Asia 201: Economic
Power
Tim Beal
12 September 2000
Outline
Context of economic power
Measurement of economic power
Asian economy in history
Japan, NIEs, ASEAN, China
Asian financial crisis and the future
Power
relationship between economic and
other forms of power
military
technological
political
financial
cultural
Relationship is complex
Examples of linkages
Colonialism, independence and
dependence
Technology and economics
Cultural and educational power
Colonialism, independence and Globalisation
Countries seldom have economic power
unless they have some independence
political + military power
Asia postwar economic growth linked to
decolonialisation
eg Bengal famine (3m, 1943) now India has self sufficiency for much
larger population
Globalisation
But countries who have best managed
links with global economy have done best
also education, military spending, savings rate, role of
government
.
eg Singapore
early 90s India >>liberalisation
to break from Hindu rate of growth
Korean peninsula and globalisation
Korean peninsula and globalisation
1945 >>two Koreas
>>1970s North Korea ahead of
South
but NK tied to USSR, SK part of
US-dominated global economy
SK moved ahead
1990 collapse of USSR>> led to
economic crisis in NK
compounded by natural disasters
Korean peninsula current situation
NK is recovering
economic growth last year
June summit in Pyongyang between Kin
Dae-jung and Kim Jong Il
family reunions, re-linking of railways, road, aid, infrastructure,
investment
Continued negotiation with US re normalisation
US lifted (more) sanctions in June
Frankfurt Incident shows dangers
Two Koreas and power
SK (US) has economic power
some estimates put norths
GNP at 5% of the souths (so per cap GDP 10%)
but north has other forms of power
vis-ΰ-vis south and US
military
cultural power Korean nationalism
Complex interaction between various
forms of power
Measurement of economic power
Output of
steel, cement, rice, oil
etc.
Currency reserves
Japan, China, Taiwan
Share of world trade
Gross Domestic Product (GDP)
Gross National Product (GNP)
Per Capita GNP/GDP
Limitations of PC-GNP/GDP
per capita - average doesnt recognise
inequality
unequal distribution of wealth
Class
100-120 million middle class in India;
more in China
Geography
coastal regions
Race
What does a pc GDP of $300 really
mean?
Purchasing Power Parity
conventional conversions are based on
exchange rates
PPP attempts to convert on basis of
prices
World Bank data on China
Conventional: 1980-91 : $300-370
PPP
1986 $770 - 1044
1991 $1,227 - 1,1663
Asias economy in history
Gary Sax : In 1820 Asia had 50% of the
worlds wealth
Contemporary Asian growth is a
renaissance not something introduced from West
Asia will dominate economy of 21st
century
despite financial crisis most observers predict recovery
environmental strain is major issue
Data for changes in global economy
1820-1992
Recent economic growth in Asia
What does this mean?
Divide Asia into groups
Japan early locomotive of growth
4 Dragons/Tigers/NICs/NIES
Taiwan
Hong Kong
South Korea
Singapore
ASEAN
China
India
Japan
Tokugawa Japan highly developed in
isolation
1859 Americans open the door
1868 Meiji Restoration
exports of copper, then textiles
considerable economic growth
1930s trade treaty with NZ
Pacific War and defeat
Postwar Japan
American occupation
Deming and quality control
Korean War
Exclusion from (price sensitive)
colonial markets on mainland
Opening of quality sensitive markets
in US
Military procurement
Japan in 50s - 1973
Rapid growth
domestic market
exports
exports of textiles and light
manufactures
raw materials imported rather than
exported
cf Africa
dependent on imported oil
Japan : shocks of the 1970s
1972 - Nixon Shock
1973 oil shock
Japan recovered by growth slowed
further oil shock in 1979
Export surplus
problems with US
Japan as No 1
Huge export surplus
pressure to invest in US, Europe
High costs (labour, land, materials,
energy) > transfer to mainland Asia
Asset inflation > capital outflows
US real estate, companies
1985 Plaza accord > appreciation of
yen
Bursting of the bubble
1990s stagnation
Trade surplus continues
Still 2nd largest economy in world (or
3rd?)
Bigger than rest of Asia put together
Now a very slow locomotive
Japanese slipstream
As costs in Japan rose
Japanese FDI in NIEs
Succeeded Japan in US and other
markets
NIEs
Hong Kong
Singapore
Taiwan
South Korea
Characteristics
Small
Korea is largest
Colonial heritage
Singapore, HK: Britain
Taiwan, Korea: Japan
Intersection between West and Asian
mainland
Intersection between West and Asian
nationalism/communism
Intersection
>>>Aid, access to
markets,technology, education
eg 3/4 Taiwan cabinet have US PhD
Spending from US wars
Korea, Vietnam
World Bank assessment
Reading: World Bank East Asian
Miracle
Good policies
Active and effective state
intervention
ASEAN- 3rd wave
1967 Bangkok declaration
Singapore, Malaysia, Philippines,
Indonesia, Thailand
later Brunei, Vietnam, Myanmar, Laos,
Cambodia
ASEAN and NIEs
Singapore is both
Raw materials
oil, rubber, tin, timber, rice
Cheaper labour than NIEs
FDI, mainly from Japan
China
Chinese Economic Area
PRC, HK, Taiwan, Overseas Chinese
Rapid growth in PRC since 1978
World Bank report : China 2020
Economic power in Asia now
1997 Asian financial crisis
Thailand>>ASEAN; Korea
China did not devalue
Economies have recovered
Japan still sluggish
last years growth
Long-term prospects; bright side
Despite problems economic outlook for
Asia is good
World Bank was estimating 6.8% growth
for next 15 years
Asia will become even more important
for NZ
Concerns
Environmental sustainability
Population growth
Widening gap between rich and poor
Outline
Context of economic power
Measurement of economic power
Asian economy in history
Japan, NIEs, ASEAN, China
Asian financial crisis and the future