Overview of the Modern East Asian Economies in the International

PerspectivesJ.D. Han

King’s University CollegeUWO

Current World Economy

• U.S. (Canada)• East Asian Economies• EU• Other BRICS; South Americas; Africa

-> The Closest Economic Relationship exists between U.S., and East Asian Economies

Trade is only one aspect of the ‘Closest Relationship between U.S. and East Asia”

• The Largest Proportion of World Trade takes between U.S. and East Asia

• The two regions, U.S. and the East Asia have dove-tailing interests in terms of International Division of Labor.

The second aspect of the closest relationship between U.S. and E.A. concerns International Division of LaborBetween U.S.’s Financing and East Asia’s Maufacturing

• Take the example of U.S.-(it is the same for U.S.-Japan, U.S.-Taiwan, and U.S.-Korea)

- My PPPP entitled “Bird Eye View of International Division of Labor between U.S. and China”

- East Asia: Manufacturing Goods, selling goods for U.S. dollars- U.S.: Buying Goods with U.S. dollars- -To make the circle completely sustainable, the U.S. dollars (Trade

Surplus) should come from China back to U.S. - -The International Capital Outflows from China to U.S. is only possible

when S>I in China and S<I in U.S.

- U.S.: Managing International Finance/Investment

Why is it so important for U.S. to get the trade surplus money back from E.A., particularly China?

• Economic Reasons -> a long term sustainability

• Political Reasons -> U.S. fears China’s use of the money for military build up eg)http://www.presstv.com/detail/2013/12/14/339949/us-urged-to-devise-war-plan-for-

china/

*Why would U.S. buy from East Asia, not manufacture Goods?

• Protecting U.S. jobs was no longer the first priority of the U.S. government after the L.A. Riot.

• Protecting U.S. jobs-> Expensive Domestic Goods-> a Falling Real Standard of Living of the Poor -> Poverty/Social Unrest

• Getting Manufactured goods at the lowest possible prices leads to social stability

• Which country or countries can manufacture goods of the quality fitting U.S. consumer culture, in a massive quantity and at lowest possible prices?

• It has to be a Big Country with an abundance of labor forces -> A massive amount of outputs

• The labor forces should be disciplined -> A low labor cost/prices

• U.S. Technology should be implanted in non-propagating/non-transferring manner -> The circle is more or less permanent.

• Which country or countries fit all these conditions?

• What should be the structure to ensure the long-run sustainability?

• Workers with a High level of work ethics

• Workers Tolerant/Internalizing and not prone to Violence

• An Institution Dynamic yet Conducive for Social Harmony ensuring a Long-term Stability

The third aspect of the closest economic relationship between U.S. and E.A. is the integration of the trans-pacific region’s ‘Supply Chain’.

• U.S. ‘s fundamental/scientific technology feeds• Japan’s Industrial technology, which feeds• Taiwan and Korea’s industry, which depends• China’s assembly lines in factories

eg) Mobile Phones; Apple i Phone; Samsung Phones

• Can we generalize the East Asian Economic Growth experiences into a theory or model?

• What would be the key factor?

• Can we transfer/transplant the East Asian Economic Growth Model to other countries?

• Neo-Confucianism of East Asia(Japan, Taiwan, Korea, and China)

• My PPPs discuss Its impacts on Economy in the context of the “Endogenous Economic Growth Theories”.

• Conventional Economic Growth Theories do focus on K, L, and T, and do not recognize contribution by institutions.

• Endogenous Economic Growth Theories look for the ‘4th contributing factor’.

• The East Asian Economic Growth Theory as one of many Endogenous Economic Growth models focuses on positive impacts of Neo-Confucianism on individuals and institutions.

*Why does the U.S. feed China with technology through Foreign Direct Investment?

• Jim Mann, Beijing Jeep: A Case of Western Businessmen in China, 1997 summarizes all.

http://www.amazon.ca/Beijing-Jeep-Study-Western-Business/dp/081333327X

-There is no property right protection in China;-Chinese are hard-bargainers.

What is the U.S.’s solution to the above problem?

• U.S. Supply Chain (structure)

-> “Flying Geese Model” in Japanese

Is the Supply Chain solid among E.A.?

• So much ‘Nationalism’ (Historical Legacy)

• Yet, the economic relationship among is very solid

Han, Lee and Lee (2012)’s work on the Peace and Conflicts, and Trade among E.A. countries

• Why is it the most efficient and most effective production system for U.S.?

- Most Efficient -> Lowest Cost- Most Effective -> Massive Amount

The Key is Neo-Confucianism

Think of the Characteristics of Confucius in contrast to his competing social philosophers/policy-makers/politicians;

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The Key is Neo-Confucianism

Think of the Characteristics of Confucius in contrast to his competing social philosophers/policy-makers/politicians;

- Pacifistic; Non Coersive- Meritorious

*The specific economic/institutional manifestations of Neo-Confucian Ethics

• Frugality – high Savings ratio and Capital Accumulation

• Hard work – Labor Input quality and quantity• Harmony – Low social transactions cost/ high

social capital• Good Leadership – Effective and efficient/

non-self serving government; Noblesse Oblige

• It runs parallel to Max Weber’s idea of “The Protestant Ethics and the Spirit of Capitalism.”

• Max Weber pioneered a study on the interaction between various religious belief (institution) and economic behaviours(economy).

• He identified a particular set of ethics as a core part of religious belief, which is conducive for a sustainable modern capitalism: “The Protestant Ethics.”

• The East Asian Economic Growth Model in general argues that Neo-Confucian ethics is similarly conducive to a rapid economic growth.

• The East Asian Economic Growth Model of this course says that Neo-Confucian ethics is conducive for partnership with the U.S. and its design of the international division of labor.

• We will also reflect on the East Asian Economic Growth Model’s possible extension and limitations:

-Order vs. Oppression -Hard work vs. Competitiveness -Internalization vs. Self-destructive -Material Abundance vs. Lack of Welfare or

Happiness -Harmony vs. Inequity