THEMATIC FOCUS

§ The United States under Ronald Reagan

• United States 40th president from 1981 to 1989

• Policies

  • • tax cuts intended to spur growth (known as "supply-side" economic program / Reaganomics)

      • • 30 percent reductions in both individual and corporate income taxes over a three-year period

    • advocated for increases in military spending

    • reductions in certain social programs

      • • education, food stamps, low-income housing, school lunches for poor children, Medicaid (the major program of health insurance for the poor), and Aid to Families with Dependent Children (AFDC)

    • measures to deregulate business

• supporters of his policies

  • • the US entered a period of prosperity that would extend throughout Reagan’s presidency

      • • unemployment and inflation were significantly reduced

    • foreign policy initiatives strengthened US position globally

• Critics of his policies

  • • his policies led to increased budget deficits and a growing national debt

      • • tripling of the national debt to more than $2.5 trillion

        • Also, trade deficit increased from $25 billion in 1980 to $111 billion in 1984

    • many argued his economic programs favored the rich

§ Britain under Margaret Thatcher

• 1979 -- Margaret Thatcher became prime minister of Great Britain

  • • rejected the economic theories of John Maynard Keynes

    • preferring the monetarist approach of Milton Friedman

• Policies as Prime Minister

  • • lowered direct taxes while increasing taxes on spending

    • sold off public housing

    • put in austerity measures and made other reforms

      • • even as rising inflation and unemployment caused Thatcher’s popularity to temporarily wane

    • 1982 -- Argentina invaded the Falkland Islands

      • • British retook the islands

    • took on the trade unions

      • • requiring them to hold a secret ballot before any work stoppage and refusing to make any concessions during a yearlong miners’ strike

    • privatized British Telecom, British Gas, British Airways, Rolls-Royce and a number of other state-owned companies

    • supported Europe Union being a free-trade area rather than a political endeavor

    • after 1987 -- lowered income tax rates to a postwar low

§ China under Deng Xiaoping

Deng Xiaoping (1904–1997)

• was a veteran of the Communist Party since 1954

• Deng had been purged twice -- suffered the same fate as millions of other Chinese during the Cultural Revolution

  • • he had to recant criticisms of Mao

    • identify himself as a petite-bourgeois intellectual

    • forced to labor in a tractor-repair factory

• When a radical faction failed to maintain the Cultural Revolution after Mao’s death, Deng emerged as the leader of China

Deng’s Revolution

• Deng came to power in 1981

• Deng inherited a China:

  • • with a Central Planning bureaucratic mechanism destroyed by the Cultural Revolution

    • Regions and cities were left to plan their own economies based on self-reliance making them receptive to market based opportunities

    • Sino-Soviet split in the 1950’s and ‘60’s left the U.S.A. and Japan receptive to helping China reform in the post-Mao era.

• The issue facing China as it entered the global economy was how (or whether) to reap economic benefits without compromising its identity and its authoritarian political system

• Deng's reforms:

  • • sent tens of thousands of Chinese students to foreign universities to rebuild the professional, intellectual, and managerial elite needed for modern development

    • Four Modernizations: agriculture, defense, Industry, Science and Technology

    • One Child Policy (1979-2009)

      • • used to control population growth

        • impacted 36% of the population

          • • estimated to have prevented 200-million births

        • no restrictions on minority groups

    • focused on exports

      • • supported to the production of goods that could be sold to other countries for a profit

        • created Special Economic Zones (SEZs) for foreign investment

Problems:

• • • students sent to foreign universities were exposed to the democratic societies of western Europe and the United States.

      • • staged pro-democracy demonstrations in Beijing’s Tiananmen Square in 1989

        • April 15, 1989 -- the death of Hu Yaobang, a Chinese politician who was seen as a supporter of democracy initiated the protest

        • On April 18, ten thousand students staged a sit-in in Tiananmen Square

        • April 21, one hundred thousand students marched on Tiananmen Square

          • • Demonstrations began to occur all over China, and the protests escalated in Beijing

    • Deng, whose experiences in the Cultural Revolution made him wary of zealous revolutionary movements, approved a bloody crackdown

      • • June 4, 1989 -- soldiers violently cleared the protesters

        • estimates on those killed range from 2,000-10,000

        • Deng faced hostile world opinion after crushing the student movement

        • Tank Man -video

        • Chinese Plain-Clothes Officials Block CNN Cameras With Umbrellas In Tiananmen Square-video

        • Political Control: Tiananmen Square Protests (CNN report, ABC report)

    • China managed to maintain both centralized political control over China and maintain economic growth and development

§ Chile under Augusto Pinochet

• June 1974 Pinochet became President after a coup d'etat

• Policies -- The "Miracle of Chile"

  • • three main objectives;

      • • economic liberalization

        • privatization of state-owned companies

        • stabilization of inflation

    • reversal of the Allende government’s socialist policies resulted in a lower rate of inflation and an economic boom between 1976 and 1979

    • Specifics

      • • welcomed foreign investment

        • eliminated protectionist trade barriers

        • mining

          • • Codelco (primary copper mining company) -- remained nationalized

            • copper resources declared under national control by the 1980 Constitution

            • private companies were allowed to explore and develop new mines for resources other than copper

        • ended free floating exchange rates

          • • brought inflation under control

            • created a balance-of-trade problem

Knowledge Economy

• Less developed countries tend to have agriculture and manufacturing-based economies.

• In the Information Age, the global economy has moved toward the knowledge economy, bringing with it the best practices from each country's economy.

  • • The knowledge economy addresses how education and knowledge, that is, "human capital," can serve as a productive asset or business product to be sold and exported to yield profits for individuals, businesses, and the economy.

• The World Bank defines knowledge economies according to four pillars

  • • Institutional structures that provide incentives for entrepreneurship and the use of knowledge

    • Availability of skilled labor and a good education system

    • Access to information and communication technology (ICT) infrastructures

    • A vibrant innovation landscape that includes academia, the private sector, and civil society

§ Finland

• 1960s -- Finland’s economy was largely based on forestry and paper production

  • • Finland is historically competitive in manufacturing, particularly in the wood, metals, engineering, telecommunications, and electronics industries.

• 1994 -- telecommunications and multiplex communications surpassed paper making as the top patent class

• Today

  • • Finland's most prominent corporation is Nokia, a global leader in mobile and wireless communications.

    • highly industrialized, largely free-market economy

    • exports account for over one-third of GDP in recent years

    • excels in export of technology as well as promotion of startups in the information and communications technology, gaming, cleantech, and biotechnology sectors.

• recent free market initiatives

  • • 2016 -- Competitiveness Pact aimed at reducing labor costs, increasing hours worked, and introducing more flexibility into the wage bargaining system

      • • As a result, wage growth was nearly flat in 2017

    • Government also seeking to reform the health care system and social services

• demographic crisis

  • • similar issue to what Japan is facing

    • since 2016, deaths have outpaced births

      • • gap is predicted to get worse over the next 50 years

    • people over 85 represented just 1.5 per cent of the population in 2000, today they are 2.7 per cent, and by 2070 are expected to be close to 9 per cent

§ Japan

Asian “economic miracle”

• largely a result of economic globalization

• by 1949 the Japanese economy had already attained its prewar level of productivity

• US Policies:

  • • Just as western European countries had benefited from the Marshall Plan, so Japan benefited from direct U.S. financial aid ($2 billion), investment, and the timely abandonment of war reparations

      • no restrictions on the entry of Japanese products into the U.S. market

      • United States assumed the role as Japan’s military protector

        • • 1952 mutual defense treaty stipulated that Japan could never spend more than 1 percent of its gross national product on defense

          • Japan’s postwar leaders channeled the nation’s savings into economic development

• Japanese Economy

  • • focused on export-oriented growth supported by low wages

    • compliant workforce, willing to endure working conditions and wages considered intolerable by organized labor in western Europe and the United States

      • • gave Japanese employers a competitive edge over international rivals

• Knowledge Economy

  • • 1960s switch

      • • Japanese companies used their profits to switch to more capital-intensive manufacturing and produced radios, television sets, motorcycles, and automobiles

    • 1970s

      • • Japanese corporations took advantage of a highly trained and educated workforce and shifted their economic resources toward technology-intensive products such as random access memory chips, liquid crystal displays, and CD-ROM drives

    • “Made in Japan” -- once associated with cheap manufactured goods, signified state-of-the-art products of the highest quality

The Four Little Tigers

• Hong Kong, Singapore, South Korea, and Taiwan

  • • successful imitated of the Japanese model for economic development

    • by the 1980s these newly industrializing countries had become major economic powers.

• Like Japan, all four countries suffered from a shortage of capital, lacked natural resources, and had to cope with overpopulation

  • • like Japan a generation earlier, they transformed apparent disadvantages into advantages through a program of exportdriven industrialization

• Indonesia, Thailand, and Malaysia would join them in the 1990s

§ U.S.

• early 1960s -- focuses on the rise of new science-based industries and their role in social and economic change in response to the Cold War

• 1970s -- transition begins from a manufacturing-based to services-driven economy

• Technology patents

  • • early 1980s -- the volume of patenting picks up and increases steadily until the late 1990s, when the pace takes off even more sharply

    • Over this 20-year period, the number of patents issued to U.S. inventors more than doubles, while all patents issued in the United States climb from less than 47,642 to more than 168,040.

• Economy in transition

  • • 1996– 1998 -- found that the sectors that contributed most to economic growth were industrial machinery and electronic machinery, which are the sectors that include computers and semiconductor

• fear of a jobless future

  • • fear going back to debates concerning automation in the early 1960s

    • regained attention owing to the upsurge in information technology

    • new jobs tend to favor educated workers over those with less education and skills.

    • growing income gap

      • • More education translates into higher earnings, but this payoff is most pronounced at the highest educational levels

        • At the same time, low-skilled positions are made redundant by technology, which decreases the need for less-educated workers

• winners and losers

  • • favors the well-educated over those less-educated

    • narrowing of the gender gap in pay

    • persistence of a racial wage gap

    • younger workers favored over older

Companies in wealthier countries have often found it advantageous to build such facilities in places where labor is less expensive or environmental regulations are less strict

• The worst results—in terms of child labor, low pay, few benefits, and dangerous working conditions—have been called “sweatshops.”

  • • Such abuses have generated an international movement challenging those conditions

• The positive results--this has resulted in lifting millions of people out of poverty and greater autonomy for women.

§ Vietnam

• 1986 -- Law on Foreign Investment

  • • enabled foreign companies to enter Viet Nam

• 1995 -- Viet Nam joined the ASEAN free trade area

• 2000 -- Viet Nam signed a free trade agreement with the US

• 2007 -- Viet Nam joined the World Trade Organisation

• Results

  • • Since 2010, Viet Nam’s GDP growth has been at least 5% per year, and in 2017 it peaked at 6.8%

    • 2018 -- exports make up 99.2% of GDP

    • concerns over human rights and privacy

      • • press freedom considered on of the worst in the world

        • citizens are monitored online

        • human rights activists not welcome in Viet Nam

    • Viet Nam benefiting from from deteriorating US-Chinese economic relationship

      • • US has backed out of the Trans-Pacific Partnership

        • companies with a manufacturing site in China are considering relocating to countries like Viet Nam

§ Bangladesh

• garment industry is the lifeline of Bangladesh's economy, earning $25 billion in exports each year as of 2015

  • • employing 4 million workers, mainly women

    • about a million children aged 10 to 14 working as child laborers in Bangladesh, according to UNICEF

      • • Due to workload kids eat, shower and sleep inside the factories with just half a day off a week

• Unregulated Dangers:

  • • Estimated 7,000 informal factories in Bangladesh are not subject to safety controls

    • 2013 -- collapse of Rana Plaza in a Dhaka suburb resulted in more than 1,100 people were killed, most of them poor seamstresses

Planet Money Makes a T-Shirt:

Part 1

Part 2

Part 3

Part 4

Part 5

Part 6

§ Mexico

NAFTA

• Mexico entered its own regional alliance, approving the North American Free Trade Agreement (NAFTA) with Canada and United States (the largest national economy in the world) in 1993

• NAFTA went into effect in 1994, constitutes the world’s second-largest free-trade zone

  • • it is a loose trade bloc, lacking the economic coordination so typical of the European Union

    • resulted in the elimination of tariffs and other barriers to regional free trade

Globalization divides Mexico

• The northern part of the country, with close business and manufacturing ties to the United States, grew much more prosperous than the south, which was largely a rural agricultural area and had a far more slowly growing economy

  • • 1994, southern resentment boiled over in the Chiapas rebellion, which featured a strong anti-globalization platform

    • Its leader, Subcomandante Marcos, referred to globalization as a “process to eliminate that multitude of people who are not useful to the powerful.”

§ Honduras

• Overall Economy

  • • as of 2019 -- second highest economic growth rates in Central America, only behind Panama

    • historically dependent on the export of bananas and coffee

    • has diversified its export base to include apparel and automobile wire harnessing

    • depends heavily on US trade and remittances

• International Monetary Fund

  • • supports economic and institutional reforms on key issues

      • • improving the sustainability of the electricity sector

        • governance and the business climate

        • rural economic development

        • improve human capital outcomes and foster more job and economic opportunities

• push factors for migration

  • • better economic opportunities in United States

      • • 2018 -- 48.3 percent of people live in poverty

    • crime and violence

      • • 2017 -- 41 homicides per 100,000 inhabitants

    • family reintegration in United States

free trade

• meaning freedom from state-imposed limits and constraints on trade across borders

• The issue of free trade engendered a debate about the extent to which free trade enhances the prosperity of a society.

• following World War II, leaders from industrialized nations, especially from the United States, took a decisive stand on the issue

  • • U.S. politicians and business leaders wanted to establish an international trading system that suited their interests, and they pushed for the elimination of restrictive trading practices that stood in the way of free trade

General Agreement on Tariffs and Trade (GATT)

• 1947 -- signed by the representatives of 23 noncommunist nations

  • • goal of removing or loosening barriers to free trade

• 1948 and 1966 -- World trade (exports and imports) grew by 6.6 percent annually

• 1966 and 1977 -- World trade (exports and imports) grew 9.2 percent annually

• 1994 -- the member nations of GATT (now totaling 123) signed an agreement to establish the World Trade Organization (WTO)

§ World Trade Organization (WTO)

• 1995 -- took over the activities of GATT

• The WTO has developed into a forum for settling international trade disputes, with the power to enforce its decisions.

• December 2001 -- China became a member

  • • now is a global economic superpower

• Events of recent years put the future of the WTO in question

§ North American Free Trade Agreement (NAFTA)

• North American Free Trade Agreement (NAFTA) with Canada, Mexico and United States (the largest national economy in the world) was created in 1993

• NAFTA went into effect in 1994, constitutes the world’s second-largest free-trade zone

  • • it is a loose trade bloc, lacking the economic coordination so typical of the European Union

    • resulted in the elimination of tariffs and other barriers to regional free trade

Differing impacts

• Mexico The northern part of the country, with close business and manufacturing ties to the United States, grew much more prosperous than the south, which was largely a rural agricultural area and had a far more slowly growing economy

• United States The trade deal has been blamed for the lose of many manufacturing jobs and American corporations closed their factories in the United States and opened operation in Northern Mexico.

§ Association of Southeast Asian Nations (ASEAN)

• Established in 1967 by the foreign ministers of Thailand, Malaysia, Singapore, Indonesia, and the Philippines

• its principal objectives were to accelerate economic development and promote political stability in southeast Asia

  • • Originally conceived as a bulwark against the spread of communism in the region

    • the economic focus of ASEAN became sharper after it signed cooperative agreements with Japan in 1977 and the European Community in 1980

• 1992 -- member states agreed to establish a free-trade zone and to cut tariffs on industrial goods over a fifteen year period

multinational corporation

• has facilities and other assets in at least one country other than its home country and derives at least a quarter of its revenues outside its home country

• Positives

  • • establish operations in markets where their capital is most efficient or wages are lowest

    • multinationals reduce prices and increase the purchasing power of consumers worldwide

    • spurring job growth in the local economies

    • growth increases in the company's tax revenues for governments and profits for investers

    • global increase in variety of goods

• Criticism

  • • domestic jobs are susceptible to moving overseas

    • multinationals say they are ways for corporations to develop a monopoly

      • • driving up prices for consumers, stifling competition, and inhibiting innovation

    • negative environmental impact

      • • said to have a detrimental effect on the environment because their operations may encourage land development and the depletion of local (natural) resources

    • in developing nations, they tend to hurt smaller, local businesses

    • Activists claim that multinationals breach ethical standards, accusing them of evading ethical laws and leveraging their business agenda with capital

§ Nestlé

West Africa

• Ivory Coast and other West African countries produce 75 percent of the world's cocoa

• 2009 the U.S. Department of State estimated:

  • • more than 109,000 children working in Ivory Coast's cocoa industry

    • about 10 percent were victims of human trafficking or enslavement

• 2012 -- Nestlé opened up its supply chain to investigation by the Fair Labor Association

• 2019 -- Nestlé could not guarantee that any of their chocolates were sourced without child labor

• Result: your Halloween chocolate most likely comes from child labor working under harsh labor conditions in Cote d'Ivoire's cocoa farms

United States (Florida spring water)

• As of 2019 -- Nestlé permitted to take nearly 1.2 million gallons a day from its wells around Ginnie Springs

  • • wants to increase the daily withdrawal to the full amount

• state water managers determined that the flow in the Santa Fe River and nearby springs had declined below a level that's sustainable, and action must be taken to help the aquifer recover

  • • flow down 28% from historic levels

• Florida Springs Council says under the current system, companies make millions of dollars from a public resource for which they pay little or nothing

§ Nissan (Renault)

• Mississippi, USA

  • • 2001 -- State of Mississippi accused of abusing its eminent domain authority by taking the land of Madison County property owners not for a public use, but at the behest of a private company—Nissan Motor Co.—for its private use

    • 2015 -- Nissan accused of anti-union campaign filled with implicit threats that workers at the Canton, Mississippi factory

      • • Nissan responded by saying these were false allegations by the union and they have never violated labor standards and would never tolerate threats or intimidation of our employees

• 2020 -- French prosecutors accused Renault-Nissan alliance with suspicious financial flows of corporate assets, abuse of trust and money laundering between 2009 and 2020 for amounts of several million of euros

§ Mahindra and Mahindra

• company was started in 1945 and is based in Mumbai, India

  • • known for top tractor brands in the world and Farm equipment

    • expanded into: Automotive sector, Two wheeler sector, sector, Hospitality sector, and Information technology sector

• 2018 -- Mahindra Automotive North America

  • • US government prohibits the sale or import of the Roxor, and sent a cease and desist order to Mahindra and its North American unit.

    • U.S. regulator ruled the vehicles too closely resembles the Toledo-built Jeep Wrangler

• 2020 -- Federal Lawsuit (New Jersey) accuses Tech Mahindra (Americas) Inc. of intentionally discriminating against non-South Asian workers in hiring and other employment decisions

  • • accusations of gaming the US Visa system go back to 2015