Class notes for the Week of October 7 , 2013
Political Science 3B03
O CTOBER 7, 2013
Summary of Class by Richard Stubbs
NB: PM Harper‟s trip to Malaysia and to APEC.
Importance of the flood of foreign direct investment (FDI) into Southeast Asia as a consequence
of the increase in value of the yen produced by the Plaza Accord.
Massive flood of capital into the region beginning in 1987 just as Southeast Asian countries were
recovering from a recession in their economies created by a slump in commodity prices. As luck
would have it Malaysia and Thailand opened up their economies as a way of trying to avoid so
much dependence on commodity exports at the same time as Japanese companies were searching
for low cost platforms from which to export manufactured goods back to Japan as well as to the
US and Europe.
With Japanese companies moving to low cost countries so their American, European, South
Korean and Taiwanese competitors had to consider following their example. As a result FDI
flowed into the region until at least 1992 when China started to provide a competitive venue for
low cost manufacturing.
Nature of Japanese investment meant that the balance of the relationship between the state and
society changed. Society became stronger as companies and the economy prospered. Foreign
companies also pushed for changes to the economic strategy followed under the Developmental
State – eg lower tariffs so that exporters could argue for lower tariffs on their products that were
imported into other countries.
E VENTS IN THE LATE 1980 S
3 events in the late 1980‟s started to unravel conditions that led to the developmental state, and
the leadership in the region
1. Influx of FDI
2. End of the Cold War
FOREIGN D IRECT INVESTMENT
- Importance of the PLAZA ACCORD; of 1985 (When the central bankers of the major
economies, „capitalist‟ economies, got together at the Plaza Hotel and arranged for the
doubling in the value of the Yen.
o 240JPY to 1USD
o After the Plaza Accord; central bankers manipulated the value of the Yen; and it
fell to 120JPY to 1 USD
o Example, 1 auto that cost 1,000,000.00 JPY, could get a car for 4,167 USD
When value depreciated, the value of the car was 8,333 USD
To reduce the flow of cheap Japanese imports into the United States.
o Example, Television set
50,000 JPY 208 JPY
After Plaza Accord 50,000 416 USD
- America had leverage over Japan, because of a series of defense agreements.
1 Class notes for the Week of October 7 , 2013
Political Science 3B03
- Japanese committed to; move the manufacturing base to a country where the value of the
currency is stagnant. To get relatively cheap land and cheap labour. Go to the old
o 1985 is the Plaza Accord;
o 1986 Japan starts looking at Korea and Taiwan;
o The Americans told Korea and Taiwan to increase the value of their currency.
o Now Japan was looking at Singapore, Malaysia or Thailand. Planned for some
kind of investment in South East Asia.
o INCREASE IN INVESTMENT South East Asia
1985 1986 1987 1990
Singapore 339 302 494 840
Thailand 48 124 250 1154
Capital coming in, via companies.
Foreign Direct Investment Investment that goes into building concrete
buildings and infrastructure; plants which will manufacture and produce.
It‟s not just money that it‟s invested in a bank.
Investment in South East Asia that comes about because of the Plaza
Singapore & Thailand – Manufacturing Foreign Direct Investment
When Singapore and Thailand were trying to get investment due to the
recession that swept through south east Asia as a response to recession in
the West; elsewhere in the world (in Latin America); weary of Foreign
Direct Investment, such as American corporations coming in and telling
them what to do.
It‟s not that Japanese start pouring investment, but other parts of the
world start to follow suit and get an influx of investment in the region.
- Japanese investment in South East Asia (cheaper labor, land and currencies)
o Although the Americans put pressure on Japanese to reduce the surplus of trade.
o Moved the trade surplus from Japan to South East Asia; once the Japanese went
into some of the European corporations were worried about Japanese production
of goods „cheaper‟.
- Investment coming into the economies through corporations; who start to become
influential. Strong societies and strong states; balanced relationship and it becomes
difficult for the state to start dictating and telling the society what to do.
o Tied in with Globalization;
o Globalization in a sense starts in the 1980s because of the movement of
corporations (manufacturing) corporations into other parts of the world.
- Before 1984 most of what was being sent from South East Asia was raw materials; heavy
investment the ration of manufactured goods go up, (Singapore 60% manufactured, and
40% Japan for example)
- Increase of US imports of manufactured goods made in East Asia and South East Asia
o Japanese set up manufacturing centers in these countries and goods went to
United States, back to Japan or even European countries.
o The United States substituted its trade problem with Japan and moved it into
South East Asia;
o Japan lead the way, European countries went in and afterwards American.
o Companies competing in the Global Market had to set up manufacturing bases in
South East Asia.
o 1989 – China Starts to Open Up, it‟s not until 1992 that China starts to become a
major destination for foreign direct investment.
2 Class notes for the Week of October 7 , 2013
Political Science 3B03
o Start to see the development of computer technologies
- When they went into these countries, the conglomerates for Japan.
o Toyota did subcontracting; would move their assembly of cars and would take
their subcontractors; and these would have subcontractors; cooperation with
subcontractors that would encourage loyalty. Network capitalism; building up a
series of networks. Also meant that the nature of the society was changing; now
there was an influx of foreign multinationals and had a different view of the
world. Did not mind working with governments (Japan, Taiwanese, South
Korean); were used to working with Governments, but the interest might be
slightly different from the domestic companies. Lowering of trade barriers if
wanted to trade with other countries such as Australia, etc.
o The wave of the foreign direct investment at the end of the 1980s is important in
changing the dynamic between the state and business. Foreign Direct Investment
is hard to do in Japan. At the same time this was happening, the cold war was
coming to an end. 1989 the Berlin war came down, Vietnam, which had invaded
Cambodia, agreed to withdraw; Malaysia communist party and Malaysian
government agreed to end their dispute. Around the world; communism threat
was coming to an end. China was becoming less confrontational and opening up
its economy. Americans had decided that the cold war had come to an end.
O CTOBER 9, 2013
Summary of class by Richard Stubbs
During the late 1980s the Cold War began to ebb. The fall of the Berlin War in 1989 was an
important marker of the end of the Cold War while in East Asia