Key Concepts in Political Science for Strategic Decision Making of States

This paper analyzes the five key concepts in political science that determine the strategic decision making of states for economic growth and resource distribution. The concepts include distribution of capital, risk measure and analysis, role of institutions, market versus hierarchy, culture and the economy, and embeddedness of the market. The paper also discusses how these concepts are crucial in decision making of Multinational Corporations (MNCs) and their influence on global processes.

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Introduction
In this paper we are going to analyze the five concepts in political science that are key to the
strategic decision making of states. These concepts determine how state strategy will be
formulated in a political economy.
Neo-institutionalist thinking aims to dispel the mystery of development, emphasizing the solid
link between the institutional framework and growth. The "Political Economy of Development",
linked to the neo-institutionalism of "Rational Choice", emphasizes the political aspects of
development. With the support of "narratives" about the birth and evolution of the Western
world, it explains the emergence of the modern nation-state analyzing the role of violence as a
source of prosperity (welfare) and institutional quality, depending on its public or private
provision . Starting from a parallel between the underdeveloped world and the insecure Hobbes
society, where the control of violence is private, it focuses on the causes that have prevented the
contemporary countries of the Third World from following the development guidelines of the
States(Haggard et al. 234).
Distribution concept
The neo-institutional approach has extended to the study of colonization along two lines: the
"Political economy of conquest" and the "Political economy of economic failure". The first
argues that the colonization modalities determined different political, economic and social
institutions and these would explain the divergences of growth rates. The second, that the
abundance of indigenous population and precious metals explain the appearance of a high degree

of economic and political inequality that would have been a decisive hindrance to economic
development.
The first concept is distribution of capital. Inadequate government policies and other Social
economic factors could lead to political and social instability in a country. According to Ricardo
a classical economist distribution of capital should be divided into three social classes: rent for
landlords, wages for laborers and profits for the owners of capital (Bartels, Larry 45). According
to Ricardo if we take limited growth potential of any national economy a particular social class
could have more gain at the expense of another. Thus , strategic decision making of states is
essential to economic growth and this is the reason why Economic stimulus Programs (ESP) are
sometimes important to be carried out by the government as a way of distributing income and
wealth in the state.
Risk measure measurement and analysis concept
This concept determines the risks of a country using various variables. In every country there is
country level risk and also a tool called Robin Country Risk Index that incorporates four
dimensions namely operations, economics , governance and society. The policy makers should
make decisions based on these parameters.
Role of Institutions
This concept shows how important institutions are to the economy and how they can be used in
making good strategic decisions for the economy. The role of institutions in a political economy
cannot be understated. It is because of social challenges, long standing and deep rooted political
challenges that necessitate the introduction of these institutions (Haggard et al. 234). Economic

institutions such as institutions for conflict management, regulatory institutions, institutions for
macroeconomic stabilization and many others play a critical role in resource distribution an
economic growth. Therefore, this concept is important because any decision making made by the
state should be made using recommendations and advice received from these institutions and
especially the macroeconomic institutions.
Market versus hierarchy concept
The concept of political networks started with the same basic idea as the new state management:
the modern state fails to meet public needs, there is an urgent need to change hierarchical
administration to a new form of government. But if the state management in the search for new
approaches places emphasis on a market economy, the theory of political networks tries to settle,
taking into account the communicative processes of post-industrial society and the democratic
practice of modern states. As T.Berzel emphasizes, for the production of public goods the state
increasingly depends on other actors and subsystems; in this situation of interdependence
between public and private actors, neither the hierarchy nor the market are effective structures
for coordinating the interests and resources of the various actors involved in the production of
political decisions; as a result, political networks become the dominant model of governance.
Culture and the economy concept
Culture can be defined as the consciousness about social relations and life in political and
economic activities in a society including values, morality and consciousness. Political and
economic practices are the basis of culture while the content of culture are in the thoughts and

how people understand the state political and economic practices (Gilpin, Robert 78). Culture
evolves with political and economic practices. Thus the state makes decisions based of the
culture of the people.
Embeddedness of the market
According to Karl Polanyi who came up with this concept, the economy in its substantive sense
is an instituted process of interaction between the environment and man. The human economy is
enmeshed and embedded in institutions which can be either economic or non economic (Cohn,
Theodore 167). This concept argues that religion or government may be crucial for the
functioning of the economy as the machines and availability of tools that lighten the toil of labor.
Economies should start from acquiring stability and unity in the sense that interdependence and
recurrence of the various parts of the economy can be secured. This concept is important as it
helps the government to make decisions correctly.
How this concepts are crucial in decision making of MNCs.
All this concepts are critical and affect the decision making of Multinational Corporations. For
example, the Multinational Corporations will make decisions on where to invest based on the
incentives and policies that a state makes through macro-economic institutions like the Central
bank. Also all these concepts influence the growth of the economy either directly or indirectly.
This means that before a Multinational Corporations plans to start its operations in a country it
must analyze how the economy of the country is to make its projections.
The influence of transnational corporations (MNCs) on global processes is determined by their
scale. Sales volumes of some energy MNCs are comparable with the GDP of large states (see
table below). Unlike national companies, private MNCs are not tied to a particular country, even

if their business operations historically started from the territory of one state. The global scale of
MNC's activities is explained by the fact that companies are looking for cheap natural resources,
cheap workers and new markets.
References
Bartels, Larry M. Unequal democracy: The political economy of the new gilded age. Princeton
University Press, 2016.
Cohn, Theodore H. Global political economy: Theory and practice. Routledge, 2016. Cohn,
Theodore H. Global political economy: Theory and practice. Routledge, 2016.
Gilpin, Robert. The political economy of international relations. Princeton University Press,
2016.
Haggard, Stephan, and Robert R. Kaufman. The political economy of democratic transitions.
Princeton University Press, 2018.