Download UNIT 3 – MIDDLE EAST

Economies of Southern and Eastern Asia
SS7E8 The student will analyze different economic systems.
c. Compare and contrast the economic systems in China, India, Japan and North Korea.
CHINA
In late 1978 the Chinese leadership began moving the economy from a
sluggish, inefficient, Soviet-style centrally planned economy to a more
market-oriented system. Whereas the system operates within a
political framework of strict Communist control, the economic
influence of non-state organizations and individual citizens has been
steadily increasing. The authorities switched to a system of household
and village responsibility in agriculture in place of the old
collectivization increased the authority of local officials and plant
managers in industry, permitted a wide variety of small-scale
enterprises in services and light manufacturing, and opened the
economy to increased foreign trade and investment. The result has
been a quadrupling of GDP since 1978. Measured on a purchasing
power parity (PPP) basis, China in 2003 stood as the second-largest
economy in the world after the US, although in per capita terms the
country is still poor. Agriculture and industry have posted major gains
especially in coastal areas near Hong Kong, opposite Taiwan, and in
Shanghai, where foreign investment has helped spur output of both
domestic and export goods. The leadership, however, often has
experienced - as a result of its hybrid system - the worst results of
socialism (bureaucracy and lassitude) and of capitalism (growing
income disparities and rising unemployment). China thus has
periodically backtracked, retightening central controls at intervals. The
government has struggled to (a) sustain adequate jobs growth for tens
of millions of workers laid off from state-owned enterprises, migrants,
and new entrants to the work force; (b) reduce corruption and other
economic crimes; and (c) keep afloat the large state-owned enterprises,
many of which had been shielded from competition by subsidies and
had been losing the ability to pay full wages and pensions. From 80 to
120 million surplus rural workers are adrift between the villages and
the cities, many subsisting through part-time, low-paying jobs. Popular
resistance, changes in central policy and loss of authority by rural
cadres have weakened China's population control program, which is
essential to maintaining long-term growth in living standards. Another
Long-term threat to growth is the deterioration in the environment,
notably air pollution, soil erosion, and the steady fall of the water table
especially in the north. China continues to lose arable land because of
erosion and economic development. Beijing says it will intensify
efforts to stimulate growth through spending on infrastructure - such as
water supply and power grids - and poverty relief and through rural tax
reform. Accession to the World Trade Organization helps strengthen
its ability to maintain strong growth rates but at the same time puts
additional pressure on the hybrid system of strong political controls
and growing market influences. China has benefited from a huge
expansion in computer internet use. Foreign investment remains a
strong element in China's remarkable economic growth. Growing
shortages of electric power and raw materials may hold back the
expansion of industrial output. In summary:
(1) What to produce?
 40 % of the Chinese economy is still based in state-run
industries
 60% of the economy is based on the private sector in where
producers and consumers make production decisions
(2) How to produce?
 The many inefficiencies found in the state-run industries,
particularly in the area of agriculture, limit China’s growth.
 In the private market, the speed of economic growth has caused
Chinese officials to have increasing difficulty monitoring
consumer safety and environmental pollution.
(3) For whom to produce?
 China requires food production to meet self-sufficiency level
for the nation and only the surplus may be exported. In reality,
there is not enough proper storage of food to meet the selfsufficiency requirement.
 China exports a large amount of manufactured goods.
 However, the expanding middle class in China is seen as a
growth market for both Chinese and foreign companies.
Economies of Southern and Eastern Asia
SS7E8 The student will analyze different economic systems.
c. Compare and contrast the economic systems in China, India, Japan and North Korea.
Place on the continuum: China is slightly on the market side of center
on the continuum.
Population: 1,367,485,388 (July 2015 est.)
GDP: $11.38 trillion
GDP Per Capita: $14,300 (2015 est.)
Population below Poverty Line: 10.0%
Household Income: 1.6%
Inflation Rate: 4.70%
Labor Force: 804 million
Labor Force by Occupation: agriculture: 33.6% industry: 30.3% services: 36.1%
Unemployment Rate: 4.2% (2015 est.)
Fiscal Year: calendar year
Budget: $2.426 trillion
Industries: iron and steel, coal, machine building, armaments, textiles and
apparel, petroleum, cement, chemical fertilizers, footwear, toys, food processing,
automobiles, consumer electronics, telecommunications
Industrial Production Growth Rate: 12.9%
Agriculture Products: rice, wheat, potatoes, sorghum, peanuts, tea, millet,
barley, cotton, oilseed, pork, fish
Economies of Southern and Eastern Asia
SS7E8 The student will analyze different economic systems.
c. Compare and contrast the economic systems in China, India, Japan and North Korea.
NORTH KOREA
North Korea, one of the world's most centrally planned and isolated
economies, faces desperate economic conditions. Industrial capital
stock is nearly beyond repair as a result of years of underinvestment
and spare parts shortages. Industrial and power output have declined in
parallel. The nation has suffered its tenth year of food shortages
because of a lack of arable land, collective farming, weather-related
problems, and chronic shortages of fertilizer and fuel. Massive
international food aid deliveries have allowed the regime to escape
mass starvation since 1995-96, but the population remains the victim
of prolonged malnutrition and deteriorating living conditions. Largescale military spending eats up resources needed for investment and
civilian consumption. In 2003, heightened political tensions with key
donor countries and general donor fatigue threatened the flow of
desperately needed food aid and fuel aid as well. Black market prices
continued to rise following the increase in official prices and wages in
the summer of 2002, leaving some vulnerable groups, such as the
elderly and unemployed, less able to buy goods. The regime, however,
relaxed restrictions on farmers' market activities in spring 2003,
leading to an expansion of market activity. In Summary:
(1) What to produce?
 Although there have been some small market reforms recently,
the majority of legal economic activities are centrally
controlled by the government.
 Due to natural disaster and inefficient government-run
industries, North Korea is a major recipient of food and basic
service aid from Non-Governmental Organizations (NGO) and
foreign nations. The U.S. provides the people of North Korea
with a large amount of aid.
 Like in many highly centralized economies, there is a large
underground economy that runs on a more market based
system.
(2) How to produce?
 Production decisions and methods are primarily determined by
the government.
(3) For whom to produce?
 Approximately one fourth of all domestic output is devoted to
maintaining the military. This severely limits the amount of
goods and services that make it to the rest of the people of
North Korea.
 North Korea produces natural resources and manufactured
goods for export.
Place on the continuum: North Korea would be much more to the
command side of the continuum than any of the other nations
discussed. One of the most command economies in the world today.
Population: 24,983,205 (July 2015 est.)
GDP: $40 billion (2013 est.)
GDP Per Capita: $1,800 (2013 est.)
Population below Poverty Line: %
Household Income: %
Inflation Rate: 0.00%
Labor Force: 14 million
Labor Force by Occupation: agricultural 36%; nonagricultural 64%
Unemployment Rate: 0%
Fiscal Year: calendar year
Budget: $3.2 billion
Industries: military products; machine building, electric power, chemicals; mining
(coal, iron ore, magnesite, graphite, copper, zinc, lead, and precious metals),
metallurgy; textiles, food processing; tourism
Industrial Production Growth Rate: %
Agriculture Products: rice, corn, potatoes, soybeans, pulses; cattle, pigs, pork,
eggs
Economies of Southern and Eastern Asia
SS7E8 The student will analyze different economic systems.
c. Compare and contrast the economic systems in China, India, Japan and North Korea.
INDIA
India's economy encompasses traditional village farming, modern
agriculture, handicrafts, a wide range of modern industries, and a
multitude of support services. Government controls have been
reduced on foreign trade and investment, and privatization of
domestic output has proceeded slowly. The economy has posted an
excellent average growth rate of 6% since 1990, reducing poverty by
about 10 percentage points. India is capitalizing on its large numbers
of well-educated people skilled in the English language to become a
major exporter of software services and software workers. Despite
strong growth, the World Bank and others worry about the
continuing public-sector budget deficit, running at approximately 10%
of GDP. In summary:
(1) What to produce?
 Since 1991, India has slowly allowed the markets to open up
to private sector domestic and foreign businesses.
 The majority of the population relies on subsistence
agriculture as a means of survival.
 There is a lot of bureaucracy and corruption involved in setting
up and operating business.
(2) How to produce?
 India is increasing its oversight of intellectual and private
property rights, but legal challenges are fraught with
bureaucracy.
 India has an increasingly educated workforce particularly in
areas of engineering and computer science.
 A complex, corrupt, and hefty tax system can sometimes make
operating a business in India difficult.
(3) For whom to produce?
 Food production is largely for domestic consumers with many
citizens producing food mainly for their own family
consumption.
 The software and business process outsourcing industries are
rapidly expanding export markets for private Indian
companies.
Place on the continuum: India would be more to the market side of
the continuum than China.
Population: 1,251,695,584 (July 2015 est.)
GDP: $8.027 trillion (2015 est.)
GDP Per Capita: $6,300 (2015 est.)
Population below Poverty Line: 29.8% (2010 est.)
Household Income: 3.6%
Inflation Rate: 5.90%
Labor Force: 502.1 million (2015 est.)
Labor Force by Occupation: agriculture: 49% industry: 20% services: 31%
Unemployment Rate: 7%
Fiscal Year: 1 April - 31 March
Budget: $236 billion
Industries: textiles, chemicals, food processing, steel, transportation equipment,
cement, mining, petroleum, machinery, software
Industrial Production Growth Rate: 10.0%
Agriculture Products: rice, wheat, oilseed, cotton, jute, tea, sugarcane, potatoes;
cattle, water buffalo, sheep, goats, poultry; fish
Economies of Southern and Eastern Asia
SS7E8 The student will analyze different economic systems.
c. Compare and contrast the economic systems in China, India, Japan and North Korea.
JAPAN
Government-industry cooperation, a strong work ethic, mastery of
high technology, and a comparatively small defense allocation (1% of
GDP) helped Japan advance with extraordinary rapidity to the rank of
second most technologically-powerful economy in the world after the
US and third-largest economy after the US and China. One notable
characteristic of the economy is the working together of
manufacturers, suppliers, and distributors in closely-knit groups called
keiretsu. A second basic feature has been the guarantee of lifetime
employment for a substantial portion of the urban labor force. Both
features are now eroding. Industry, the most important sector of the
economy, is heavily dependent on imported raw materials and fuels.
The much smaller agricultural sector is highly subsidized and
protected, with crop yields among the highest in the world. Usually
self-sufficient in rice, Japan must import about 50% of its
requirements of other grain and fodder crops. Japan maintains one of
the world's largest fishing fleets and accounts for nearly 15% of the
global catch. For three decades overall real economic growth had been
spectacular: a 10% average in the 1960s, a 5% average in the 1970s,
and a 4% average in the 1980s. Growth slowed markedly in the 1990s,
averaging just 1.7%, largely because of the after effects of
overinvestment during the late 1980s and contractionary domestic
policies intended to wring speculative excesses from the stock and real
estate markets. Government efforts to revive economic growth have
met with little success and were further hampered in 2000-2003 by the
slowing of the US, European, and Asian economies. Japan's huge
government debt, which is approaching 150% of GDP, and the ageing
of the population are two major long-run problems. Robotics
constitutes a key long-term economic strength with Japan possessing
410,000 of the world's 720,000 ""working robots."" Internal conflict
over the proper way to reform the ailing banking system continues.
In Summary:
(1) What to produce?
 Japan’s economy is primarily market driven with supply and
demand determining what will be produced.
 The few industries that are highly government-controlled, such
as agriculture, have much lower productivity rates than those
industries controlled by market forces.
(2) How to produce?
 Private businesses determine their own production processes in
most of the economy.
(3) For whom to produce?
 Japan’s population enjoys a high standard of living and creates
a strong domestic market for goods and services.
 The efficiency of Japan’s production and its reputation for
quality products/services has made it a major exporter.
 Place on the continuum: Out of all four countries in this
element, Japan would be the closest to the market side of the
continuum.
Population: 126,919,659 (July 2015 est.)
GDP: $4.127 trillion (2015 est.)
GDP Per Capita: $38,200 (2015 est.)
Population below Poverty Line: %
Household Income: 4.8%
Inflation Rate: 0.00%
Labor Force: 64.32 million (2015 est.)
Labor Force by Occupation: agriculture: 2.9% industry: 26.2% services: 70.9%
(February 2015 est.)
Unemployment Rate: 3.3% (2015 est.)
Fiscal Year: 1 April - 31 March
Budget: $1.439 trillion
Industries: among world's largest and technologically advanced producers of
motor vehicles, electronic equipment, machine tools, steel and nonferrous metals,
ships, chemicals, textiles, processed foods
Industrial Production Growth Rate: 1.3%
Agriculture Products: rice, sugar beets, vegetables, fruit, pork, poultry, dairy
products, eggs, fish
Industries: textiles, chemicals, food processing, steel, transportation equipment,
cement, mining, petroleum, machinery, software
Industrial Production Growth Rate: 10.0%
Agriculture Products: rice, wheat, oilseed, cotton, jute, tea, sugarcane, potatoes;
cattle, water buffalo, sheep, goats, poultry; fish