Sunday, 25 January 2015

Lesson 3: The new Asian powers in the globalization process


Cf. pages 76 and 77 of your DNL textbook

The new Asian powers are: India, China, and South-East Asian nations like Thailand, Malaysia, Singapore, Indonesia, and the Philippines. They are becoming more and more economically important and contribute largely to globalization. They are disrupting the balance of (economic) power (the dominance of the Triad is being undermined). Greater integration into a global economy, however, is not without consequences for these countries...

Documents 1 and 2 concern China and Singapore, two key players of the Asia Pacific region and of globalization.

Document 1 is an optimistic article from the New York Times which highlights the impact of the Chinese economy on that of the USA. The trade deficit of the USA (meaning the USA imports more than it exports) is greatly due to its import of cheap goods from Asia. The fact that China is now the dominant economic power of the region (even more than Japan) is, according to the journalist, actually beneficial to the US economy. Because China makes consumer products more cheaply than the USA, the USA actually makes savings by importing them from China (it would cost more to the USA if it made the goods itself). This makes China a privileged trade partner for the USA for goods such as shoes, toys, electronic and numerous other consumer goods. In fact, the USA trade deficit has actually gone down because it now trades with China rather than more expensive Asian countries (South Korea, Japan).

China’s economic growth since 1979 (and especially 2001 when it finally joined the WTO) has been staggering. It has become the “workshop of the world”, overtaking other Asian nations in the amount of goods produced and pushing prices down. This is good news for consumers but not for the less competitive nations.

The photo of Singapore harbour (document 2) shows one of the world’s biggest and most modern container port facilities. This harbour is a major global trade hub because it has been modernized and is strategically situated on major sea routes between Japan, China, South Korea and the Middle East, Europe and North America. The harbour facilities have made the city state very wealthy (9th on the UN HDI 2013 list).

We see part of the modern harbour complex: it is clean, well-ordered and highly-mechanized. Freight is unloaded by giant cranes along the piers. The very numerous containers are stacked along the wharfs. In the middle-distance, close to the harbour, is the CBD (high-rise prestigious office blocks for the headquarters of merchant companies, banks, insurance companies, etc.).

The map (document 3) illustrates the fact that Asia has become the workshop of the globalized economy. It shows where the various activities of Seagate Technology, an American TNC, are situated. Though its Registered Office is actually in a fiscal paradise on the Cayman Islands (which allows it to pay less taxes), the headquarters of Seagate (where the company’s executives and research staff are) is in the TNC’s “home” country (USA). Most of the actual production of the hard drives it makes takes place “offshore” in Asian countries where labour is as qualified but cheaper than in the USA.

Document 4 is an extract from a 2006 The Guardian newspaper article. In it, the journalist explains that the spectacular economic growth in Asia has resulted, unexpectedly, in unemployment and inequality. This is because many (young) people leave the countryside to work in the factories, hoping for better wages, but the demand for jobs has grown faster than the number of jobs available. The result is increased competition for jobs (and so greater job insecurity, unemployment, and poorer working conditions) as well as increased food insecurity in the countryside.

The fact that Chinese production costs are the lowest (though this is likely to change) means that companies move production to China away from other countries of the region, resulting in rising unemployment in those Asia-Pacific countries.

Conclusion

Asian countries, notably China since it adopted “state capitalism”, have become an essential component of the globalized economy, providing cheap and abundant labour for the TNCs and goods for the world via an efficient system of maritime transport (to the benefit of coastal cities like Hong Kong and Singapore that have invested in modern harbour facilities). However, the economic boom has not spared Asia from the problems inherent to globalization and from the risks involved in becoming dependent on a world-wide economic system.

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