GEOG 113C – Geography of East and Southeast Asia
Professor: Dr. Jean-Paul Rodrigue
Topic 3 – Pacific Asian Economy and Society
A – The Social Landscape
B – Pacific Asian Development
Hofstra University, Department of Global Studies & Geography
A. THE SOCIAL LANDSCAPE
1. Religions
What are the major religions of Pacific Asia?
2. Rice
What is the economic and cultural importance of rice?
3. Demography
What are the major demographic characteristics and issues of the region?
4. Social Problems
What are the major regional social problems?
5. Urbanization
What is the extent of urbanization?
© Dr. Jean-Paul Rodrigue
1. Religions
■ Religions
6%
3%
3%
4%
• Influence culture and behavior.
■ Religious hearths
33%
14%
15%
22%
Christianity
Islam
Hinduism
Non religious
Buddhism
Chinese traditional
Tribal/Indogeneous
• 4 of the world’s most important
religions originated in Asia.
• Hinduism, Buddhism, Islam and
Christianity.
• They all diffused in the region:
•
•
•
•
Conquest.
Voluntary conversion.
Migration.
Proselytization.
• Two major religions have their
hearths close to Pacific Asia.
© Dr. Jean-Paul Rodrigue
1. Religions
■ Religious diversity
• Simplistically: Buddhism in the
north and Islam in the south.
• The outcome of endogenous and
exogenous influences.
• Hinduism, Buddhism, Islam and
Christianity are of external
origins:
• Less the case for Hinduism and
Buddhism.
• Diffused the region under
different eras and
circumstances.
• Traditional Chinese
(Confucianism) and Shinto:
• Indigenous religions with
adaptations from Buddhism.
© Dr. Jean-Paul Rodrigue
1. Religions
Hinduism
Buddhism
Polytheistic; more than
Reform of Hinduism; a
333,000 gods (Devas):
religion, a philosophy, an
Part of Brahman; one ultimate ideology.
reality. Trinity of Brahma
(creator), Vishnu (preserver of
good and order) and Shiva
(destruction and creation).
Islam
Christianity
Monotheistic religion;
“submission to God”. A
Muslim is a “believer”.
Word of Allah contained in the
Koran (recitation).
Monotheistic faith: Jesus
Christ as the Son of God.
The Holy Bible contains the
teachings of God, Jesus
Christ and His followers.
Northern India. Oldest
religion. (3,000-4000 BC); no
specific founder.
Northern India (563 BC).
Emerged in Saudi Arabia in
Siddhartha became the first
the 7th century (Mecca).
Buddha, or “Awakened One”.
Karma: Your deeds, good or
bad, will return to you.
Reincarnation: You are the
sum of numerous past
existences. Dharma:
Individual ethics, duties and
obligations.
Four Noble Truths: Suffering
is universal and inevitable.
The cause of suffering is
desire and ignorance. A way
to dispel ignorance and
relieve suffering; The eightfold
path; achieving Nirvana.
Cast system reflecting one’s Mahayana and Theravada
position in the ladder.
Buddhism.
About 1 billion followers (India
and Indian communities).
Emerged in Israel in the 1st
Century.
Five Pillars of Islam: One God Salvation is achieved in faith
(Allah) and Mohammad as His and adherence to the
prophet. Prayer five times a
teaching of the Holy Bible.
day. A month of daytime
fasting (Ramadan). Giving of
alms. One pilgrimage to
Mecca (The Hajj).
Came through trade.
Conversion of local
populations.
Through missionaries during
the colonial era. Spain and
Portugal being its strongest
advocates.
© Dr. Jean-Paul Rodrigue
© Dr. Jean-Paul Rodrigue
2. Rice
■ Major farming and settlement patterns
• Swidden in the uplands:
•
•
•
•
Shifting agriculture or “slash and burn”.
Vegetation is burned to transfer nutrients to the soil.
Plots are planted in until soil nutrients are exhausted.
Plots are abandoned an vegetation and returns to its original form (takes at
least 10 years).
• Sustainable when populations are small and stable.
• Rice in the lowlands:
• Irrigation systems.
• Fixed large quantities of labor in the countryside.
• Plantation agriculture:
• Began with European colonization.
• Often located on coasts because of the need to transport overseas.
• Products like rice, rubber, cane sugar, tea, pineapple, and copra.
© Dr. Jean-Paul Rodrigue
2. Rice
■ Rice and society
• Deep economic, cultural and social influence.
• Why rice in Asia?
• Rice originates in Southeast Asia.
• Most productive form of agriculture.
• Limited amount of flat land.
• Asia produces about 90% of all the rice in the world:
• China and India: 50%.
• Asia’s top 10 produce 86%.
• Staple food of several cultures:
• Cultural and religious significance.
• Many cultures have legends where rice is linked with their creation.
• Chinese: “she fan” means “to eat” as well as “to eat rice”; “Fan Dian”
means “restaurant” is well as a “place where rice is served”.
• Japanese: “Gohan” means “rice” as well as a “meal”.
© Dr. Jean-Paul Rodrigue
World’s Largest Rice Producers, 2004
United States of America
China
Japan
Bangladesh
India Myanmar
Thailand Philippines
Viet Nam
2004 Production (Metric tons)
Indonesia
100,000 - 7,500,000
7,500,000 - 25,000,000
Brazil
25,000,000 - 50,000,000
More than 50,000,000
Source: FAO
© Dr. Jean-Paul Rodrigue
Land Suitable for Rice Production, Pacific Asia
Irregular water flow;
discrepancies in rice
cultivation.
© Dr. Jean-Paul Rodrigue
Share of Agricultural Land Irrigated
Storage and distribution of
surpluses. Irrigation canals,
reservoirs and terrace paddy
fields.
© Dr. Jean-Paul Rodrigue
2. Rice
■ Paddy fields
• 85% of all the rice produced in the world is in paddy fields:
• From the Malay word “padi” which means “rice”.
• Massive amount of labor required:
• 1,000 hours of work per hectare.
• Field preparation, dike mending, transplanting, weeding and harvesting.
• Terrace paddy fields.
• Flooded fields enclosed by small walls.
• Highly productive because nutrients dissolved in water:
• 5,000 liters of water to produce one kilogram of rice.
• 50% of paddy fields are irrigated by rainfall.
• 35% of paddy fields are irrigated artificially.
• Possibility of 1, 2 or 3 crops of rice per year:
• Depending of rainfall and temperature.
• Alternance wheat (winter) and rice (summer / monsoon).
• Also used as fish ponds.
© Dr. Jean-Paul Rodrigue
2. Rice
■ Rice growing cycle
• 1- Sowing seeds:
1
• In small seedbeds (avoid weeds) for
about 60 days.
• Prepare (plow) the fields.
• 2- Transplantation:
• Hand transplant the seedlings into
flooded fields.
• Rice grains are ready for harvest in 3 to 6
months.
2
• 3- Harvest:
• Dry the field.
• Harvest rice with sickles or knives, tie it in
bundles, and let it dry in the field.
• 4- Grain preparation:
3
• Remove the grain from the plant.
• Dry the grain.
© Dr. Jean-Paul Rodrigue
2. Rice
Part
Usage
Grain Cooked and served with
vegetables or meat. Fermented
into wine or brewed into beer.
Animal feed. Cosmetic powders.
Straw Animal feed. Crafted into rope,
hats, shoes, etc. Molded in bricks
and made into paper.
Bran
Pressed into oil to make soap and
cosmetics. Nutritional additive
(fiber).
Hull
Packing and insulation. Fuel.
© Dr. Jean-Paul Rodrigue
Population Density and Ecumene
East Asia: Coastal plains.
Ethnic homogeneity.
Southeast Asia: Separation of
communities by mountain
ranges. Ethnic diversity.
Minorities often living in higher
and less fertile locations.
Very high density; wet rice
cultivation. Limited ecumene
(continuously settled area).
Distribution along river deltas and
irrigated areas.
© Dr. Jean-Paul Rodrigue
Conventional Cycle of Population Growth
High infant mortality rate
Preference for sons
Support for population growth
Cycle
More labor for rice production
Wet rice agriculture
Irrigation
© Dr. Jean-Paul Rodrigue
3. Demography
■ Altitudinal ethnic stratification
• Prevalent in Monsoon Asia,
especially Southeast Asia.
• Fertile / flatland occupied by the
dominant ethnic group; higher
populations.
• Marginalization increases with
altitude; isolation and lower
populations.
■ Mekong
Lowlands
Midlands
• Lowlands: Vietnamese / Khmer.
• Midlands: Lao.
• Highlands: Hmong.
Highlands
© Dr. Jean-Paul Rodrigue
Ethnic Composition in East Asia
Country
90%
China
Han
Japan
Japanese
Koreas
Koreans
Taiwan
80%
60%
40%
20%
10%
5%
55 minorities
such as Uygur
and Tibetan
Taiwanese
Chinese
Hakka
© Dr. Jean-Paul Rodrigue
Ethnic Composition in Southeast Asia
Country
90%
80%
Burma
Cambodia
60%
40%
20%
Burmese
Khmer
Vietnamese
Javanese
Laos
Lao Loum
Lao Theung
Malaysia
Malay
Chinese
Philippines
Vietnam
Sudanese
Cebuano
Tagalog
Singapore
5%
Karen
Shan
Chinese
Indonesia
Thailand
10%
Chinese
Madurese
Chinese
Lao Sung
Indian
Iloko
PanayHiligaynon
Bikol
Bisaya
Chinese
Malay
Indian
Thai
Chinese
Vietnamese
Lao
Montagnard
Chinese
© Dr. Jean-Paul Rodrigue
3. Demography
■ Demographic transition
• Process of demographic growth:
• Particularly after WWII.
• Huge increase in population.
• Demographic growth is slowing down:
• Significant declines in fertility observed across the board.
• Economic and social modernization of the region (age of marriage).
• Various population planning policies.
• Korea, Taiwan, Singapore, and Hong Kong:
• Currently experiencing great decreases in their birth rates.
• Their fertility rates are below replacement rate.
• South Korea has the lowest fertility in the world (2005).
• People’s Republic of China:
• Government policy has lead the way to lower birth rates.
• Imposed a “One Child Policy” (1981-2002).
© Dr. Jean-Paul Rodrigue
Demography of the Three Largest Nations of Pacific
Asia (1961-2010) (in millions)
2000
Japan
Indonesia
China
1800
1600
1400
1200
1000
800
600
400
200
2009
2007
2005
2003
2001
1999
1997
1995
1993
1991
1989
1987
1985
1983
1981
1979
1977
1975
1973
1971
1969
1967
1965
1963
1961
0
© Dr. Jean-Paul Rodrigue
Fertility Transition in some Asian Countries, 1962-2006
8
7
1962
6.7
6.7
1982
6.5
1990
2000
6
5.4
5.4
5.4
2006
TFR
5
4
3.3
2.9
3
2.9
2.2
2
1.7
1.2
1
0
Philippines
Bangladesh
India
Indonesia
China
South Korea
© Dr. Jean-Paul Rodrigue
Average Age of Marriage, Women, 1970-2005
35
30
Hong Kong
Japan
South Korea
Indonesia
India
25
20
15
1965
1970
1975
1980
1985
1990
1995
2000
2005
2010
© Dr. Jean-Paul Rodrigue
3. Demography
■ Agriculture and collectivism
• Asia tends to have a higher degree of collectivism.
• A major explanatory factor is the intensity of agriculture:
• Requires cooperative land management, notably irrigation systems.
• Settlements tend to be nucleated with villages surrounded by fields.
• Cooperation at its peak during planting and harvesting.
• This social structure pervades today:
• The needs of the collectivity surpasses the needs of the individuals.
• Social order with duties.
• Most Pacific-Asian countries are still heavily rural.
© Dr. Jean-Paul Rodrigue
Percentage of Agricultural Population, 2003
United States
2.0%
Japan
3.2%
South Korea
7.2%
Malaysia
15.7%
Philippines
37.5%
Indonesia
42.1%
Thailand
46.6%
China
64.9%
Viet Nam
66.1%
Cambodia
68.9%
Myanmar
69.3%
Laos
76.0%
0%
10%
20%
30%
40%
50%
60%
70%
80%
© Dr. Jean-Paul Rodrigue
3. Demography
■ Role of children
• A reflection of dominantly rural societies.
• Multidimensional role:
•
•
•
•
•
Continuity of the family name (males).
A direct link to ancestors.
Inheritance of family property, notably farmland.
Agricultural labor (in the field by the age of 7 or 8 years).
Take care of parents in old age (limited social security).
• Rural areas tend to have high levels of fertility:
• Maximizes the chances of having a son and of survival.
• Daughters are increasingly sent to the cities to work in factories.
• Child labor:
• 15% of 7-14 years old work in fields or factories.
© Dr. Jean-Paul Rodrigue
Percentage of Economically Active Children Aged 7-14
13.9
Bengladesh
20.9
10
India
16.3
52.1
Cambodia
52.4
10
Philippines
16.3
0
10
20
30
Females
40
50
60
Males
© Dr. Jean-Paul Rodrigue
4. Social Problems
■ Gender issues in rural areas
• Acute gender differences in rural societies.
• Unequal access to education, health care and employment:
• 70% of the world’s poor are women.
• Often not qualified as work in the fields, but as “help”.
• Women’s products:
•
•
•
•
Small animals of low value (chickens, goats and pigs).
Vegetables and roots.
For subsistence.
Plant, weed and harvest.
• Man’s products:
•
•
•
•
Large high value animals (horses and cattle).
Grains and tree products.
For cash.
Prepare fields for cultivation.
© Dr. Jean-Paul Rodrigue
Percentage above 15 years Literate, 2005
61
Laos
77
87
Vietnam
94
91
Thailand
95
93
93
Philippines
86
Burma
85
Malaysia
87
Indonesia
94
92
94
96
South Korea
99
99
100
Japan
87
China
0
10
20
30
40
50
60
Females
Males
70
80
90
95
100
© Dr. Jean-Paul Rodrigue
4. Social Problems
■ Gender issues in urban areas
• Majority of recent migrants are women.
• Left the countryside to work in manufacturing and service
industries (particularly in China):
• Send remittances back home.
• Often more an asset than the son.
• Transposition of gender issues in the modern workplace:
• Even in advanced societies (Japan, Korea).
• Woman fulfilling clerical functions.
• Expectation to work until getting married and then assume the traditional
child raising function.
© Dr. Jean-Paul Rodrigue
4. Social Problems
■ Prostitution
• Different perspectives in Asian cultures:
• On average tolerated.
• Most prostitution is internal.
• Boomed after World War II:
•
•
•
•
•
Rising prosperity in developed countries.
Development of tourism.
Poverty, conflicts and natural disasters.
Commodification of sex by the pornography industry.
Establishment of American military bases (R&R).
• Complex networks of abductions, trafficking and bondage (debt):
• 2 million girls (aged 5 to15) introduced into the sex industry each year.
• Replace overworked, sick or dead prostitutes.
• A prostitute gets $10,000-$15,000 of debt to work in Australia.
© Dr. Jean-Paul Rodrigue
4. Social Problems
• The “value” of a prostitute drops with her age.
• Child prostitution:
• About 1 million in Asia.
• 800,000 children working in the sex industry in Thailand.
• Average age: 10 to 14.
• “Mail-order bride”:
•
•
•
•
100,000 – 150,000 women a year advertise themselves for marriage.
About 10,000 available on the Internet at any time.
Mainly from Southeast Asia and Russia.
Come from places in which jobs and educational opportunities for women
are scarce and wages are low.
© Dr. Jean-Paul Rodrigue
Prostitution in Pacific Asia
■ Sex cities
Taipei
• Significant infrastructures of
bars, karaoke clubs, hotels, and
massage parlors.
• Bangkok (2), Manila and Saigon
as major destinations.
■ Sex tourism
Manila
Bangkok
Saigon
• Mainly Europeans, Americans,
Australians, Saudi Arabians and
Japanese.
• Either informal or organized by
sex travel agencies.
• Seek exotic, submissive,
obedient woman not
contaminated by feminism.
© Dr. Jean-Paul Rodrigue
4. Social Problems
■ Missing female population
• About 165 million females are missing from Asian population
(2005).
• Normal ratio at birth is about 100 girls to 105 boys.
• Boys are weaker and the ratio evens out after 5 years.
• Since 1900 the ratio has been declining, especially after 1990.
• Particularly the case for China and India (0-4 age group):
•
•
•
•
•
China accounts for about 60 million missing females; India for 25 million.
1990: 110 boys per 100 girls.
1995: 118 boys per 100 girls.
2000: 119 boys per 100 girls.
Ratios even higher for second and third child.
• Problems exacerbated by declining fertility and growing standards
of living.
© Dr. Jean-Paul Rodrigue
Sex Ratio (males per 100 females), 2000
Less than 90
90 - 95
95 - 100
100 - 105
105 - 110
More than 110
NA
Related to societies where gender
inequality prevails (religious and social
causes).
© Dr. Jean-Paul Rodrigue
Infant Mortality Rate (per 1000 under age 5), by Sex,
Selected Countries, 2006
81
India
72
27
China
Female
Male
21
7
United States
8
0
20
40
60
80
100
© Dr. Jean-Paul Rodrigue
Missing Female Population, 1998
Indonesia
202
Bangladesh
62.1
2.9
Pakistan
63.4
6.5
India
2
473.9
China
43.7
599.4
0
100
200
300
54.9
400
500
600
700
Female Population
Female population (millions)
Missing females (millions)
© Dr. Jean-Paul Rodrigue
4. Social Problems
■ Gender roles and the missing female population
• Sons are perceived as an asset:
•
•
•
•
•
•
•
Farm work.
Security for old age (no social security in several countries).
Take over the family name.
Sons get better health care, food and schooling.
100% of them must find a bride and produce an heir.
One of the greatest Confucian sins is not to have male descendants.
In China, the birth of a boy is labeled as “big happiness” while the birth of a
girl is labeled as “small happiness”.
• Daughters are perceived as a liability:
• Marry and leave home to provide labor to another family.
• Dowries are often to be paid.
© Dr. Jean-Paul Rodrigue
4. Social Problems
■ Causes of the missing female population
• High female mortality in infancy or childhood:
• Preferential treatment for boys; better food and health care.
• Infanticide.
• Excess female mortality in utero:
• Sex-selective abortion.
• 500,000 and 750,000 unborn Chinese girls are aborted every year after
sex screening.
• Net out-migration of female children:
• International adoptions.
• Abandon; Orphanage are strictly populated by girls.
• Sex-selective undercount of children:
• Daughters are not declared.
• No education provided by the state.
• “Sold” / “rented” as a factory worker, wife or prostitute.
© Dr. Jean-Paul Rodrigue
Official Adoptions from China to the United States,
1985-2008
9000
7906
8000
7044
6859
7000
6943
6000
5453
5053
5053
4681
5000
42064101
3597
3333
4000
3909
3000
2130
2000
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
206 330
20 10 11 12 17 29 61
1986
0
787
1985
1000
© Dr. Jean-Paul Rodrigue
4. Social Problems
■ Consequences of the missing female population
• Demographic “backlash”:
•
•
•
•
May help achieve demographic stability.
Fast decline in fertility.
Fast decline of population growth and then of absolute population.
About 35 million men forced to be bachelors by 2020 (25 million in India);
“bare branches”.
• Social consequences:
• Limit the advancement of women in society.
• The “value” of females will increase considerably in the future:
• Millions of men will not be able to find a wife.
• Changes in the economics of marriage.
• Inverted dowry; “Bride prices” are becoming more common (about $4,000
in China).
• Daughters increasingly an asset for industrial work.
© Dr. Jean-Paul Rodrigue
5. Urbanization
Causes
Natural increase (ongoing demographic
transition).
Rural to urban migration.
Modernization and globalization.
Consequences
Fast urbanization.
Mega-cities.
Shantytowns (2).
Environmental degradation.
© Dr. Jean-Paul Rodrigue
Cities of More than 10 Million Inhabitants, 2007
11.2
Istanbul
Moscow
Manila
Beijing
Osaka-Kobe
Rio de Janeiro
Cairo
Karachi
Los Angeles
Buenos Aires
Dhaka
Kolkata (Calcutta)
Shanghai
Delhi
São Paulo
Mumbai (Bombay)
Mexico City
New York
Tokyo
10.5
12.8
12.8
11.4
12.8
13.5
14.9
13.2
13.4
17.0
17.0
17.2
18.7
2015
2007
20.5
21.9
1950
20.2
20.0
36.4
0
5
10
15
20
25
30
35
40
© Dr. Jean-Paul Rodrigue
B. PACIFIC ASIAN DEVELOPMENT
1. From Ashes to Riches
How does Pacific Asia compares economically with other regions of the world, now
and then?
2. Development Factors
What were the major reasons behind the success of many Pacific Asian countries?
3. Development Problems
What are some specific development problems the region is facing?
© Dr. Jean-Paul Rodrigue
1. From Ashes to Riches
■ Geopolitical instability
• Around 1950, Pacific Asia was in ruins with limited development
prospects.
• Almost the whole continent was at war, revolution or under
famine between 1930 and 1960.
■ China: A Difficult Start
• Wars:
• 20 million Chinese killed during the war with Japan (1937-45) and the civil
wars (1920-37; 1945-49).
• China tried to invade Vietnam in 1979.
• China - USSR border clashes (1965-1985).
• Demagogy:
• 40 million died of starvation during the “Great Leap Forward” (1958-62).
• Around 10 million killed during the Cultural Revolution (1967-76).
© Dr. Jean-Paul Rodrigue
1. From Ashes to Riches
■ Southeast Asia
• Indochina War (1945-76):
• Involved guerrilla between Communists and non-Communists, including
France and the United States.
• France pulled out in 1958.
• United States pulled out in 1973.
• Hundred of thousands of refugees.
• Indonesia:
• Invasion of East Timor in 1975.
• Ethnic clashes:
– Around 500,000 ethnic Chinese were killed in 1965 during a failed coup in Indonesia.
• Genocide:
• About 1 million Cambodians (15-20% of the population) were killed by the
Khmers Rouges between 1975 and 1978.
© Dr. Jean-Paul Rodrigue
1. From Ashes to Riches
■ Regional conditions (1960)
• Low levels of development:
•
•
•
•
Limited infrastructures (WWII, Civil/Liberation Wars, Colonialism).
Political instability (e.g. Cold War).
Low educational levels.
Limited capital.
• Comparisons:
•
•
•
•
•
Africa might have been better off than Pacific Asia.
Japan had income 1/8 of the US.
South Korea and Taiwan as poor as Sudan and Zaire (DR Congo).
China was three times poorer than Taiwan.
Hong Kong was a struggling, cheap labor-oriented colony facing massive
influxes of refugees from China.
© Dr. Jean-Paul Rodrigue
1. From Ashes to Riches
■ Accelerated development
• From the 1950s, economic development accelerated:
• Led to the biggest accumulation of wealth in human history.
• Fastest rise in incomes for the largest number of people ever recorded.
• Labeled “The Asian Miracle” by the World Bank.
• Between 1970 and 1990:
• Number of very poor persons fell from 400 million to 180 million in East
Asia.
• Population climbed by 425 million.
• Around 650 million people escaped poverty.
• Africa failed:
• Its combined GDP in 2000 was less than Switzerland.
© Dr. Jean-Paul Rodrigue
1. From Ashes to Riches
1940
1950
1960
1970
1980
■ Waves of Pacific Asian
Development
WWII
Korean War
Japan
Great Leap
Forward
Four Dragons
Vietnam War
Cultural Rev.
China, Malay., Thai., Indo.
Philippines, Vietnam
1990
• First Wave, 1950s (Japan).
• Second Wave, 1960s (The Four
Dragons).
• Third Wave, 1970s (Malaysia,
Thailand, China and Indonesia).
• Fourth Wave, 1980s (The
Philippines and Vietnam).
• Fifth Wave, 1990s (Growth and
recession).
■ China reclaiming its
historical share
AFTA
• 25-30% of global GDP.
Asian Crisis
2000
China joins WTO
© Dr. Jean-Paul Rodrigue
Industrial Revolution and Time to Double National
Income
China
9 9
Korea
11
Japan
34
United States
47
United
Kingdom
58
1780
1830
1880
Year
1930
1980
© Dr. Jean-Paul Rodrigue
World GDP, 1AD - 2008
80%
70%
60%
United Kingdom
Italy
Germany
France
United States
Japan
India
China
50%
40%
30%
20%
10%
0%
1 1000 1500 1600 1700 1820 1870 1900 1913 1940 1970 2008
© Dr. Jean-Paul Rodrigue
World Nominal GDP, 2009 ($US)
South Korea
0.83
Mexico
0.87
Australia
0.92
Russian Federation
1.23
India
1.31
Canada
1.34
Spain
1.46
Brazil
1.57
Italy
2.11
United Kingdom
2.17
France
2.65
Germany
3.33
China
4.99
Japan
5.07
United States
14.12
0
5
10
15
Trillions
© Dr. Jean-Paul Rodrigue
2. Development Factors
■ United States
• Initial role:
• Marshall Plan also applied in Asia after WWII.
• South Korea and Taiwan would not have survived without the support of
the United States.
• Between 5 and 10% of the GDP in foreign aid in the 1950s.
• Direct aid ended at the beginning of the 1960s.
• Freed internal financial capacity and promoted savings.
• Contemporary role:
• The United States has become an important market for Asian products.
• Supporting of the export-oriented development.
© Dr. Jean-Paul Rodrigue
2. Development Factors
■ High savings rates
•
•
•
•
Related to the availability of local investment capital.
Savings were preferred over consumption.
Ranges around 20 to 30% of GDP.
Many societies offer little if any social security:
• Responsibility of the individual / family to cover expanses such as health
care, education and retirement.
• Government mandatory saving and insurance policies.
• The average American has an income of about $40,000 a year:
• The personal savings rate is about 1% (negative in 2006).
• The average Chinese earns around $1,500 per year:
• The personal savings of 45% of his income.
• A poor Chinese saves more than a wealthy American.
© Dr. Jean-Paul Rodrigue
Personal Savings Rate, United States and China
50
USA
45
China
40
35
30
25
20
15
10
5
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
1972
1970
0
© Dr. Jean-Paul Rodrigue
National Savings Rates (as % of GDP), 2001
Taiwan
26
Indonesia
26
South Korea
30
Thailand
30
Hong Kong
30
China
39
Singapore
46
0
5
10
15
20
25
30
35
40
45
50
© Dr. Jean-Paul Rodrigue
2. Development Factors
■ Abundance of labor
• Numbers do not guarantee industrialization, but an advantage in
labor intensive activities.
• Demographic growth helped maintain low labor costs:
• Exports are more competitive.
• Foreign investment is attracted.
• Productivity often grows faster than wages.
• Usage of women labor:
•
•
•
•
In the manufacturing sector.
Notably 15-25 years old.
Often account between 40 and 50% of labor.
Lower wages and more disciplined.
© Dr. Jean-Paul Rodrigue
Hourly Compensation in Manufacturing, 2004 ($US)
0
5
10
15
20
25
Germany
$22.87
$2.50
Japan
$21.42
Taiwan
$5.97
South Korea
$11.52
Singapore
China
35
$32.53
United States
Mexico
30
$7.45
$0.91
© Dr. Jean-Paul Rodrigue
2. Development Factors
■ Globalization
•
•
•
•
Development models vary greatly in the region.
Diversity of economic and political systems.
Convergence towards the capitalist model.
Pacific Asia took advantage of the emerging global economy:
• Opening of foreign markets.
• Liberalization of trade.
• Export-oriented development.
• Significant improvements in the welfare of the population.
• Development of international transportation:
• Pacific Asia accessible a lower costs.
• Containerization.
© Dr. Jean-Paul Rodrigue
Share of World Goods Exports, Selected Countries,
1950-2009
20%
40%
18%
35%
16%
30%
14%
25%
12%
10%
20%
8%
6%
4%
2%
0%
15%
United States
Japan
Germany
China
Four large traders (Right axis)
10%
5%
0%
© Dr. Jean-Paul Rodrigue
2. Development Factors
■ Foreign Direct Investments (FDI)
•
•
•
•
Capital investments by foreign interests (mostly private).
Related to the speed of development.
Massive transfers of technology and investment.
FDI are mostly undertaken as joint-ventures:
• The foreign firm often provides capital and technology.
• The Asian firm provides labor and raw materials.
• About 60% of FDIs are occurring in the manufacturing sector.
• United States and Japan:
• Account for more than 50% of FDIs.
• Japan massively investing in China; lower production costs.
• China accounts for 50% of all FDIs going to developing countries.
© Dr. Jean-Paul Rodrigue
Value of Chinese Exports and Received FDI, 1983-2009
(Billions of $US)
1,600
1,400
120
Exports
100
FDI Inflows
1,200
60
600
40
400
20
200
0
0
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Exports
800
FDI
80
1,000
© Dr. Jean-Paul Rodrigue
2. Development Factors
■ Sub-contracting
• High production / labor costs in developed countries:
• Corporations looking at ways to reduce costs and compete.
• A increasing share of production is done by sub-contracting.
• Transfer of a manufacturing process.
■ Technology transfers
• Mostly done by licensing (Taiwan, South Korea):
• A firm has the authorization to use a technology.
• Pays a royalty.
• Several technologies “stolen”.
• Software and industrial process piracy.
• Asian countries have become innovators:
• Japan and the Tigers first.
• China: substantial potential for innovation.
© Dr. Jean-Paul Rodrigue
IT Industry Competitiveness Index, 2007
Singapore
Switzerland
Canada
Denmark
Sweden
Taiwan
Australia
United Kingdom
South Korea
Japan
United States
40
45
50
55
60
65
70
75
80
© Dr. Jean-Paul Rodrigue
Value of an iPhone 3G Components and Labor, 2009
Total: $178.96
27%
34%
3%
6%
13%
Japan
Germany
South Korea
United States
China
Other
17%
© Dr. Jean-Paul Rodrigue
2. Development Factors
■ Government and industrial development
• Asian governments tend to be of small size:
• Lower taxation on the society; less social safety nets.
• Notable exceptions; China, Vietnam.
• Often account for less than 20% of GDP (about 45-50% for the US).
• Involvement of the government:
• Defines the strategic orientation of the economy; Favor export-oriented
strategies.
• Developing projects and providing financing (preferential loans).
• Favor trade-related infrastructure projects.
• Significant regulatory involvement (misallocations and some corruption).
• Special economic zones:
• Enclave where foreign corporations are given specific privileges (mainly
taxation).
• Attract foreign investments, new industrial activities and technologies.
• Hong Kong is a free trade zone since 1841.
© Dr. Jean-Paul Rodrigue
2. Development Factors
■ Confucianism
• Important imprint in most Pacific Asian societies.
• Basis of most social structures, especially in the Chinese world.
• Main values:
•
•
•
•
•
•
Hard work as a symbol of achievement.
Thriftiness.
Obedience to authority and respect of hierarchy.
Benevolent leadership.
Consensus, harmony and common interest.
Education as a tool of social promotion.
• Possible to make accept difficult living conditions to justify future
development.
• Its importance is argued.
© Dr. Jean-Paul Rodrigue
Development Factors (Synopsis)
Factor
United States
Savings
Labor
Globalization
Foreign direct
investments
Sub-contracting
Government
Confucianism
Initial role (1950s). Marshall Plan. Financial support. Military protection
(Japan, South Korea, Taiwan). Major market outlet.
High saving rates (about 30% of GDP). Availability of national capital.
Large labor pool. Wages kept relatively low. Reliance on women.
Development of skills through education.
Increased participation to international trade. Lower tariffs. Lower transport
costs.
Transfers of production and manufacturing capacities. Mainly from Japan
and the United States. Joint ventures. Transfer of technology.
Access to foreign markets.
Special economic zones. Export-oriented development strategies.
Mandatory savings.
Social order. Work ethics. Consensus. Respect of authority. Its role is
argued.
© Dr. Jean-Paul Rodrigue
3. Development Problems
■ Questioning the “Asian Miracle”
• Used to be called “Miracle Economies” by the World Bank.
• Two crisis:
• Financial crisis of 1997-98.
• Financial crisis of 2008-
■ The Asian Financial crisis of 1997-98
•
•
•
•
•
•
The bursting of a bubble, mainly based on real estate.
Exacerbation of social problems.
Inequalities.
Loss of spending power.
Especially true in countries depending on imports (Indonesia).
Political unrest (fall of the Suharto government in 1998).
© Dr. Jean-Paul Rodrigue
3. Development Problems
■ The role of governments
• Governments regulate massively their economy:
• Industrial control; the appeal of an export-oriented strategy.
• Preferential loans.
• Informal “Black” market: Avoid government regulation creating artificial
scarcity.
• Corruption:
• Where there is government there are misallocations.
• Corruption is a form of misallocation (using public power to regulate,
coerce and confiscate).
• Corruption becomes a source of income for low paid bureaucrats.
• Cronyism (favoritism shown to friends and associates).
• Lack of transparency.
• “Hidden clauses” often account for up to 30% of the amount of a contract.
• Weak legal systems leaving limited recourse.
• Institutions did not develop with the economy.
© Dr. Jean-Paul Rodrigue
Corruption Perception Index, Selected Countries, 2006
(10 = the least corrupt)
Myanmar
Indonesia
Philippines
Vietnam
China
Thailand
Malaysia
South Korea
Taiwan
United States
Japan
Hong Kong
Singapore
Finland
0
1
2
3
4
5
6
7
8
9
10
© Dr. Jean-Paul Rodrigue
3. Development Problems
■ The currency leverage game (2000-2008)
• Systematic positive export balance:
• Increase of the value of a national currency.
• Eventually exports slow down has they become more expensive.
• Asian currencies should have increased substantially.
• Maintaining the exports:
• Continue the export-oriented system.
• Japan and Korea bought large amounts of US securities to recycle their
foreign reserves (T-bills, bonds, stocks, etc.).
• China pegged its currency (Yuan) to the US dollar at 8.2 and also
purchased US securities.
• Inflated US assets (housing) and kept consumers buying.
• Transfer of wealth from the West to the East.
© Dr. Jean-Paul Rodrigue
9.0
8.0
5.0
4.0
Jan-81
Jan-82
Jan-83
Jan-84
Jan-85
Jan-86
Jan-87
Jan-88
Jan-89
Jan-90
Jan-91
Jan-92
Jan-93
Jan-94
Jan-95
Jan-96
Jan-97
Jan-98
Jan-99
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Yuan Exchange Rate (per USD), 1981-2011 (Monthly)
10.0
Export Oriented
Debasement
Discount Window
7.0
6.0
Closing of the
Discount Window
3.0
2.0
1.0
0.0
© Dr. Jean-Paul Rodrigue
Ownership of US Treasury Bills, 2010
6.0
1.61.3
3.42.1
6.4
42.2
7.5
$13,562 billions
(Sept. 2010)
11.6
17.9
US Individuals & Institutions
Social Security Trust Fund
All Other Foreign Nations
China (incl. Hong Kong)
Japan
US Civil Service Ret. Fund
UK
US Military Ret. Fund
Oil Exporters
Brazil
© Dr. Jean-Paul Rodrigue
Major Foreign Holders of U.S. Treasury Securities, 2008
Korea
32.2
Singapore
32.6
Thailand
34.8
Taiwan
40.3
Hong Kong
65.2
Brazil
134.5
Oil Exporters
187.7
Caribbean Banks
219.5
U.K.
360.2
Japan
585.5
China
652.9
0
100
200
300
400
500
600
700
Billions
© Dr. Jean-Paul Rodrigue
3. Development Problems
■ The limits of the export-oriented model
• Pacific Asian development strongly dependent on exports to
North American and European markets:
• A form of “neo-mercantilism”.
• Correlated (“coupled”) with the dynamics of these markets.
• Decoupling thesis:
• Development of an internal market.
• Less dependency with North America and Europe.
• A business cycle with a large bust phase that began in 2008:
• Sharp drop in exports (China, Korea and Japan).
• The decoupling thesis turned out to be inaccurate.
• The export-oriented model is being questioned.
© Dr. Jean-Paul Rodrigue