Globalization Effects on East Asia
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Transcript of Globalization Effects on East Asia
7/30/2019 Globalization Effects on East Asia
http://slidepdf.com/reader/full/globalization-effects-on-east-asia 1/23
Definitions of globalisation
The intensification of worldwide socialrelations which links distant localities insuch a way that local happenings are
shaped by events occurring many milesaway and vice-versa.
The integration of the world economy
De-territorialisation – or…the growth of supraterritorial relations between people.
Time-space compression
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East Asia Miracle
30 years previous to 1997
Unprecedented economic growth
Massive poverty reduction Increased stability
Referred to as the East Asia Miracle
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Reasons for success
Gradual market liberalisation
State-directed industrial policy
Closing of the knowledge and technologygap
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Events of 1997
On 2nd of July the Thai baht collapsed
Effects felt all around the world
Economic crisis comes as a surprise The effects are felt all over the world
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The presentation
Divided into two sections.
Thailand South Korea
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ThailandPre-1997
The crisisPost-1997
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Thailand: Pre-1997
Until 1980‟s, Thai‟s domestic and exporteconomies were depended on theprimary sector
Prices of the primary exports fell in theearly 1980‟s
Hidden production volume (reduced
export earnings) – Devaluation of Baht
– Improved export competitiveness
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Thailand: Pre-1997
1986 – 1991 Accelerated integration intoglobal economy – Manufactured exports growth rate of 26.6%
– GDP growth rate ranging from 7 to 9 % perannum
– Growth rate of total exports & earnings
– Increase in investments (foreign investorsand TNCs)
– High profit rates in finance, insurance andreal estate sectors
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Thailand: Pre-1997
1992 – 1996: slight reductions in FDI andGDP growth rate
Decrease in the export growth rate
Increase in international debt
7/30/2019 Globalization Effects on East Asia
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Thailand: The crisis
6 factors which contributed to the crisis (Krogkaew 1999) financial sector mismanagement excessive current account deficit high domestic interest rates uncontrolled capital flows a rigid exchange rate lack of economic leadership on the part of politicians decline in export performance
Economic impacts Devastating effect on Thai economy. Thai 1998 GDP shrank by
7.9% 1997, 12.3% in 1998 and 7% 1999. Foreign investment andintervention necessary. Thai crash as trigger to “the greatest economic crisis since the great
depression” (Stiglitz 2002)
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Thailand: The crisis
Who was to blame? “It became clear that IMF policies not only
exacerbated the downturns but were partlyresponsible for the onset: excessively rapid
financial and capital market liberalization wasprobably the single most important cause of thecrisis.” (Stiglitz 200)
“The IMF‟s influence with the Thais in May 1997
was weak, in any event. Worse, the Thaiswere holding back vital information….namely,the full details concerning how much hardcurrency the central banks held.” (Blustein 2001)
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Thailand: The crisis
Implications
Shaken faith in the stability of global markets.
Questioning the policies of IMF and
Washington Consensus Organisations.
IMF self-criticism: Mexico PESO crisis 1994 – similar pattern.
Danger of interconnectivity. Reactionary movements.
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Thailand: Post-1997
PHASE 1 – Road to recovery according tothe IMF
Thailand hands over the reins of theireconomic policy to the IMF
The IMF recovery package and its flaws
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Thailand: Post-1997
PHASE 2 – New Government, increasing criticismof the IMF and growing populace unrest.
New Democratic government
American criticism of the IMF
Increasing business nationalism and populism inThailand
Thai government reverses IMF macro policy butcontinues with IMF restructuring of the Thaifinance sector
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Thailand: Post-1997
PHASE 3 – International criticism of theIMF and Japan to the rescue
World Bank criticises IMF policies
$30 billion Miyazawa Scheme for crisisrecovery
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Korean Experience
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South Korea: Background
The economic boom was referred to as the „miracle on the HanRiver‟ also referred to as Korea‟s economic miracle
Concept of globalization (segyehwa) driven by government…A strategic choice…
„Fellow citizens: Globalization is the shortcut that will lead us to building a first-class country in the 21st century. This is why I revealed my plan for
globalization and government has concentrated all of its energy in forgingahead with it. It is aimed at realising globalization in all sector – politics,foreign affairs, economy, society, education, culture and sports. To this end,it is necessary to enhance our viewpoints, way of thinking, system, andpractices to the world class level…we have not choice other than this‟.
President Kim Young Sam 6 January 1995
people did not want it but government wanted to
pursue…(President Kim Young Sam)
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South Korea: Effects
New government focused on four objectives based onIMF advice: – Macro-economic policies – public sector reform to reduce deficit
and contain inflation (tax increases, expenditure cuts)…capitalflights…bankruptcies deep recession
– Financial sector restructuring – strengthening regulation bymonetary authorities; rationalisation of commercial financialinstitutions .e.g. companies could not use each other asguarantors
– Labour market reform – to massive layoffs…high unemployment
levels; civil unrests – Capital account and trade liberalisation – opened up traditionally
protected industry…
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South Korea: Effects
Social implications: during economic boom andafter crisis
– Population explosion – increase life expectancy
– International migration – increased mobility – Urbanisation – growth of megacities
– Occupational structure and class stratification – increased inequalities…
– Gender dynamics – more women in skilled labourforce
– Income disparities-gap was expanded
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South Korea: Effects
Democratisation – trade unions active(labour related)
Global human-rights norms is introduced - e.g. women rights (S,Kim 2000)
Strongly military bonds with U.S. – national security has changed and no border in security(S.Kim 2000)
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Conclusion
Both Thailand and Korea have gonethrough 3 phases of globalization
Two initial phases state-driven/protection
Financial crisis a pivotal moment in East Asian globalization process…repercussionsin region
Question of how dynamics have changedbetween state and markets