Discuss stability of governments and list the main political causes of instability in international markets.
The ideal political climate for a multinational firm is a stable, friendly government. Radical shifts in government philosophy when an opposing political party ascends to power, pressure from nationalist and self-interest groups, weakened economic conditions, bias against foreign investment, or conflicts among governments are all issues that can affect the stability of a government. At the top of the list of political issues concerning foreign businesses is the stability or instability of prevailing government policies.
There are five main political causes of instability in international markets: (1) some forms of government seem to be inherently unstable, (2) changes in political parties during elections can have major effects on trade conditions, (3) nationalism, (4) animosity targeted toward specific countries, and (5) trade disputes themselves.
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