‘The global economy has moved on from the Asian Tigers; the present and the future of the global economy now lie elsewhere.’ To what extent do you agree with this statement? (40 marks)
The Asian Tigers, consisting of Hong Kong, South Korea, Singapore and Taiwan, were the second group of countries to develop after World War II, with the first being Japan. The Asian Tigers were able to develop due to a combination of comparative advantages, including partially existing developed levels of infrastructure, good geographical locations with open access to the sea allowing easy exportation, cheap labour and strong government support.
The Asian Tigers were most noted for their rise to power in the 1960-1980s, and were able to develop their country at rates unseen anywhere else in the world at that time. They experienced these decades of supercharged growth mainly from large amounts of exports to developed countries and high levels of internal competition. This gave the countries a vast trade surplus, allowing them to re-invest the money in areas such as infrastructure, creating a positive multiplier effect.
At the peak of this development in Taiwan, 1/6 of all people in work had set up, and were currently running, their own business. While the Asian tigers still command significant power in the global economy (all are within the top 40 largest economies), many people would argue that the BRICS (Brazil, Russia, India, China and South Africa) are now the main focus of development and the potential superpowers of the future global economy, with all of these economies being within the top 25 largest economies.
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While all of them have the potential to be global economic superpowers, with some arguing that China with is current rates of 7% growth and a budget surplus of 10% already is, people must remember that these economies are still developing, and, on their own, cannot be the focus of the global economy alone. The developed economies are driving the development of the BRICS economies, with the USA alone buying over $300 billion of exports from China in 2011.
Regardless of where the future global economy is situated, it will have to rely on trade links and globalisation from other developed nations. Purely from the size of the BRICS economies, it is true that the BRICS have overtaken the economies of the Asian Tigers, and that the global economy has moved on from the latter. Despite this, one must remember that this does not necessarily mean that the BRICS countries are more developed. Development encompasses many more factors than economical ones, including political, educational and health. Therefore it is entirely feasible to have the BRICS economies being the future of the global economy, while the Asian Tigers remain more developed.
Regardless of the current powers of the Asian Tigers, and the current and potential future powers of the BRICS economies, many people would argue that in the future, the future of the global economy will be in the hand of the oil producing countries, mainly OPEC. With oil becoming scarcer in the future and experts expecting it to run out in about 50 years, the immediate future of the global economy will focus on countries willing to export oil. Despite many developed countries investing heavily in renewable resources, China alone invested $300 billion last year, the results are not yet significant enough for oil to no longer be a necessity. Thus OPEC, who holds 79% of the estimated oil reserves, hold a degree of monopoly power over oil reserves, and will dictate the price in the next 50 years – with the potential effects of cost-push inflation and resulting unemployment being felt all over the world.
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This shows that wherever the central focus of the global economy is located, they will depend upon oil producing nation, with these nations themselves having the potential to become the focus of the global economy, while oil is still a necessity – when oil runs out, or renewables remove the need for oil, the OPEC countries will have almost power or influence. Countries such as Dubai has realised this fact, and have invested heavily in tourism, and thus Dubai is likely to remain a large part of the global economy than Saudi Arabia, for example, another OPEC country which derives 95% of its total revenue from oil exports. These examples show that the focus of the global economy can shift quickly depending on resources, and that countries wholly dependent on one aspect, in this case exports, are unlikely to remain as an important part of the global economy ones its resources have run out/are not needed.
Along with the importance and power of the country itself, people must also consider the power and importance of transnational corporations created in the Asian Tigers, especially the South Korean Chaebols (Daewoo, LG, Hyundai and Samsung).
These TNCs still play a large part in the global economy, with these brand names being known around the developed and developing world. It is unlikely that any TNCs from currently developing economies will be able to rival these existing TNCs because of set-up costs and levels of technology needed to produce products which are on par with existing ones. Equally, the existing TNCs have the advantages of brand loyalty and economies of scale which newly formed companies will not yet have. In this respect, certain features of the Asian Tigers are heavily linked to, and will continue to play a large part in the future of the global economy.
As well as the TNCs, each Asian Tiger is able to specialise in certain products and services. South Korea specialises in microchips, and has the specialisation and levels of technology to compete with the rest of the world on this front. It is unlikely that any developing or developed countries would try to compete in this market, as South Korea already benefits from economies of scale and large amounts of existing technology to produce these items. If the rest of the world wants to compete, and command a place in the world economy, they either need to invest in research and development, to produce a produce which will be superior to ones already being produced, or focus on mass produced items for a cheaper price than is currently available.
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Therefore, I would argue that the Asian Tigers still hold a strong place in the global economy, but the future will be more focus on countries which are able to produce new goods which are sustainable. Brazil is currently investing large amounts of money in renewable fuels, and produced 81% of the world’s Biofuel in 2011. Brazil is likely to become one of the major economies in the next 10 years or so, not just in size (currently the world’s sixth largest) but in importance to the development of the rest of the world. It is the only country to have a combination of significant growth, a balanced budget and a continuously diminishing wealth gap, suggesting its future power and importance once it has solved its debt problem of $400 billion. In some cases, it can be easily argued that the world has moved on from the BRICS economies. India is famous (or infamous) for its call centres. Firms initially outsourced these services to India because of its many comparative advantages including the second largest English speaking population in the world (after the USA), an average of 60% lower wages and a low income tax rate of about 8-10%, all of which make outsourcing economical. Despite this, many firms have re-located to the Philippines in the last few years – the main comparative advantages over India being; 30% cheaper wages, easier to understand accents and a strong IT network already in place. The Philippines exported $7.6 billion last year, compared to India’s $7 billion. Thus, in some aspects, the world has even moved on from the BRIC countries, meaning the Asian Tigers are several steps behind, in term of the current hub of the global economy. In conclusion, I believe that the present focus of the global economy is mainly on the BRIC countries because they are the ones likely to be the superpowers of the future.
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Along with the BRIC countries, the future of the global economy will focus on specific hubs, such as OPEC and the countries which are able to develop and produce future necessities for the world – mainly widely useable renewable energy sources. While the Asian Tigers are still influential in the global economy, and the TNCs originally from them play a large part in driving globalisation, I believe that both the present and future of the global economy will focus on the developing economies, rather than the already developed ones.
