Just like any technology, however, it can be abused.   In the hands of an abusive law enforcement officer, stun guns may cause serious injury against a suspect if not used properly.   According to United Nations Committee use of stun guns by the police may cause extreme pain and in certain cases may lead to death.   (David Morgan, 2007, p.2)   It has been reported that since 1999, 80 people have died and others have been seriously injured by police using electronic stun gun which negate the claims that they are non lethal weapons.   (Greg Mathis, 2005, p.1) Use of police car video surveillance may be advantageous for some but it may pose a serious constitutional challenge for others.  Ã‚   Lawyers have challenged the legality of the act of police officers using their video camera as proof to apprehend those who commit over speeding and those who run against red lights.   Their contention is that the owners of the car are automatically considered guilty and imposed a penalty even if it may be possible that the car owners were not driving the vehicles at the time the infraction was committed.   Aside from constitutional violation of presumption of innocence, some police officers may use the video camera for the purpose of invading the privacy of private individuals. Conclusion Technology is indeed the successful attempt by man to control and modify nature for the purpose of satisfying human needs and providing solutions to his problem.   It may happen that the technology may turn into something that it is intended to do or to something that it is not intended to.   This is precisely what technology is.   It may turn out beneficial to mankind but it may also pose serious risks for us. In the case of stun guns, I believe it is still one of the most non-lethal instruments that police officers can utilize against suspects.   It would be better however if police officers are educated on its use and its dangers before they are allowed to use these instruments.   The same thing is true for video surveillance which is most effective if it is utilized for strictly law enforcement work.   These instruments therefore are not dangerous in themselves.   They are not evil in themselves.   Problem starts when those who utilize it use it improperly.   This problem could be remedied by proper orientation and training so that old and new law enforcement officers may be advised on how to properly utilize these new pieces of technology.

Marketing The Non-Interest Banking System Essay -- Finance

Marketing Non-Interest Banking (International Business Vitality) Traditional Western banking system, with its 5-9% APR on loans performs some benefits for borrowers, but not "absolute," as the bankers like to joke. Much more favorable conditions for customers offer Islamic banks. These financial institutions are willing to lend money without any interest at all. At first glance, this statement seems absurd: after all, why should the bank give money to borrowers in debt with no hope of getting any benefit, if it is more successful to invest the same money in the deal and get a significant income? However, skepticism is hardly justified in this situation. The principle of Islamic banking system is based on the fact that every Muslim, regardless of whether he uses - a loan or debt, cannot carry financial transaction under a steady rate according to the religious canons. Usury is forbidden by Quran. The income of the bank is received from the investment redistribution. A Muslim who brings the money to the bank has a choice: to put them on the current account or into the investment account. If he chooses the current account, he does not receive any money, except the inflation rate, which is set by the state. If he chooses an investment account, the banker and the client agree on the client's income from the income of the bank in a given investment project . Due to the fact that Islamic banks have their own companies and production, which bring income from the sales of specific goods in the market, these programs bring profits to the investors as well. There different programs in which European banks (English and German) can be interested in. (Dalrymple, B) Accordingly, the same principle applies to borrowers. Taking the money in ... ...dely implemented by the European countries in order to prevent financial crisis and develop local businesses. (Brach, J., 2010). References Ali A. Ibrahim, The rise of customary businesses in international financial markets: An introduction to Islamic finance and the challenges of international integration. Georgetown University Law Center. (n.d.). Accessed at: http://works.bepress.com/ali_ibrahim/3 Brach, J. (2010). The Global Financial Crisis and the Arab World: Impact, Reactions and Consequences. Mediterranean Politics. Dalrymple, B. How Sharia law is affecting global interest rate determination. Journal of Finance and Accountancy . Jobst, A. A. (2007). The Economics of Islamic Finance and Securitization. IMF Working Papers Robbins, H. E. (2010). Soul Searching and Profit Seeking: Reconciling the Competing Goals of Islamic Finance. Texas Law Review Marketing The Non-Interest Banking System Essay -- Finance Marketing Non-Interest Banking (International Business Vitality) Traditional Western banking system, with its 5-9% APR on loans performs some benefits for borrowers, but not "absolute," as the bankers like to joke. Much more favorable conditions for customers offer Islamic banks. These financial institutions are willing to lend money without any interest at all. At first glance, this statement seems absurd: after all, why should the bank give money to borrowers in debt with no hope of getting any benefit, if it is more successful to invest the same money in the deal and get a significant income? However, skepticism is hardly justified in this situation. The principle of Islamic banking system is based on the fact that every Muslim, regardless of whether he uses - a loan or debt, cannot carry financial transaction under a steady rate according to the religious canons. Usury is forbidden by Quran. The income of the bank is received from the investment redistribution. A Muslim who brings the money to the bank has a choice: to put them on the current account or into the investment account. If he chooses the current account, he does not receive any money, except the inflation rate, which is set by the state. If he chooses an investment account, the banker and the client agree on the client's income from the income of the bank in a given investment project . Due to the fact that Islamic banks have their own companies and production, which bring income from the sales of specific goods in the market, these programs bring profits to the investors as well. There different programs in which European banks (English and German) can be interested in. (Dalrymple, B) Accordingly, the same principle applies to borrowers. Taking the money in ... ...dely implemented by the European countries in order to prevent financial crisis and develop local businesses. (Brach, J., 2010). References Ali A. Ibrahim, The rise of customary businesses in international financial markets: An introduction to Islamic finance and the challenges of international integration. Georgetown University Law Center. (n.d.). Accessed at: http://works.bepress.com/ali_ibrahim/3 Brach, J. (2010). The Global Financial Crisis and the Arab World: Impact, Reactions and Consequences. Mediterranean Politics. Dalrymple, B. How Sharia law is affecting global interest rate determination. Journal of Finance and Accountancy . Jobst, A. A. (2007). The Economics of Islamic Finance and Securitization. IMF Working Papers Robbins, H. E. (2010). Soul Searching and Profit Seeking: Reconciling the Competing Goals of Islamic Finance. Texas Law Review

Explore the techniques used Essay

Explore the techniques used by Carol Ann Duffy to create contrasting â€Å"voices† by comparing two of the persona poems. In the poem â€Å"Fraud†, Duffy takes on the persona of an historical figure and creates a voice for it. She writes from the point of view of this character. In doing so, Duffy portrays the feelings and emotions of that character as she sees them. The character in â€Å"Fraud† is a Jewish man whose family were all killed in the Nazi holocaust. His name was Jon Ludwick Hoch, who later changes his name to Robert Maxwell. This was so that he could escape his past and what he left behind when he left Slovakia and to help him fit in when he moved to England. A way in which a â€Å"voice† is created in this poem is through use of the language, this marks it so you can tell it can only come from this specific character. The language is very direct and factual, giving no alternatives. â€Å"What was my aim? To change from a bum a To a billionaire. † The language exposes a lot about this persona. It shows that he was intelligent and cunning and knows what he is talking about. The character is not self pitying like that of the persona in Havisham,but condsending. The two characters through the use of different voices in each poem are portrayed as once being very vulnerable but now have become hardened by time. â€Å"Poverty’s dumb. Take it from me Sunny Jim. † This quote is from â€Å"Fraud† this shows how the voice is dominating and condescending. When looking at the poem you can immediately see that the line length is generally short, with no more than fourteen words per line and no less than two. This may be a method in which the personas thoughts are expressed, very rapid and direct thoughts. A lot of the lines end with â€Å"M†, for example â€Å"scum, slum. † This â€Å"M† sound is crude and suggests that the â€Å"voice† is similar to that of a whining and spoilt child. Which, in turn, when you research the real life character, says a lot about the person. He Lots of words in the poem are mono syables which gives a heavy beat to the end of the line. The character speaks in colloquial language, using a lot of slang words; this gives us an immediate opinion of the character. There is a frequent use of curse words this gives you the impression that the character is very direct not only in his conversations with people but with his whole out look to life. Words such as â€Å"Mother fucker† are swear words, but when used in this context in the play it gives a depth to the character. Through Duffy’s use of words we as readers can learn more about the character she is portraying/ A device that Duffy has used in this poem and with a lot of previous poems is the use of ellipsis. For example, the man speaks elliptically, his attitude towards things and he doesn’t explain himself. This shows that his character is â€Å"Shady â€Å", he elliptically refers to contemporary things. When he is talking about God, he talks elliptically about a lesbian sex show. â€Å"Then there’s Him- for whom I paid for a butch and femme To make him come. † To create the contrasting voice in this poem, Duffy uses the above techniques. But what techniques are used in another of her persona poems Havisham? Havisham is a character taken from literature and given a voice by Duffy. The woman in question is the tragic Miss Havisham from Charles Dickens’s novel â€Å"Great Expectations. † Some history to the character in Havisham is; she was jilted at the alter by her lover whom she was due to marry. She never really recovered from that day. Inside her house she kept the wedding feast as it was, at this point rotting and rat infested. She wore her once beautiful wedding dress, now reduced to blackened rags. The point is, she wanted to keep everything exactly the way it was the day of her wedding, in hope that her lover would come back to her. Clearly from the outset there is still bitterness for the love she lost unsuspectedly. The first literary device used in this poem, in the first line is an oxymoron when referring to her lover. This suggests what she once felt for him, and what she thinks of him now. An oxymoron is a contradiction, so it begs the question, how can he be both of these things? â€Å"Beloved sweetheart bastard. † As in Fraud, there is a use of elliptical language which leaves the reader asking themselves questions about the character and what she is referring to. â€Å"Not a day since then I haven’t wished him dead . Prayed for it So hard I have dark green pebbles for eyes, Ropes on the back of my hand I could strangle with. † Who is he? When was â€Å"then†? To make this more effective and dramatic, Duffy uses a metaphor to try and convey what it feels like. What it feels like when she is saying how much she has longed for him to be dead. Her eyes are compared to â€Å"dark green pebbles†. This has all sorts of connotations, what does a dark green pebble feel like? The first thing that comes to my mind is that it is referring to how she has become cold and almost unhuman. This is what he has reduced her to. Another metaphor is employed in the same stanza when she talks about the ropes on her hands. Of course, she does not literally have ropes on her hands; its connotations are that of veins. The veins on her hands are bulging, through the stress she has been put through. This poem is full of rage and anguish, unlike Fraud where the main tone was demeaning of others. The woman in this poem is extremely self pitying and is completely self absorbed over what this man did to her. She is lonely and lost, grieving for her lost love. This poem is not normally structured; it does not flow as most poems do. In the first two stanzas there are two or three words, then a full stop. This method is to give that line a more dramatic and edgy feel, to set off the enigmas in the poem. â€Å"Spinster. I stink and remember. † â€Å"Beloved sweetheart bastard. † Both of the personas in these poems are not happy or jubilant in any way, they are depressing figures that eventually come to their end. The point is that similar methods are used to create the two contrasting voices. The way in which you use them and the language used is what really determines the creation of a contrasting voice and persona.

The Ideas Of Machiavelli And Socrates - 1988 Words

Essay #1 The ideas of Machiavelli and Socrates have influenced the leadership styles and approaches of leaders around the world. From Stalin to the founding fathers of the United States, Machiavellian influenced motives and ideals can be seen throughout modern history. Socrates is often referred to as the founder of Western philosophy, and his teachings have been passed on to leaders over the centuries. This paper will state both the Machiavelli’s concept of a ‘Prince’, and present Socrates’ perspective on the ‘ideal’ prince. It will then evaluate Machiavelli’s concept of prince from Socrates’ perspective, and decide as to whether Socrates would be supportive of a political system led by a Machiavellian Prince. The Machiavellian approach†¦show more content†¦This prince would not concern himself with the will of the majority, as decisions that he makes need to be logical and defensible. This prince would place an emphasis on virtue, over the pursuit for material wealth. The prince could never intentionally do wrong or evil, and would disapprove of the idea of returning an evil for an evil. The difference between the two figures is striking. Machiavelli writes about a prince that breaks his word, when necessary for his own gain. On the other hand, Socrates argues that is never right to be untruthful. Machiavelli and Socrates both argue for self-development, yet the forms of development that they advocate are very different. Although there are similarities, such as the fact that each ‘ideal’ prince should surround himself with smart, questioning advisors, the differences in the core of each argument are too deeply divided. Socrates would not approve of an ‘ideal’ Machiavellian prince, and would not be supportive of the political system that this prince would lead. The biggest difference between the two ‘ideal’ princes is their respective views on ethics and justice. For Machiavelli ethics should be pushed aside when it is in the best interest of the prince to do so. This is something that Socrates could never endorse, as it is his belief that people should spend their lives in the pursuit of virtue, and should lead ethicalShow MoreRelatedSocrates And Machiavelli s Views On Violence And Violent Actions1687 Words   |  7 PagesSocrates and Machiavelli hold vastly different views on violence and violent actions, the former advocates strongly that it is always better to be harmed rather than to harm while the latter argues that violence is essential, when used correctly, in order to gain and maintain power. These contrasting views on violence both hold merit, yet the question of which view is more corrupting depends strongly on what corruption is defined as, and thus, which view fits this definition. Socrates is determinedRead MoreM achiavelli And Socrates Similarities1437 Words   |  6 Pagesway. This is the case with two philosophers, Socrates and Machiavelli, who both lived during times of internal political strife. Greece was divided into numerous city states that were constantly at war with one another and hundreds of years later, Italy would also experience this political fragmentation and violence. Despite having these identical environments, Socrates and Machiavelli adopted two very distinctive and contrasting perspectives. Socrates used his experiences and the environment thatRead MoreSocrates And Machiavelli : A Political Philosopher1666 Words   |  7 PagesAt first glance, Socrates and Machiavelli appear to have a lot in common.   They both lived in a time of political unrest and violence. They both dealt with uncertain surroundings in their societies. Most importantly, they both tried to use philosophy to improve their society. However, there was also an important difference between them. While Socrates was a moral philosopher whose goal was to search for truth and knowledge, Machiavelli was a political philosopher whose goal was to create a lastingRead MoreMachiavelli And The Apology Of The Prince1718 Words   |  7 Pages Machiavelli writes The Prince centuries after Plato documents Socrates in Crito and The Apology. Despite the different time periods, both Machiavelli and Socrates experience times of turmoil where the concept of democracy was questioned. However, the different time periods cause the views and purposes of Machiavelli’s writing to largely differ from Socrates. Machiavelli writes in a time of turmoil where Italy was a bunch of small, fragmented states and when the Medici’s struggled to regainRead MoreSimilarities Between Socrates And Machiavelli1649 Words   |  7 PagesSocrates and Machiavelli both existed during times of political unrest. Both men sought different means of political leadership, and could be seen as activists of their times. During times of war and unrest, it was a bold choice that both men made to stand up for their beliefs and speak out against the system. However, Socrates wouldn’t have agreed with Machiavelli’s means and concepts of the Prince and his ideas for how a political establishment should function. Machiavelli’s means may have beenRead MoreSimilarities Between Machiavelli And Socrates1250 Words   |  5 PagesMachiavelli and Socrates are two of the most influential figures in modern day political philosophy. These two individuals established the bases for our interpretation of the world and human political interaction. While they were separated by centuries and a significant geographic distance, it is fascinating nonetheless to ponder what they would think of each other. Sadly it is impossible to ask themselves and so we must instead turn to their writings in order to glean an idea of what their opinionsRead MoreCompare And Contrast Socrates And Machiavelli1419 Words   |  6 PagesSocrates vs. Machiavelli: The meaning of truth As philosophers, both Socrates and Niccolo Machiavelli developed theories in response to the warring political environment around them. However, the theories and principles developed by the two philosophers are vastly different in regard to the concept of truth, Socrates would hate Machiavelli’s model prince due to Machiavelli’s manipulative view of truth. While Socrates desired a state that focuses on fundamental truth and ethical decisions, MachiavelliRead MoreSocratic Justice And The Trial And Death Of Socrates992 Words   |  4 PagesTrial and Death of Socrates. I will also go into detail about the differences between Machiavelli’s views of government as opposed to Socrates’s. Socrates and Machiavelli are two the greatest philosophers known today. Both had an effective way of showing and standing up for what they believe in. While both men were very intelligent, Socrates and Machiavelli differ with their views on justice. Socrates defines justice as doing what is best for the wellbeing of his country. Socrates shows this when givenRead MoreSimilarities Between Machiavelli And Socrates1544 Words   |  7 PagesMachiavelli and Socrates agree on very little. While an initial reading of the two may elicit some comparisons, the goals of their respective philosophies rely on different foundations, and would therefore culminate in very different political results for society. Socrates would likely see in the Prince a selfish ruler, while Machiavelli would see in Socrates a dangerous idealist whose ideas would lead to instability and the death of the state in which these ideas were implemented. Machiavelli’sRead MoreMachiavelli And Socrates1579 Words    |  7 PagesMachiavelli and Socrates Niccolo Machiavelli and Socrates both lived during turbulent, political times. Machiavelli in Florence, Italy and Socrates in Athens. Machiavelli’s The Prince outlines the necessary features and traits of a sovereign, primarily, a Prince. It served as a handbook to effective rulership in the 16th century. By analyzing Machiavelli’s belief that a prince should be strategically feared, the role of free will , and the role of the people , I will argue that Machiavelli has