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Lecture 3

Poli Sci Week 3b03 week 5.docx

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McMaster University
Political Science
Richard Stubbs

Poli Sci Week 5 (October 7 2013) Three events led to the developmental state: 1. The influx of FDI 2. The end of the cold war 3. Globalization (Including Neoliberalism) FDI: Importance of the Plaza Record of 1985 when central bankers of the major capitalist economies got together at the Plaza Hotel in Tokyo and arranged for the doubling of the Yen. The Yen was $1= 240 Yen, after the record the bankers manipulated the value of the yen and it fell to $1= 120 Yen. The point was that when you are buying with an American dollar and you want to buy a Japanese product, once the value of the yen appreciated then it would cost you more American dollars. This is what America wanted as they wanted to reduce the flood of cheap Japanese imports into the US. By making the Yen stronger, it cost more to buy Japanese goods, but the Japanese were smarter than that. They went to the US and ending up buying American goods. They also moved their manufacturing base to a country where the value of their currency is going down or stagnant in comparison to the American dollar. They wanted cheap labour and land. First they looked at South Korea and Taiwan in 1986, but the Americans protect these two countries, therefore they could see what is happening and increased the other two countries as well. Japan then look at countries like Singapore or Thailand to provide the cheap land and labour. Due to the plaza record, Japan provided East Asian countries with a wave of capital in forms of FDI. They invested in these countries as they had cheaper labour, cheaper land and a cheaper currency. America was extremely mad with the trade surplus. Once Japan started with FDI then European countries started to do the same. Japan essentially paved the way for FDI within South East Asia In terms of the facilitative conditions the money that comes into the economy is coming in through a different way- not the government but through corporations. Therefore societies become stronger- strong societies and strong states The consequences of putting money into manufacturing is that these countries then become big manufacturing centres and then these products go back to Japan, Us or even Europe. The US substitutes its trade problem with Japan and moves it over to South East Asia essentially Any company competing in the world market had to start considering ways to keep their cost down and one way to do this was through FDI 1989: China starts to open up 1991-1992: China becomes a major destination for FDI and then starts to become a competitor among these countries. (ASEAN) In part this is due to China’s location, they are close to Japan and Japan knows this region and are comfortable with investing within this region, and this starts a trend. Thi
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