Summary Chapter 13- International Relations by Joshua S. Goldstein
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Course
International relations (POL1000)
Institution
University Of Bergen
Book
International Relations
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Chapter 13
Economic development refers to the combined processes of capital accumulation, rising per
capita incomes (with consequent falling birthrates), increasing skills in the population,
adoption of new technological styles, and other related social and economic changes. One
simple measure of economic development is the per capita GDP—the amount of economic
activity per person.
The Newly Industrializing Countries (NICs):
Before China took off, a handful of poor states—called the newly industrializing countries
(NICs)—achieved self-sustaining capital accumulation, with impressive economic growth.
The most successful NICs are the “four tigers” or “four dragons” of East Asia: South
Korea, Taiwan, Hong Kong, and Singapore. Each succeeded in developing particular
sectors and industries that were competitive on world markets. These sectors and industries
can create enough capital accumulation within the country to raise income levels not just
among the small elite but across the population more broadly.
1. South Korea, with iron and coal resources, developed competitive steel and
automobile industries that export globally, creating a trade surplus.
2. Taiwan also used a strong state industrial policy, specializing in the electronics and
computer industries and in other light manufacturing.
3. Hong Kong—controlled by China since 1997—also has world-competitive
electronics and other light industries, but its greatest strengths are in banking and
trade.
4. Singapore is a trading city located at the tip of the Malaysian peninsula—convenient
to the South China Sea, the Indian Ocean, and Australia.
Beyond the four tigers, other Southeast Asian countries such as Thailand, Malaysia, and
Indonesia have tried, since the 1980s, to follow in their foot- steps.
The Chinese Experience
If there was ever doubt that the successes of the NICs could be replicated else- where
and on a larger scale, China ended those doubts. China has also had the world’s
fastest-growing economies over the past two decades. 1949-1960s: economic
policy emphasized national self-sufficiency and communist ideology. The state
controlled all economic activity through central planning and state ownership.
An “iron rice bowl” policy guaranteed basic food needs to all Chinese citizens (at
least in theory).
China under Deng Xiaoping instituted economic reforms and transformed its southern
coastal provinces into free economic zones open to foreign investment and run on
capitalist principles. Entrepreneurs started companies, hired workers, and generated
profits. Foreign investment flooded into southern China, taking advantage of its
location, cheap labor, and relative political stability. Standards of living have risen
substantially.
MNCs’ foreign investments (China’s huge population would supply limitless cheap
labor to foreign investors) primed rapid growth in Chinese exports—to $250 billion in
2000 and over $2 trillion in 2012. China became the world’s largest exporter in 2010.
, India Takes Off
India’s economy was for decades based loosely on socialism and state control of large
industries but on private capitalism in agriculture and consumer goods. The state
subsidizes basic goods and gives special treatment to farmers. Unlike China, India has
a democratic government, but a fractious one, with various autonomy movements and
ethnic conflicts. India’s government has suffered from corruption, although this has
improved in recent years.
Indian state-owned industries, like those elsewhere, were largely unprofitable.
Furthermore, bureaucracy in India discouraged foreign investment. The 1991 collapse
of the Soviet Union—India’s major trading partner—threw India into a severe
economic crisis that nearly caused it to default on its international debts.
In the era of globalization, India’s niche in the globalized world economy is in the
service and information sectors. Although the service sector accounts for less than
30 percent of India’s labor force (most of which is still in agriculture), it contributes
60 percent of GDP. Whereas South Korea specialized in exporting heavy
manufactured goods and China in light manufactured goods, India specializes in
exporting information products such as software and telephone call center services.
In India’s case, the labor force is well educated and speaks English. India also uses its
location to advantage by working during the nighttime hours in North America.
Thus, China relied on the dominance principle to force individuals to take actions that were in
society’s interest (low fertility rate- only one child policy). Its successes in improving public
health and lowering fertility provided a foundation for China’s subsequent economic success,
although obviously at a cost to individual freedom. India, by contrast, has relied more on the
identity principle, getting people to change their preferences and want to have fewer children
and help improve public health. Without a dictatorship to force compliance, India’s progress
has been slower. However, over time India is moving toward the same results as China, albeit
decades later, and doing so without giving up its own national identity as a democracy.
Other Experiments: Other sizable developing countries have pursued various development
strategies, with mixed successes and failures.
Malaysia also set out to follow closely in the footsteps of the tigers. Although it
exports oil and gas, Malaysia focused its export industry heavily on electronics.
Thailand was often suggested as a potential “fifth tiger.” It received enormous foreign
investment in the 1980s (mostly from Japan) and created a sizable middle class.
Bangladesh & Pakistan: problems related to corruption, state bureaucracies, and
political instability.
Like Brazil, Mexico has pockets of deep poverty and a sizable foreign debt but, unlike
Brazil, has oil to export. Mexico has also enjoyed relative political stability, though
corruption is a problem.
The small countries with large oil exports—such as Saudi Arabia, Kuwait, Bahrain,
and the United Arab Emirates—have done well economically. But they are in a
special class; their experience is not one that others with- out oil can follow.
Lessons:
Import Substitution and Export-led growth
One way to try to create a trade surplus, used frequently a few decades ago, is through
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