The New Millennium
continued from » Post-war
One step into the age of globalization was made by reducing barriers in trading and financial transactions so that national borders weren’t that important anymore; instead of that economic networking accelerated. (cf. Haas et al. 2009, p. 20)
For the rise of globalization several institutions were founded. The most important one was the WTO (World Trade Organization) which realized gradually a liberal world trade order. (cf. Kulke 2010, p.84)
The WTO was founded in 1995. It was developed of the existing organization GATT (General Agreement on Tariffs and Trade) which was founded in 1947 to reduce tariffs. (cf. Parnreiter 2010, p.124)
Other important institutions (IMF and WB) helped to get a more efficient and global financial world. (cf. Haas et al. 2009, p.21) The IMF (International Monetary Fund) is an organization of the UN; its assignment is to promote the international corporation of monetary policy, support the spread of world trade as well as supporting stabilization of currency, etc. The WB (World Bank) was founded to support rebuilding nations after World War Two.
By founding the WTO, free trade was supported. WTO settles trade disputes meaning it overturns national laws that interfere with trade and protects ‘intellectual property rights’ (copyrights, patents, trademarks).
Some nations built trade and economic blocks by integration of countries, so that decisions are made by one country but by one union. Examples for that are the EU (European Union; Chapter 2.2.5), NAFTA (North American Free Trade Agreement), Mercosur (Mercado Coumúm del Sur), and ASEAN (Association of South Asian Nations). (cf. Haas et al. 2009, p. 30)
The world economy has become extremely dynamic, especially capitalism. The geography of economics changes very often because of events like economic crisis, for example the Mexican financial crisis of 1994 or the Argentinian financial crisis of 2001.
The economy has changed a lot in the 50 years: The Pacific gets more and more important due to the rise of Asia and the importance of California. The Atlantic, on the opposite, lost importance. In the past, the Atlantic was more important because the main powers had been Europeans and Americans (about 500 years ago); nowadays, there are still ‘old’ powers like the US, Germany, France, and the UK, but BRIC-Economies (Brazil, Russia, India, China) get more and more important.
Not to forget Japan that led to the rise of Asia. China turned to the capitalist road: Communist China had social transformation and built an economic foundation. After the end of Mao’s era, Deng Xiaoping (communist party still in power) led China into the reform era (Chinese miracle).
After communism collapsed in the USSR, there had been several revolutions in East Europe (1989) which led to the end of communism in Russia (1991) and central Asian republics (1990).
After that, Russia wanted change right away which led to falling GDP with worse effects than the Great Depression had on the US. The population was at the brink of poverty which led to death and alcoholism because their income was decreasing and life expectancy was collapsing. In the 2000s, Russia got on track again because of oil exports.
China showed the world how change gradually to profit from it. China had a controlled transition and no ‘shock therapy’ like Russia, but there is also no political freedom. China industrialized; first domestic industry (1980s) made progress by producing older products like bicycles and refrigerators. As a second step (1980-1990s) foreign industries produced new products, like cars or shoes, by offshoring to the south of China, chiefly from Hong Kong and Taiwan. The third step was to create new industries (2000s), most of all technical goods like chips and computers. The boom of the 2000s was led by new companies settling there and the export boom was/is also important. China became ‘the workshop of the world’.
Not just China, but also its neighbors gain more importance in the world of economy. The so-called TIGER-states (Singapore, Taiwan, Hong Kong, South Korea) are on top. Also, the southeast of Asia become stronger (Thailand, Malaysia; Philippines, Indonesia; Vietnam). After breaking up with the Congress Party, India gained its liberalization in 1990s which led to free trade and rapid economic growth (6-9%).
Table1: Export Countries (Source: after WTO 2008/2009/2010/2011 (www.wto.org))
The following table shows the rise of the new industrialized countries:
Table2: Rise of the new industrialized Countries (Source: changed after the lecture by Ossenbruegge)