Development: East Asia
Development: East Asia PSC 1003
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This 4 page Class Notes was uploaded by Kerrigan Unter on Monday October 19, 2015. The Class Notes belongs to PSC 1003 at George Washington University taught by Olson, L in Fall 2015. Since its upload, it has received 6 views. For similar materials see Introduction to International Politics in Political Science at George Washington University.
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Date Created: 10/19/15
PSC 1003 Development East Asia Development Refers in the most general terms to material institutional and human progress Development measures include economic indicators demographic measures health education and political stability Can be empirically measured in a variety of ways 0 GDP growth is the most commonly used 0 PPP Purchasing Power Parity o The GINI Coefficient measures the level of inequality Factors in Predicting Development Security and political development both domestically and internationally Domestic economic policies both macro and micro Extemal economic policies especially border policies Sociocultural factors particularly the level of inequality East Asia Considered to be the most successful example of development in the second half of the 20th century Beginning with Japan then moving to the 4 Asian Tigers Hong Kong South Korea Taiwan and Singapore these states showed sustained economic growth unlike many other states in the developing world Referred to as the East Asian Miracle Despite the high level of growth it has not come without problems such as the Asian Financial Crisis in 1997 However states in Southeast Asia and China have pursued a similar set of policies and have seen success Political Stability After World War II the Asian states were either authoritarian or oneparty democracies Allowed these states to suppress labor movements and demand shortterm sacrifices from their citizens States like Japan and eventually South Korea and Taiwan would benefit from the security umbrella provided by the United States Eventually several of the states would democratize but do so without significant civil con ict Domestic Economic Policy Maintained low in ation through higher interest rates which encouraged savings 0 East Asian states had one of the highest savings rates in the world 0 Capital remained at home and could be used for investment State invested in human capital 0 Invested in education health care housing for workers and assisted small businesses Several of the states involved themselves in the economy providing direct assistance to firms or encouraging banks to set up close relationships with businesses External Economic Policies Engaged in exportled growth 0 Government subsidies provided to labor intensive industries replicating goods produced in the developed world 0 Goal is to produce at a lower cost for the foreign market 0 Domestic consumer market is secondary to the foreign markets Critics argue exportled growth is limited 0 Works well when a developing state seeks to catch up to the developed world 0 Less effective when economic innovation is needed Sociocultural Factors Emphasis on the idea of Asian values 0 Most East Asian states are relatively ethnically homogeneous which increases social cohesion 0 Role of Confucianism 39 Generally values social harmony and the community over individualism I Ethical decisions are evaluated based on balancing different social relationships I In practical terms served to mitigate inequality helped governments convince workers to sacrifice in the shortterm and promised job security to workers Critics argue that Asian values impeded economic growth 0 Fosters close but nontransparent business relationships and leads to crony capitalism 0 Ethnic homogeneity and the legacy of World War II has impeded regional economic integration The East Asian Financial Crisis The causes of the crisis are disputed but several issues both domestic and international come into play Critics of the East Asian development model argue that the financial crisis ultimately undermines exportled growth as a strategy By 1997 Asian markets both the traditional Asian Tigers and emerging markets attracted half the world s capital in ows due to high interest rates Domestic Causes Crony capitalism and the banking sector 0 Banks were encouraged to forge close relationships with businesses in order to meet government production goals 0 In essence created inhouse banks in many of the major Asian conglomerates 0 Banks provided nonperforming loans to businesses I These loans were not serviced and banks looked the other way due to the close relationships 0 As foreign investors began to invest demands were made that the banking sector become more transparent 0 Once the extent of bad loans were revealed combined with international economic conditions investors facilitated by technology pulled their money from the Asian markets leading to a run on the bank International Causes Investor confidence in emerging markets was generally low after the Mexican peso crisis in 1994 Several Asian governments pegged the value of their currency to the dollar in the 1990 s In the early 1990 s the dollar began appreciating 0 Increased the value of Asian currencies making exports less attractive 0 Interest rates were rising in the US making the US markets more attractive leading investors to leave emerging markets for the more stable dollar IMF had encouraged East Asian states to liberalize financial markets which revealed the extent of corruption in the banking sector
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