Definitions of globalisation

The intensification of worldwide social relations which links distant localities in such a way that local happenings are shaped by events occurring many miles away and vice-versa. The integration of the world economy De-territorialisation orthe growth of supraterritorial relations between people. Time-space compression

East Asia Miracle

30 years previous to 1997 Unprecedented economic growth Massive poverty reduction Increased stability Referred to as the East Asia Miracle

Reasons for success

Gradual market liberalisation State-directed industrial policy Closing of the knowledge and technology gap

Events of 1997
On 2nd of July the Thai baht collapsed Effects felt all around the world Economic crisis comes as a surprise The effects are felt all over the world

The presentation
Divided into two sections. Thailand South Korea

Thailand
Pre-1997 The crisis Post-1997

Thailand: Pre-1997
Until 1980s, Thais domestic and export economies were depended on the primary sector Prices of the primary exports fell in the early 1980s Hidden production volume (reduced export earnings)

Devaluation of Baht Improved export competitiveness

Thailand: Pre-1997

1986 1991 Accelerated integration into global economy

Manufactured exports growth rate of 26.6% GDP growth rate ranging from 7 to 9 % per annum Growth rate of total exports & earnings Increase in investments (foreign investors and TNCs) High profit rates in finance, insurance and real estate sectors

Thailand: Pre-1997
1992 1996: slight reductions in FDI and GDP growth rate Decrease in the export growth rate Increase in international debt

Thailand: Pre-1997
Socio-economic effects Widening inequality gap (rich & poor, rural & urban) Change in export base from primary to secondary commodities Introduction of unhealthy lifestyle through advertising and use foreign consumables Increase in number of immigrants Patterns of health epidemics influenced by international travel Reduction in poverty (57% - 6%) States ability to regulate currency flows restricted

Thailand: The crisis

6 factors which contributed to the crisis (Krogkaew 1999) financial sector mismanagement excessive current account deficit high domestic interest rates uncontrolled capital flows a rigid exchange rate lack of economic leadership on the part of politicians decline in export performance Economic impacts Devastating effect on Thai economy. Thai 1998 GDP shrank by 7.9% 1997, 12.3% in 1998 and 7% 1999. Foreign investment and intervention necessary. Thai crash as trigger to the greatest economic crisis since the great depression (Stiglitz 2002)

Thailand: The crisis

Who was to blame? It became clear that IMF policies not only exacerbated the downturns but were partly responsible for the onset: excessively rapid financial and capital market liberalization was probably the single most important cause of the crisis. (Stiglitz 200) The IMFs influence with the Thais in May 1997 was weak, in any event. Worse, the Thais were holding back vital information.namely, the full details concerning how much hard currency the central banks held. (Blustein 2001)

Thailand: The crisis

Implications Shaken faith in the stability of global markets. Questioning the policies of IMF and Washington Consensus Organisations. IMF self-criticism: Mexico PESO crisis 1994 similar pattern. Danger of interconnectivity. Reactionary movements.

Thailand: Post-1997
PHASE 1 Road to recovery according to the IMF Thailand hands over the reins of their economic policy to the IMF The IMF recovery package and its flaws

Thailand: Post-1997

PHASE 2 New Government, increasing criticism of the IMF and growing populace unrest. New Democratic government American criticism of the IMF Increasing business nationalism and populism in Thailand Thai government reverses IMF macro policy but continues with IMF restructuring of the Thai finance sector

Thailand: Post-1997
PHASE 3 International criticism of the IMF and Japan to the rescue World Bank criticises IMF policies $30 billion Miyazawa Scheme for crisis recovery

Korean Experience

South Korea: Background

The economic boom was referred to as the miracle on the Han River also referred to as Koreas economic miracle Concept of globalization (segyehwa) driven by governmentA strategic choice

people did not want it but government wanted to pursue(President Kim Young Sam)

Fellow citizens: Globalization is the shortcut that will lead us to building a firstclass country in the 21st century. This is why I revealed my plan for globalization and government has concentrated all of its energy in forging ahead with it. It is aimed at realising globalization in all sector politics, foreign affairs, economy, society, education, culture and sports. To this end, it is necessary to enhance our viewpoints, way of thinking, system, and practices to the world class levelwe have not choice other than this. President Kim Young Sam 6 January 1995

Policy mistakes
*strong exchange rate policy *inadequate supervision *political events

Exogenous shocks
*sudden bankruptcy of Chaebols *Financial crisis in South-East Asia

Fundamental weaknesses

Early warning signs

*slowing export growth *increasing current account deficits *increasing foreign debt (short-term debt build-up) *falling stock prices

Immediate warning signs *increasing nonperforming loans *difficulties with roll-over *increasing spreads

*corporate sector *financial sector *labour market

Financial Crisis

Hostile environmental factors *rapid liberalisation *short-term capital flows *terms of trade *Korea becomes a nut in a nutcracker

South Korea: Effects

New government focused on four objectives based on IMF advice:

Macro-economic policies public sector reform to reduce deficit and contain inflation (tax increases, expenditure cuts)capital flightsbankruptcies deep recession Financial sector restructuring strengthening regulation by monetary authorities; rationalisation of commercial financial institutions .e.g. companies could not use each other as guarantors Labour market reform to massive layoffshigh unemployment levels; civil unrests Capital account and trade liberalisation opened up traditionally protected industry

South Korea: Effects

Social implications: during economic boom and after crisis

Population explosion increase life expectancy International migration increased mobility Urbanisation growth of megacities Occupational structure and class stratification increased inequalities Gender dynamics more women in skilled labour force Income disparities-gap was expanded

South Korea: Effects

Democratisation trade unions active (labour related)

Global human-rights norms is introduced e.g. women rights (S,Kim 2000) Strongly military bonds with U.S. national security has changed and no border in security(S.Kim 2000)

Conclusion
Both Thailand and Korea have gone through 3 phases of globalization Two initial phases state-driven/protection Financial crisis a pivotal moment in East Asian globalization processrepercussions in region Question of how dynamics have changed between state and markets