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Week of October 7, 3B03

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Political Science
Richard Stubbs

th 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 3. Globalization 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 colonies. 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  1987+ 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 Accord  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
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