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Global political economy. Consequences of the current transformations

Term Paper 2014 16 Pages

Politics - International Politics - Topic: Globalization, Political Economics

Excerpt

Index

Introduction

1. The new emerging economies
1.1. China
1.2. eastern Asia
1.3. India
1.4. Brazil
1.5. South Africa

2. A challenge ahead for the U.S. and the E.U.?

Conclusion

Introduction

At the dawn of the 21st century, there were already clear signals of the economic decline the United States and Europe were facing. As opposed to it, countries that, in the course of history, have always been categorized as part of the developing world, have indeed in the last decades experienced a rapid economic development. In 2001 Goldman Sachs’ collaborator Jim O’Neill grouped these countries under the Acronym of BRIC, which stands for Brazil, China, India and Russia. Eventually the name became BRICS including South Africa among those countries.

Their economic potential is generally based on raw materials, qualified workforce as well as a relatively strong domestic market and geared industrial regulatory instruments. Their role in the world political economy has changed through the years from “emerging markets” regarded as “side dishes” for the global investors, into key market areas.

«The South has risen at an unprecedented speed and scale» states the United Nations’ Human Development Report 2013, and then goes further «by 2050, Brazil, China and India combined are projected to account for 40% of world output in purchasing power parity terms (PPP)[1] ». As a matter of facts, from 2001 to 2013, the economic output of the four BRIC countries rose from some $ 3 billion per year to $ 15 billion.

What’s more interesting is in fact their relative strength in dealing with the world economic crisis. According to Hans-Juergen Bieling, on the one hand they haven’t been hit directly by the Financial crisis but mainly by OECD-states recession and the subsequent global decreasing demand in their exports, but on the other hand they have been able to counteract the crisis through valuable business activity support programs. In this sense the financial crisis has, actually, worked as a catalyst in accelerating the so-called “rise of the south”. Furthermore, in order to maintain such a growth perspective, it’s important for the BRICS countries to keep developing their domestic markets as well as establishing a strong international cooperation, be it south-south cooperation or be it cooperation among the global governance bodies[2].

In fact, The BRICS countries have, already for a decade, been establishing ties with the UN, taking part in the G-20, dialogue and cooperation forums as well as inaugurating the BRIC -summits in 2009 (from then on, South Africa has been part of the group). Moreover, during the years the European Union has tried to tighten its relations with the BRICS through the involvement of these countries in multilateral cooperation forums, the UN system, the International Monetary Fund (IMF) and the World Trade Organization (WTO), then also building forms of interregional cooperation as for instance the E.U. engagement in the Asia-Europe Meeting (ASEM), the MERCOSUR partnership as well as partnership agreements with the ACP countries (Africa-Caribbean-Pacific). In the 21st century the so-called strategic partnerships between the EU and the new rising economic powers are playing a key-role in drawing them close to the OECD world in order to establish collaboration in the fields of security, economy, social reforms, migration, energy supply and production as well as climate.

The BRICS rising importance and economic potential is gradually reshaping the global economic geography and politics. Common belief is that they’re becoming a challenge for the world status of the “north”, it is to say the U.S., the EU. and Japan, and at the same time setting up a new world order.

Now it is increasingly the case that BRICS countries are reluctant to recognize the EU as player or stakeholder at all on many issues. Even worse, if the EU’s original idea was to coax the BRICS countries into its own framework of effective multilateralism, it has increasingly been forced to play ball with the game-rules preferred by the BRICS, taken straight from the sovereignty playbook[3].

In the next chapters an overview of the BICS countries will be given as well as an analysis of the consequences of their emerging power on the U.S. and E.U. status as world economic leaders. Furthermore the current slow-down of the BRICS countries shall be mentioned, which according to some scholars could be the eventual arrest of their economic rise.

1. The new emerging economies

1.1. China

China has been outcast from the world market until the end of the 1970s. In fact, from the 1950s to the mid-1970s, the Chinese communist leader Mao Zedong endeavored to transform China into a communist state with agricultural collectivization and as well as rural industrialization and then removing capitalist, traditional and cultural elements through movements as the Great Leap Forward (1958-1961) and the cultural revolution (1966-1971). The outcome was a disastrous setback for the whole country. Only with the subsequent new reforms issued by Deng Xiaoping, had China finally taken the path towards its rise in the world economy. From 1978 on, China slowly opened itself towards foreign investment, limited private competition, small private businesses and the world market.

China’s new direction taken in the last decade of the 20th century was one towards neoliberal-like politics. Privatization and deregulation as well as a strong orientation towards outer trends were key-points in the Chinese new track and the engine for China’s modernization. The public sector and the financial system remained, nevertheless, centralized and so, deeply state-controlled. The highest point of Chinese neo-liberalism, over the years 1992-2001, was eventually marked by China’s WTO accession in December 2001.

Since the economic liberalization, and especially since the 1990s, China has been one of the fastest growing economies with an yearly growth rate of 10%[4]. Its growth mainly leans on an efficient export strategy together with a vigorous investment. Tobias ten Brink, academic assistant at the University of Frankfurt, states, that the three main reasons of China’s economic growth are: firstly, the shifting of the global value towards the east Asian markets, and chiefly the Chinese market, which has brought to a modernization of production and the resultant export dependency of China. Secondly the low wages strategy which allowed an industrial enhancement vis-à-vis the agricultural field, and thirdly, the Chinese authoritarian political system and its control capacities, which, especially in the last decades, has reinforced the development of its market as well as entrepreneurial activities[5].

Yet, it’s important to underline that this is also the result of China’s strengthened economic ties with its Asian neighbours through the years. The 1997 Asian crisis, which hit the east Asian countries from the summer of that year, has eventually brought about a dynamic development of international cooperation among states, which was later, after the 2008 crisis, even more stronger. One of the outcomes has been the establishment of the ASEAN+3 forum, the most important regional institution of economic cooperation in eastern Asia[6].

The crisis has proved to be a focal point for the social and financial change. In fact, cooperation in the fields of financial stability, reforms, infrastructures, control of capital flows as well as mechanisms of crisis-solving were, and still are, high in the agenda. Furthermore a solid concept of east Asia has developed in the aftermath of the crisis, which has led to strong identity, mutual understanding and multilateral cooperation among the states and the rise of China as a leading character[7] among the ASEAN+3 members. At the outbreak of the 2007/08 world financial crisis, Beijing has begun new cooperative plans as the creation of an Asian Bond-market and a credit-control system, the increase of investment flows among ASEAN+3 countries, the administering of public healthcare as a common problem and the creation of a financial risk management.

Anyway, China’s influence is not confined to the Asian continent, but, especially in the last decade under administration of Hu Jintao, has spread to new areas of trade as Latin America. China has become a major customer for Latin American raw materials and food products’ markets and at the same time investing in the resources sector and becoming a major supplier of electronic products in those countries. This poses a threat to the status of the United States in the whole American continent, as Latin America has for a long time been the “U.S. backyard”.

[...]


[1] UN Human development report 2013. http://hdr.undp.org/sites/default/files/reports/14/hdr2013_en_complete.pdf

[2] Hans-Juergen Beling, Die Bric(s) in der Globalen politischen Ökonomie: Weltordungspolitische Perspektiven der Europäischen Union. In Andreas Noelke und C.May, S.Claar, Die großen Schwellenländer. Page 381

[3] Ibid. page 389

[4] Tobias ten Brink, Strukturelle Dilemmata des langen Wirtschaftsaufschwungs in China. Page 120

[5] Ibid. Pages 120-122

[6] Identität und Außenwirtschaftspolitik der Volksrepublik China in Jahrzehnte der Krise. Dirk Nabers, 2014,

[7] China had in 1997 accumulated the second world biggest currency reserve after Japan, and was at that time competitor with its neighbor Japan. This could be regarded as a conflict within the cooperative frame of ASEAN+3.

Details

Pages
16
Year
2014
ISBN (eBook)
9783656690030
ISBN (Book)
9783656690047
File size
560 KB
Language
English
Catalog Number
v275719
Institution / College
University of Erfurt
Grade
2.3
Tags
global consequences

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Title: Global political economy. Consequences of the current transformations