There are three questions I want to ask here:
1. Is it possible to sustain an export-driven economy?
2. Is the export-driven economy a mature economy?
3. Does America's enemy-driven politics make it see the East Asian races (China, Korea, and Japan) as adolescent?
Export-driven economies are dependent on wealthy, spending economies like the US and Europe. As long as the US and Europe keep on growing as a economy, the export-driven economy is fine. At first, the export driven economy is of great benefit to the spending economy. For example, the cheap factories in China have made toys cheaper as a whole. Sooner or later, export-driven East Asian economies move to specialized markets. High and middle end electronics is a market that is now highly dominated by East Asian economies in the US. At first, even in this market, I think that companies like Sony, Toshiba, Panasonic brought down the prices. Over time, as they come to dominate the market, prices stabilize and it becomes the prerogative of these companies to determine the market prices as they are the new market leaders. Now, South Korea has copied this approach so Samsung and LG have also entered the market and they are doing very well but they no longer seem to lower the prices as a whole for the consumer. As more and more East Asian economies (China foremost) enter the electronic market, it is certain that East Asian economies will determine the market prices for many electronics items. Actually, they already do in the electronics market. Of course, the market determines the price, but the market leaders in the field determine the prices that are considered accpetable by the market. East Asia also specializes in semiconductors, etc... many specific parts of computers and other machines that are made only in certain East Asian countries. The car market, with the entrance of China, will be another market in which East Asia will have a large market share and over the long term, it is possible that East Asian dominance in these markets may result in a rise in prices if the market model of going cheap, gaining more market shares as to say. Going more specialized, and more expensive. Going as a economic group (East Asia, more or less, Japan, South Korea, China, and Taiwan), gaining a majority market share as to say. Then, East Asia can determine prices as a group. I don't mean price fixing here... I just mean that as market leaders, they get to determine what is an acceptable price to the market. There are still higher end markets the East Asian economy has not penetrated, namely, the market of ultra-rich Americans. Nicholas Krystof, a New York Times columnist, states that the top 1% of Americans has more wealth than the bottom 90% of Americans. There's a market of ultra-rich yachts, 50 million dollar wine collections, $300 haircuts, etc, etc that East Asian economies have not entered. Will this be the new market that Japan tries to penetrate?
Well, the export-driven economy has one great initial competitive advantage. As long as the exports are more than the imports, the corporations in the country are always making money... the country has a surplus and will supposedly never have a deficit. Countries can have very good social programs for its citizens like Japan or countries like China can make a decent money off of lending other countries money. As for imports to East Asian economies, Hollywood movies, American music, American innovations, and American military supplies (computers, etc.) are the major imports. Everything is quickly copied and redone in a Japanese, Korean, or China manner so that even innovations do not have a lasting market presence in East Asian countries. Pirating of intellectual property (CD, DVD, MS Windows, etc) is rampant. So now there is all this money flowing around in the country? What should we do with it?
In South Korea, LG, Samsung, Hyundai, and other corporations own everything from cars to shopping malls to hotels to laundry machines to chewing gum. It is not exactly in that order and LG has not build cars yet but you get my point. The guarantee of a surplus of money flowing into the country makes the businesses bold and adventurous. The standard company is South Korea is incredibly diversified, even by East Asian standards.
Comments
Steve | July 25, 2011 - 02:52
Both East Asian economies and Western Economies are in a very tough situation.
Consumption, at least in America, makes people forget about what's truly important in life. Buying something for someone else is the easiest thing to do. You can make something for another person or you can write a poem for another person.
People take out a loan and spend the money on things they don't need. It makes us forget about some of our problems with our family or makes us feel better after we have a fight with our date or something. Capitalism has so completely entered our private lives that it's quite disturbing.
Western countries and Japan have had to assume a huge amount of debt. We are not quite sure how to finance our government programs without debt.
East Asian countries used to think that export-driven market was the way to go. But looking at Japan, they are not quite sure. South Korea and China both have to watch out for inflation and for the popping of the housing bubble... which I think began in South Korea already. I may be wrong.
A saving economy like South Korea in which the banks give the citizen plenty of incentives to save (high interest rates on savings) has to face the fact that the market seems to know that there is all that savings out there that is not being spent and I think this is what sooner or later drives inflation. Of course, the real estate market flies through the roof when a country first gets industrialized which obviously feeds inflation.
America, though, is a country in which many people feel that the country in itself has not recognized them for their achievements. It's also a closed country in terms of many country clubs or top-level clubs or societies. Michael Jordan was rejected at a country club in North Carolina, for example. All those houses at Harvard that are impossible to get into unless you have social connections, wealth or excetera. This creates a hunger for status-stamped industrially manufacteured items (Rolex, Lexus, Mercedes, BMW, Rolls Royce, expensive wine, High-end Plasma TVs). I think East Asian markets are looking more and more to capitalize on industrially manufacteured status-producing items.
Steve | July 26, 2011 - 01:57
All the highly industralized countries in Europe, the US, and Japan are in trouble.
Japan's national debt is 2 times its GDP.
America's national debt is 84% its GDP.
You can read an articles in Forbes magazine called, "The Global Debt Bomb," to get a better view.
I guess worldwide, the value of the currency of various countries could be cheapened.
I am not really very knowledgable about economics. I am just writing about what I see happening in the world.