Huntington fractured world based on different civilizations each with culture (not ideology), each with value system and ideology aligned with the local hegemon that has ability to enforce a set of rules which governs behavior. People identify themselves first according to religion and culture, but for Fukayama, people identify themselves by location first. Huntington thinks that civilizations differentiated by history, language, culture, tradition, religion, and each has a different set views linked to relations between God and man, the individual and the group, importance of rights and responsibilities, liberty, authority, equality and hierarchy. Fukayama thinks western ideals of individualism, liberalism, constitutionalism, human rights, equality, liberty, the rule of law, democracy, free markets, separation of church and state little resonance with other civilizations. Huntington believes that modernization continues but is a tool of specific civilizations with respective values and cultures defining the structure of the institutional arrangements within which their societies operate. Fukayama believes that the motivating force of innovation and entrepreneurism driving economic progress defining the institutional arrangement within which the development takes place. To Huntington, the world was unifying economically and technologically but not socially. Huntington's main point was that modernization is not the same as westernization. Foreigners' participation in Western consumer culture does not mean that they accept Western values, such as social pluralism, the rule of law, the separation of church and state, representative government, or individualism.
Institutional arrangements are the policies, systems, and processes that organizations use to legislate, plan and manage their activities efficiently and to effectively coordinate with others in order to fulfill their mandate.
As market globalize and an increasing proportion of business activity transcends national borders, institutions are needed to help manage, regulate, and police the global marketplace, and to promote the establishment of multinational treaties to govern the global business system. Differences between countries require that an international business vary its practices country by country. Marketing a product in U.S. may require a different approach from marketing the product in China. Sometime maintaining close relations with a particular level of government may be very important in Mexico and irrelevant in Great Britain. If we want to do business with different country, we need to know the way how they do things. That is why institutional arrangements are important fundamental determinants of economic growth and development.
Questions 3: For market-based economy, all productive activities are privately owned, as opposed to being owned by the state. The goods and services that a country produces are not planned by anyone. Production is determined by the interaction of supply and demand and signaled to producers through the price system. Since distribution depends on market, all of the factors of production and products are distributed by market, thousands of manufacturers and individuals make an extensive and intense competition for the limited resource. The consumers have more freedom to choose what to buy and where to buy, the manufacturers compete intensely for the consumers. There is an uneven distribution of income in market economy, the