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🗳️ap comparative government review
5.2 Political Responses to Global Market Forces
Verified for the 2025 AP Comparative Government exam•Last Updated on March 14, 2025
In the last topic, we covered the Globalization and Liberalization of the economy over the past century. In this topic, we will discuss how the core countries have reacted and dealt with the ever-changing global economy. These policies have a significant impact on the nation-states, and the way that they deal with it has several implications. After reading this guide you should hopefully be able to, not only compare the handling of the different nations, but also notice how different political systems and institutions can lead to different responses.
Here are some essential vocab you should know for this topic:
- Privatization — The process of transferring state-owned enterprises to private owners. This policy is usually adopted to increase efficiency and cut government spending (Austerity)
- Nationalization — The process of transferring ownership from a private organization to the government. This policy is usually adopted to increase social welfare, protect national interests and regulate the economy.
- Re-Nationalization — The process of transferring privately owned assets or industries back into the control of the government.
- Example: Russia re-nationalized oil (after it had been privatized following the collapse of the Soviet Union) to assert control over domestic oil prices.
- Re-Nationalization — The process of transferring privately owned assets or industries back into the control of the government.
Response to Market Forces in the Course Countries
In the table below you will read examples of different policies the course countries have adopted. It is important to keep in mind that these nations are still experimenting with different policies, and they might have different economic goals depending on the time period.
| Country | Regime | Handling of Market Forces |
|---|---|---|
| UK 🇬🇧 | Democracy | Although the UK has a mixed economy, the private sector plays a vital role in the nation's economy. In contrast to other course countries, the UK is the country that most privatizes its national resources although there is a certain level of regulation. |
| China 🇨🇳 | Authoritarian | In comparison to other nation, China is the country that least privatizes its natural resources. In China there are Special Economic Zones (SEZs) which are regions along its east coast that have a more "liberal" handling of the economy. That means that government regulations in those areas are looser because the government wants to promote growth there. |
| Mexico 🇲🇽 | Illiberal Democracy | Mexico's economy relies on its abundance of oil. One of the largest companies of the country is the oil company PEXEM, which stands for Petróleos Mexicanos. In recent years the government has made efforts to privatize sectors of the company to increase competition within the Mexican oil and natural gas market. |
| Nigeria 🇳🇬 | Illiberal Democracy | In the 1970s a great amount of oil was found in Nigeria leading to the creation of the Nigerian National Petroleum Corporation (NNPC). This is a state-owned company and it is crucial for Nigeria's economy. Although it is controlled by the government, the NNPC has engaged in joint activities with other nations to extract and produce oil. There is still space for the Nigerian government to fulfill its national goals, but contributing with other countries has also led to economic growth. |
| Russia 🇷🇺 | Authoritarian | Under the government of Vladimir Putin there have been some instances of nationalization or re-nationalization. For instance, Yukos, an oil company, was integrated into the state-owned company Rosneft, after the company's founder was accused of fraud and corruption. Putin has also limited foreign direct investment in the country. |
| Iran 🇮🇷 | Authoritarian | The lack of transparency of state-owned enterprises in Iran is detrimental to its economy. The country is still reliant on oil as its main economic activity, but it its trying to stray away from it. Nevertheless, its struggle to integrate in the International market after the imposition of sanctions only furthers its economic challenged. |
Purpose of Government Response to Market Forces
Governments shape their economic policies based on their political, social, and economic goals. Their responses to market forces depend on what they prioritize, such as protecting domestic industries, responding to public demands, maintaining political control, or expanding influence. Here’s how different governments adjust their economic strategies:
1. Protecting Domestic Industries 💪
Some governments take active measures to ensure that their key industries benefit the national economy rather than foreign interests.
🔹 Example: Nigeria’s Oil Industry
- Nigeria applies protections to its oil sector, ensuring that the economic benefits remain within the country.
- While Nigeria has a mixed economy (a blend of government intervention and free markets), it limits foreign control over its oil resources to prevent exploitation by international corporations.
📌 Why? This helps Nigeria retain economic sovereignty and ensures that its natural resources contribute to domestic development.
2. Responding to Public Expectations & Demands 🗣
Governments also adjust their economic policies based on what their citizens expect. If a country has a strong ideological preference (e.g., neoliberalism, socialism), its policies often reflect these beliefs.
🔹 Example: The UK and Neoliberalism
- The UK has historically embraced neoliberal economic policies, meaning less government intervention and more privatization.
- British citizens expect their government to follow these principles, leading to policies that promote free-market competition.
- The UK has privatized industries like public transportation and healthcare services to encourage competition.
📌 Why? Governments in democratic nations often follow public expectations to maintain support and legitimacy.
3. Controlling Political Power 👑
In some countries, economic policies are used as a tool to maintain political power—especially in authoritarian regimes.
🔹 Example: Iran’s State-Controlled Economy
- The Iranian government tightly controls its industries to prevent outside influence and maintain economic and political stability.
- Iran’s lack of economic liberalization (such as refusing to negotiate major trade deals) ensures that government elites retain control.
- The state controls major sectors like oil production, limiting private enterprise and foreign business presence.
📌 Why? This strategy helps Iran preserve its authoritarian regime by preventing foreign interference and keeping economic power centralized.
4. Expanding National Influence 🤑
Some governments intervene in the economy to strengthen their global and domestic influence by making state-owned enterprises (SOEs) more competitive.
🔹 Example: Mexico & PEMEX
- PEMEX, Mexico’s state-owned oil company, is a key player in the global energy market.
- The government has introduced reforms to make PEMEX more competitive and reduce inefficiencies.
- By strengthening PEMEX, Mexico increases its influence in international trade and secures its position in the global oil market.
📌 Why? A strong national industry boosts economic power and increases Mexico’s role in international affairs.
Key Takeaways
Governments do not have a one-size-fits-all approach to market forces. Their economic decisions reflect their goals and political priorities, whether it's protecting local industries, responding to public demands, maintaining control, or expanding influence. Understanding these motives helps explain why different countries adopt different economic policies.