JC History Tuition Online - What are chaebols in South Korear - Asian Tigers Notes

What are chaebols in South Korea?

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Topic of Study [For H2 History Students]: 
Paper 1: Understanding the Global Economy (1945-2000)
Section B: Essay Writing
Theme II Chapter 3: Rise of Asian Tigers from 1970s to 1990s [South Korea and Taiwan] 

Origins of Chaebols
Chaebols (재벌) are large family conglomerates that played a crucial role in the economic miracle of South Korea. The word “chaebols” refers to “financial clique”. After the Korean War (1950-1953), some entrepreneurs took advantage of the available opportunities, particularly the purchase of former Japanese-owned companies that were nationalised by the Rhee government. During Japanese colonial rule, these businesses dominated the manufacturing, trading and finance sectors.

The chaebols began to emerge under the patronage of the Rhee regime, and they paid the regime back through illicit political contributions. The major sources of chaebol accumulation during the Rhee period were selective allocation of import licenses and quotas, bargain price acquisition of former Japanese properties, aid funds and materials, cheap bank loans, and government and U.S. military contracts for reconstruction activities.

[…] Vested properties provided the initial base for many chaebols.

An excerpt from “In the Shadow of Violence: Politics, Economics, and the Problems of Development” by Douglass C. North, John Joseph Wallis, Steven B. Webb and Barry R. Weingast.

Additionally, these Korean entrepreneurs were aided by the Rhee government through the latter’s use of import-substitution policies. The local market was insulated from foreign competition in targeted sectors, biding time for these companies to flourish. In other words, close networks between the entrepreneurs and government were vital in enabling the rise of private businesses.

Following the military coup led by General Park Chung-hee in 1961, the military government switched gears, transitioning towards an export-driven economy. The Park regime had identified local businesses to support its industrialisation plans. Through continued support in the form of incentives like preferential tariffs and low interest loans, these Korean businesses thrived.

Enter Byung-chul: Founder of Samsung
Pragmatic and competent Korean entrepreneurs like Lee Byung-chul and Chung Ju-yung had surmounted obstacles and leveraged on available opportunities to dominate local and world markets. In 1938, Lee formed Samsung Trading (삼성물산). Although the Korean War had disrupted his plans, Lee remained determined to expand his business globally. After the end of the war, he set up Samsung Trading’s branch office in Tokyo, Japan.

Whilst under the Rhee government, Lee capitalised on the business opportunities granted by the former’s import-substitution policies. He established a sugar and flour manufacturing company known as Cheil Jedang (씨제이제일제당 주식회사) in 1953 and a textile company called Cheil Mojik (제일모직) in 1954.

Lacking know-how in textile production during its early days, [Cheil Mojik] engaged in technology transfers with European and Australian firms to learn spinning, grinding, shearing, raising, and milling technologies. With the rise of export-orientation industrialization strategies during the 1960s, Cheil engaged in exports, starting with 8000 lbs. of worsted yarn, exported to Hong Kong in 1961.

An excerpt from “The Routledge Companion to Asian Family Business: Governance, Succession, and Challenges in the Age of Digital Disruption” by Ho-Don Yan and Fu-Lai Tony Yu.

After the rise of Park’s military government, Lee re-positioned Samsung Trading and Cheil Mojik as key Korean exporting companies. In 1969, Samsung was given a chance to venture into the electronics industry. Lee sought help from Japanese electronics firms Sanyo and NEC (Nippon Electric Company) to access foreign technology.

Lee Byung-chul also sought to identify and leverage other new business opportunities for Samsung, taking advantage of strong economic growth and the rapidly advancing skills of Korean engineers. The group expanded into shipbuilding through a combination of acquisitions and new shipyard constructions.

[…] In the 1980s, as Lee Byung-chul sensed global business opportunities earlier than others, Samsung took the lead among Korean manufacturers in setting up overseas factories in order to strengthen its global market presence. This new direction was particularly visible in the electronics industry, where Samsung had become a major global competitor. It invested into production sites in Portugal, the UK, and the USA.

An excerpt from “Entrepreneurship in Korea: From Chaebols to Start-ups” by Martin Hemmert and Jae-Jin Kim.

What can we learn from this article?
Consider the following question:
– Assess the significance of private businesses in contributing to the economic miracle of South Korea.

Join our JC History Tuition to learn more about the rise of Asian Tiger economies. The H2 and H1 History Tuition feature online discussion and writing practices to enhance your knowledge application skills. Get useful study notes and clarify your doubts on the subject with the tutor. You can also follow our Telegram Channel to get useful updates.

We have other JC tuition classes, such as JC Math Tuition and JC Chemistry Tuition. For Secondary Tuition, we provide Secondary English Tuition, Secondary Math tuition, Secondary Chemistry Tuition, Social Studies Tuition, Geography, History Tuition and Secondary Economics Tuition. For Primary Tuition, we have Primary English, Math and Science Tuition. Call 9658 5789 to find out more.

JC History Tuition Online - How did the USA help Japan's economy after WW2 - Global Economy Notes

How did the USA help Japan’s economy after WW2?

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Topic of Study [For H2 History Students]: 
Paper 1: Understanding the Global Economy (1945-2000)
Section B: Essay Writing
Theme II Chapter 1: Reasons for growth of the global economy

A shift of US priorities in Japan: ‘Reverse Course’ policy
After Japan was defeated in World War Two, the Allied Occupation oversaw social and political reform of Japan from 1945 to 1946, ensuring that it would not endanger world peace. Under the Supreme Commander for the Allied Powers (SCAP) led by American general Douglas MacArthur, the Japanese military was disbanded and the zaibatsu conglomerates were broken up.

Against the backdrop of the looming Cold War tensions in Europe, the US government relooked its priorities. Instead of punishing Japan for its wartime aggression, the government supported the post-war recovery of Japan, in hopes of cultivating it as a new Cold War ally. This was also known as the ‘Reverse Course’ policy (逆コース).

After the early stages of the Occupation, SCAP began showing a strong interest in stabilizing Japan’s economy near the end of 1946. In spite of the fact that the “Basic Directive” clearly stated that the Occupation would not be responsible for economic reconstruction, faced with the danger of rampant inflation unless production restarted, SCAP had no choice but to become involved in economic reconstruction.

An excerpt from “The Economic History of Japan: 1600-1990: Volume 3: Economic History of Japan 1914-1955: A Dual Structure” by Takafusa Nakamura, Konosuka Odaka and Noah S. Brannen.

Consequences of warm bilateral relations: US aid to Japan
In 1958, negotiations for a US-Japan Security Treaty (日本国とアメリカ合衆国との間の相互協力及び安全保障条約) were underway. In essence, the treaty permitted US military bases in Japan, thereby establishing a military alliance between the two countries.

At the same time, the USA provided a series of economic assistance to build up Japan as a bulwark against communist expansion in Asia. For instance, the US government offered low-interest loans to Japan. These substantial capital injections led to increase in Japanese investments that propelled economic growth.

Additionally, the USA sponsored Japan’s admission to the General Agreement on Tariffs and Trade (GATT) organisation in September 1955. The USA feared that an absence of market for Japanese exports may possibly draw Japan into the Communist bloc for economic cooperation. As such, the Eisenhower administration rejected protectionist demands from local groups in the USA and opened American markets to Japanese exports.

The United States needed Japan as a stable capitalist country that would provide a bulwark against communism in Asia. It therefore supported Japanese membership of the IMF and GATT in 1955 and assisted Japan in improving relations with other Asian countries in the late 1950s and early 1960s, while at the same time keeping its own market open to Japanese goods and making technology and capital available to Japanese enterprises. Japanese capitalism could thus pursue its own interests on the international stage under the umbrella of U.S. world strategy.

An excerpt from “Japanese Capitalism Since 1945: Critical Perspectives” by Tessa Morris-Suzuki and Seiyama Takuro.

From 1958 to 1960, US purchases from Japan rose by more than 150%. This enabled Japan to enjoy its first-ever trade surplus. The correction of Japan’s balance of payment deficits thus allowed it to grow rapidly.

What can we learn from this article?
Consider the following question:
– Assess the importance of the USA in contributing to the economic miracle of Japan after 1945.

Join our JC History Tuition to learn more about the growth of the Global Economy. The H2 and H1 History Tuition feature online discussion and writing practices to enhance your knowledge application skills. Get useful study notes and clarify your doubts on the subject with the tutor. You can also follow our Telegram Channel to get useful updates.

We have other JC tuition classes, such as JC Math Tuition and JC Chemistry Tuition. For Secondary Tuition, we provide Secondary English Tuition, Secondary Math tuition, Secondary Chemistry Tuition, Social Studies Tuition, Geography, History Tuition and Secondary Economics Tuition. For Primary Tuition, we have Primary English, Math and Science Tuition. Call 9658 5789 to find out more.

JC History Tuition Online - When did the European Union start and why - Global Economy Notes

When did the European Union start and why?

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Topic of Study [For H2 History Students]: 
Paper 1: Understanding the Global Economy (1945-2000)
Section B: Essay Writing
Theme II Chapter 1: Problems of economic liberalisation

Historical context: The end of bipolarity and desires for a Common Market
Following the historic collapse of the Berlin Wall on 9 November 1989 that marked the end of the Cold War, the border between East and West is finally opened. Germany was united after more than 40 years, allowing its Eastern half to join the European Communities (EC) in 1990.

Apart from the political integration of Germany, member nations in the EC had expressed growing concerns about the slow economic progress by the mid-1980s. In comparison to rival economies like Japan and the USA, the EC members supported deregulation to boost production and trade.

The introduction of the Single or Internal Market Programme had the effect of launching a new phase in the integration process, spilling over into renewed efforts in institutional reform, reinforced EC social, regional and competition policies, and economic and monetary union. […] The programme was initially presented as an exercise in deregulation and received wholehearted support from the EC member states and business community.

An excerpt from “The European Union: Economics, Policy And History” by Susan Senior Nello.

Maastrict Treaty
European nations engaged in negotiations to anticipate the wave of globalisation in the 1990s. On 7 February 1992, the Maastrict Treaty was signed by twelve founding member states of the EC. Also known as the ‘Treaty on European Union’, it ushered in the next phase of regional integration. For instance, a single currency called the ‘Euro’ was introduced.

In December 1991 at Maastricht, member nations agreed on the Treaty on the European Union (EU), which became informally known as the “Maastricht Treaty”. […]Moreover, as part of the first pillar the Maastricht Treaty also called for an European Economic and Monetary Union (EMU) which entails the creation of the European Central Bank (ECB) and the European single currency, the Euro, by 1999.

An excerpt from “The Path to European Economic and Monetary Union” by Scheherazade S. Rehman.

Impacts of the EU on international trade
With the formation of the EU, the trading bloc had accelerated the increase in intra-regional trade. It coincided with the signing of the North American Free Trade Agreement (NAFTA) of 1994, which was a joint effort between the USA, Mexico and Canada. Overall, the EU did bring about a significant increase in world trade in comparison with NAFTA and Japan.

Trade openness, as measured by the average shares of extra-EU nominal goods exports and imports in GDP, rose from 8 per cent in the early 1960s to about 10 per cent in the late 1990s. Currently, the NAFTA area and Japan show somewhat lower trade shares in GDP, with the former increasing its share over the period. Since the mid-1980s, the European Union and Japanese trade have shown a decline. This is largely due to relative price changes of energy and raw materials.

An excerpt from “The European Union’s Trade Policies and their Economic Effects” by Peter Hoeller Nathalie Girouard and Alessandra Colecchia.

What can we learn from this article?
Consider the following question:
– How far do you agree that Europe had played a significant role in trade liberalisation?

Join our JC History Tuition to learn more about the growth of the Global Economy. The H2 and H1 History Tuition feature online discussion and writing practices to enhance your knowledge application skills. Get useful study notes and clarify your doubts on the subject with the tutor. You can also follow our Telegram Channel to get useful updates.

We have other JC tuition classes, such as JC Math Tuition and JC Chemistry Tuition. For Secondary Tuition, we provide Secondary English Tuition, Secondary Math tuition, Secondary Chemistry Tuition, Social Studies Tuition, Geography, History Tuition and Secondary Economics Tuition. For Primary Tuition, we have Primary English, Math and Science Tuition. Call 9658 5789 to find out more.

JC History Tuition Online - How does protectionism affect the global economy

How does protectionism affect the global economy?

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Topic of Study [For H2 History Students]: 
Paper 1: Understanding the Global Economy (1945-2000)
Section B: Essay Writing
Theme II Chapter 1: Problems of economic liberalisation

Trade imbalances
By the late 1960s, the USA had faced economic setbacks, such as persistent trade deficits vis-à-vis Japan and Western Europe that surged to nearly US$40 billion in 1980. Throughout the 1960s, the USA had clashed with Japan over alleged dumping that hurt the profit levels of American businesses.

In particular, the automobile industry was affected by the entry of Japanese automakers which were known for their durability and fuel efficiency. The dominance of the ‘Big Three‘, namely General Motors, Ford and Daimler Chrysler, was being challenged by the Japanese counterparts.

The Nixon administration and economists generally attributed the emerging trade deficit to Vietnam War inflation, lagging productivity gains, an overvalued dollar, and ballooning energy costs.

An excerpt from “Opening America’s Market: U.S. Foreign Trade Policy Since 1776” by Alfred E. Eckes.

Trade Act of 1974
In the early 1970s, the US government contemplated on the use of protectionism to address the economic malaise. The problems were compounded by the first oil shock in 1973 that led to a surge in inflation rates.

The committee complained about the executive’s “soft” response to certain unfair foreign trade practices. “By pursuing a soft trade policy, by refusing to strike swiftly and surely at unfair trade practices, the Executive has actually fostered the proliferation of barriers to international commerce.”

As enacted, the Trade Act of 1974 appeared to represent a major shift away from the philosophy that had guided trade policy since 1934.

An excerpt from “Opening America’s Market: U.S. Foreign Trade Policy Since 1776” by Alfred E. Eckes.

Voluntary Export Restraints
In the early 1980s, the Reagan Administration negotiated a Voluntary Export Restraint (VER) with Japan to limit the number of Japanese automobile exports. The restriction was meant to ease the competition that local car producers were facing at that time. As intended, the VER had succeeded in preventing the potential collapse of the automobile industry in the USA.

By 1985, Honda was producing over 150,00 cars in Marysville, Ohio, and Nissan had started operations in Tennessee. In the years that immediately followed, Toyota, Mazda, and Mitsubishi followed suit. […] Finally, by the early 1980s, the surge in imported automobiles from Japan that occurred in the mid- and late 1970s had aged such that the demand for after market parts for Japanese cars was now increasing.

An excerpt from “The Effects of U.S. Trade Protection and Promotion Policies” by Robert C. Feenstra

What can we learn from this article?
Consider the following question:
– How far do you agree that the economic problems in the 1970s and 1980s were the result of US policies?

Join our JC History Tuition to learn more about the problems of the Global Economy. The H2 and H1 History Tuition feature online discussion and writing practices to enhance your knowledge application skills. Get useful study notes and clarify your doubts on the subject with the tutor. You can also follow our Telegram Channel to get useful updates.

We have other JC tuition classes, such as JC Math Tuition and JC Chemistry Tuition. For Secondary Tuition, we provide Secondary English Tuition, Secondary Math tuition, Secondary Chemistry Tuition, Social Studies Tuition, Geography, History Tuition and Secondary Economics Tuition. For Primary Tuition, we have Primary English, Math and Science Tuition. Call 9658 5789 to find out more.

JC History Tuition Online - What are the Seven Sisters Oil Companies - Global Economy Notes

What are the Seven Sisters Oil Companies?

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Topic of Study [For H2 History Students]: 
Paper 1: Understanding the Global Economy (1945-2000)
Section B: Essay Writing
Theme II Chapter 1: Reasons for growth of the global economy

What are the ‘Seven Sisters’?
It refers to a group of integrated international oil companies that dominated the global oil markets from the mid-1940s to the mid-1970s. In the 1950s, the head of the Italian state-owned company Eni Enrico Mattei dubbed these companies as the ‘Seven Sisters’.

There were seven members:

  • Anglo-Iranian Oil Company
  • Gulf Oil
  • Royal Dutch Shell
  • Standard Oil Company of California
  • Standard Oil Company of New Jersey
  • Standard Oil Company of New York
  • Toxaco

Some of these members took on more familiar names, partly due to mergers. For instance, Gulf Oil and Texaco are part of Chevron. Notably, among these companies, most were owned by the Americans, including the well-known Rockefeller (Standard Oil).

By 1949, they occupied 82% of the discovered oil reserves outside the United States. The main role of the Seven Sisters was to keep oil prices stable so as to prevent the problematic ‘price collapse’ that frequently haunted the oil industry.

Price setting
The Seven Sisters established a system to ascertain the pricing of crude oil. Between the 1920 and the early 1970s, there were two markets: the US and the non-US. In the US, crude oil prices were set in free markets.

Outside the US, major oil producers had greater influence on production, which affects supply. Producers used a ‘basing point’ price system to prevent the occurrence of price wars.

The goal of the basing point price system was to discourage cheating through transparency and to prevent price wars. The cement and steel industries had operated similar systems. The bane of cartels, after all, had been cheating by members tempted to illicitly sell below the price established by the cartel but still high enough to earn the clandestine seller a juicy profit. Since the base price was published for all to see and freight charges were jointly agreed, all producers could be confident they weren’t being undercut by a rival.

An excerpt from “Crude Volatility: The History and the Future of Boom-Bust Oil Prices” by Robert McNally.

A new age: Enter OPEC
In the Middle East, governments in oil-rich countries began to organise themselves.

In April 1951, the Iranian Prime Minister Mohammad Mossadegh nationalised the nation’s oil assets, angering the owners of British Petroleum (BP). In retaliation, the Seven Sister members boycotted Iranian oil exports, forcing its output to fall to almost zero. In August 1953, Mossadegh was overthrown, resulting in the reversal of the nationalisation policies.

In 1958, two anti-Western uprising took place in Iraq and Venezuela, eventually leading to the diminished influence of the Seven Sisters in the global crude oil industry. In January 1958, a revolution had toppled the military regime under General Pérez Jiménez. The new Venezuelan government requested a lawyer Juan Pablo Pérez Alfonzo (later known as the ‘Father of OPEC’) to form a national oil company. In six months later, Iraqi forces led a military coup against King Faisal II and the pro-Western Nuri al-Said.

In September 1960, Kuwait, Iraq, Iran, Venezuela and Saudi Arabia gathered in Baghdad and set up the Organisation of the Petroleum Exporting Countries (OPEC). By then, OPEC had occupied more than four-fifths of the world’s oil exports.

Libya made the first move to challenge the dominance of the Seven Sisters. In September 1969, a military coup against King Idris I resulted in the rise of the leader Muammar Qaddafi. Qaddafi successfully demanded a hike in the per barrel price of oil. Subsequently, other OPEC members followed suit, setting off a frenzy.

Fearful of being picked off one by one, the seven majors, Total, and eight independents banded together in a united front to bargain with OPEC.

[…] The Shah played on western officials and companies’ fears, warning the former that if oil companies resisted, “the entire Gulf would be shutdown and no oil would flow,” and admonishing that the “all-powerful Six or Seven Sisters have got to open their eyes, and see they they’re living in 1971, and not in 1948 or 1949.” Washington—terrified above all of a supply cut off it no longer had ample spare capacity to offset— sided with the Shah and against oil companies, supporting OPEC’s demand for two regional negotiations.

An excerpt from “Crude Volatility: The History and the Future of Boom-Bust Oil Prices” by Robert McNally.

What can we learn from this article?
Consider the following question:
– Assess the view that oil was the most significant factor that influenced the development of the global economy in the post-war years.

Join our JC History Tuition to grasp the topic on the Global Economy, namely the ‘Golden Age of Capitalism’ and the ‘Crisis Decades’. The H2 and H1 History Tuition feature online discussion and writing practices to enhance your knowledge application skills. Get useful study notes and clarify your doubts on the subject with the tutor. You can also follow our Telegram Channel to get useful updates.

We have other JC tuition classes, such as JC Math Tuition and JC Chemistry Tuition. For Secondary Tuition, we provide Secondary English Tuition, Secondary Math tuition, Secondary Chemistry Tuition, Social Studies Tuition, Geography, History Tuition and Secondary Economics Tuition. For Primary Tuition, we have Primary English, Math and Science Tuition. Call 9658 5789 to find out more.

JC History Tuition Online - What is the role of multinational corporations in the global economy - Global Economy Notes

What is the role of multinational corporations in the global economy?

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Topic of Study [For H2 History Students]: 
Paper 1: Understanding the Global Economy (1945-2000)
Section B: Essay Writing
Theme II Chapter 1: Reasons for growth of the global economy

What are multinational corporations?
By definition, a multinational corporation (MNC) is a company that operates businesses in two or more countries. In contrast with corporations that operate strictly in their country of origin, MNCs expand their scale of operations to other countries. In the post-WWII period, the United States took the lead in establishing MNCs based in different parts of the world, such as Western Europe and Japan.

The Post-War Years
In the 1950s and 1960s, the United States contributed to nearly half of the world’s manufacturing output. American MNCs made their way to host countries like Great Britain, facilitating the transfer of technology and technical know-how. In return, host countries benefited from job creation and improvement of living standards.

By 1966 US multinationals accounted for more than 80 per cent of sewing machines, typewriters, and color film, more than 60 per cent of the calculating machines, razor blades, breakfast cereals, and spark plugs, and more than 50 per cent of the automobiles made in Britain. More than 80 per cent of the computers sold in West Germany and Italy were produced by American multinationals.

An excerpt from “Transnational Corporations and the Global Economy” by Richard Kozul-Wright and Robert Rowthorn.

The meteoric rise of Western Europe and Japan: New competitors
With the continued American support, economies in Western Europe and Japan recovered quickly. MNCs from these two parts of the world began to secure a foothold in the international landscape. By the 1980s, the American firms acknowledged the remarkable feats of their innovative counterparts in Europe and Japan.

In the 1970s, Japanese electronic multinationals moved their investments into Asia, exporting popular consumer electronics like televisions. Host countries like Singapore, Hong Kong and Taiwan benefited from the influx of Foreign Direct Investment (FDI). Similarly, Japanese automakers have gained global recognition due to its fuel-efficiency, even challenging the dominance of veteran American companies like General Motors and Ford.

The oil shocks of 1973 and 1979 increased the demand for more fuel-efficient cars, and the Japanese were well-positioned to capture an initial portion of the U.S. market. The ensuing growth during the 1980’s of foreign competition in the domestic market marked several significant transformations of the domestic automobile industry. Japanese producers priced their automobiles very competitively and consumers placed increasing emphasis on product quality and value in their purchase decisions. By 1990, Japanese firms had captured 33 percent of all U.S. car sales; European firms 5 percent; and Korean companies, 2 percent.

An excerpt from “Monthly Labour Review” by the U.S. Government Printing Office, 1992.

Vehicles of foreign investment and international trade
In addition to the role of governments in advanced economies driving the growth of the world economy, MNCs support FDI flows to accelerate the economic development of different countries. In the 1960s, Third World nations attracted nearly half of the entire world’s FDI. However, the proportion of FDI in developing countries has declined to nearly one-third by the 1970s.

An increasing proportion of world trade occurs within transnational corporations, that is, from one branch or plant of a corporation to another branch in a different country. In 1970, more than a quarter of US manufactured exports were sold by multinational corporations to a majority-owned foreign affiliate.

… Almost all foreign direct investment originates in the developed world. In 1978, the USA alone provided 41.4% of the total stock of accumulated foreign direct investment; Japan 6.8%; and Canada 3.5%. A mere 3.2% derived from developing countries.

An excerpt from “The Golden Age Illusion: Rethinking Postwar Capitalism” by Michael John Webber.

What can we learn from this article?
Consider the following question:
– Assess the view that the multinational corporations were necessary in advancing the growth of the global economy after the Second World War.

Join our JC History Tuition to learn more about this enriching topic. The H2 and H1 History Tuition feature online discussion and writing practices to enhance your knowledge application skills. Get useful study notes and clarify your doubts on the subject with the tutor. You can also follow our Telegram Channel to get useful updates.

We have other JC tuition classes, such as JC Math Tuition and JC Chemistry Tuition. For Secondary Tuition, we provide Secondary English Tuition, Secondary Math tuition, Secondary Chemistry Tuition, Social Studies Tuition, Geography, History Tuition and Secondary Economics Tuition. For Primary Tuition, we have Primary English, Math and Science Tuition. Call 9658 5789 to find out more.

JC History Tuition Online - How did Japan emerge as a developed economy - Global Economy Notes

How did Japan emerge as a developed economy?

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Topic of Study [For H2 History Students]: 
Paper 1: Understanding the Global Economy (1945-2000)
Section B: Essay Writing
Theme II Chapter 1: Reasons for growth of the global economy

Rapid industrialisation
After experiencing defeat during the Second World War, the Japanese government focused its efforts on post-war reconstruction. Under the ‘Reverse Course’ policy, Japan was backed by the USA to rebuild its industries.

The Cold War climate proved to be fortuitous as Japan gained from the surge of demand during the Korean War in 1950. The increased US involved in the conflict became an opportunity for Japan to raise production of war supplies.

Additionally, the Japanese government turned to the Americans for access to foreign technology. The purchase of technology then aided the private firms’ efforts to raise the efficiency of production, as seen by the rise of prominent companies like Toyota and Honda.

Japanese companies in the 1950s and 1960s spent one-quarter to one-half of all their research and development budgets to buy foreign technology.

… Over the next few years [Sony] made cheap copies of the tape recorders American occupiers had brought to Japan. In 1953 it licensed from Western Electric the right to produce the new transistors that Bell Labs had recently invented. Sony turned out its first transistor radio – the world’s second – in 1955 and brought a miniaturized “pocket radio” to market two years later.

An excerpt from “Global Capitalism” by Jeffry A. Frieden.

Better lives: Impacts of industrialisation
Strong state intervention was recognised as a major contributing factor for the Japanese ‘economic miracle’. Subsidies and loans were granted to the private firms to accelerate industrial production. Over time, living standards in Japan have improved tremendously. By 1970, almost every Japanese household owned a television, refrigerator and washing machine, ushering the ‘electronics age’.

Practically every household in Japan is now in possession of a radio while the dissemination rate of television sets is 87.8 per cent, that of electric washing machines 61.4 per cent and electric refrigerators 38.2 per cent, indicating that the standard of living in Japan has been raised considerably.

An excerpt from Japan Report, Volume 10 Number 19 – by Japan Information Center, Consulate of Japan, 15 May 1964.

By the 1970s, Japan had caught up with the USA, becoming the second-largest market economy in the world.

What can we learn from this article?
Consider the following question:
– How far do you agree that the government was responsible for the phenomenal growth in Japan after the post-war years?

Join our JC History Tuition to learn more about the developments of the global economy. The H2 and H1 History Tuition feature online discussion and writing practices to enhance your knowledge application skills. Get useful study notes and clarify your doubts on the subject with the tutor. You can also follow our Telegram Channel to get useful updates.

We have other JC tuition classes, such as JC Math Tuition and JC Chemistry Tuition. For Secondary Tuition, we provide Secondary English Tuition, Secondary Math tuition, Secondary Chemistry Tuition, Social Studies Tuition, Geography, History Tuition and Secondary Economics Tuition. For Primary Tuition, we have Primary English, Math and Science Tuition. Call 9658 5789 to find out more.

JC History Tuition Online - What is NAFTA and what is its purpose - Global Economy Notes

What is NAFTA and what is its purpose?

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Topic of Study [For H2 History Students]: 
Paper 1: Understanding the Global Economy (1945-2000)
Section B: Essay Writing
Theme II Chapter 1: Problems of economic liberalisation

The North American Free Trade Agreement (NAFTA)
On 1 January 1994, the NAFTA was signed by three members – the United States, Mexico and Canada. Its purpose was to eliminate tariffs between the signatories, facilitating market integration. Furthermore, the agreement required all parties to support the gradual elimination of trade barriers over a course of fifteen years to enhance cross-border investment and the flow of goods and services.

Before the signing, the Mexican government sought US investment in the wake of the Latin American debt crisis. In June 1990, Mexican President Carlos Salinas de Gortari and the American President George H. W. Bush announced the creation of a free trade area between the United States and Mexico.

Impacts on involved parties
It turns out that the NAFTA yielded tremendous benefits to the trading partners. NAFTA amounted to a $6 trillion economy with a population of 360 million. By 2004, the NAFTA area expanded to a $12.5 trillion economy.

Wonnacott believes, that in one important way, the NAFTA is superior to treaties like the GATT, which allows developing countries to maintain many of their own barriers to liberalized imports. The NAFTA has effectively told Mexico and other future participants that if they want to participate in the agreement, they must be prepared to remove their own trade barriers.

An excerpt from “Nafta As a Model of Development: The Benefits & Costs of Merging High-And Low-Wage” by Richards S. Belous and Jonathan Lemco.

From the US perspective, the NAFTA was seen as a significant step forward to achieve encourage international trade. The agreement was meant to be a signal to other participating members of the GATT to re-affirm their commitment to achieve freer trade.

I am gratified that, as Vice President Gore and Chief of Staff Mack McLarty announced 2 weeks ago when they met with President Salinas, next year the nations of this hemisphere will gather in an economic summit that will plan how to extend the benefits of trade to the emerging market democracies of all the Americas.

… The United States must seek nothing less than a new trading system that benefits all nations through robust commerce but that protects our middle class and gives other nations a chance to grow one, that lifts workers and the environment up without dragging people down, that seeks to ensure that our policies reflect our values.

An excerpt from US President Bill Clinton’s speech on the NAFTA, 8 December 1993.

What can we learn from this article?
Consider the following question:
– How far do you agree that the USA played a crucial role in the resurgence of trade in the 1990s?

Join our JC History Tuition to learn more about the development of the global economy. The H2 and H1 History Tuition feature online discussion and writing practices to enhance your knowledge application skills. Get useful study notes and clarify your doubts on the subject with the tutor. You can also follow our Telegram Channel to get useful updates.

We have other JC tuition classes, such as JC Math Tuition and JC Chemistry Tuition. For Secondary Tuition, we provide Secondary English Tuition, Secondary Math tuition, Secondary Chemistry Tuition, Social Studies Tuition, Geography, History Tuition and Secondary Economics Tuition. For Primary Tuition, we have Primary English, Math and Science Tuition. Call 9658 5789 to find out more.

JC History Tuition Online - What caused Japan's lost decade - Global Economy Notes

What caused Japan’s Lost Decade?

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Topic of Study [For H2 History Students]: 
Paper 1: Understanding the Global Economy (1945-2000)
Section B: Essay Writing
Theme II Chapter 1: Problems of economic liberalisation

The geese ahead of the flock
Before the ‘Lost Decade‘, Japan’s economic progress have continued until it was the second largest in the world, after the United States. In fact, the ‘flying geese paradigm’ was used to refer to Japan as the frontrunner of economic development in Southeast Asia (contrast with the ‘Four Asian Tigers’).

The pattern was one in which first Japan, followed by its former colonies, achieved miracles of growth. They left such bastions of U.S. influence as the Philippines in the dust. South Korea, Taiwan, Hong Kong, and Singapore, followed by Thailand, Malaysia, and Indonesia were all members of Japan’s flock. Even China took its turn.

An excerpt from “How Asia Got Rich: Japan, China and the Asian Miracle” by Edith Terry.

Speculative activities: A growing asset bubble
After the Plaza Agreement was signed, Japanese Yen was twice the value of US dollar between 1985 and 1987, spurring speculators to plough their funds in assets and stocks. Additionally, borrowers could obtain funds from banks in Japan easily, fueling more speculative activities. Over time, stock and land prices surged.

Between January 1985 and December 1989 the real value of the Nikkei 225 stock price index tripled. By the middle of 1992, the index in real terms was less than 20% above its January 1985 level. Land prices have behaved similarly. An index of land prices in Japan’s six largest cities almost tripled in real terms between 1985 and 1990.

An excerpt from “Japan’s Bubble, Deflation, and Long-term Stagnation” by Kōichi Hamada, A. K. Kashyap, David E. Weinstein.

The Bank of Japan viewed the growing bubble as a threat. As such, it raised interest rates from 2.5% to 6% to discourage speculation. Consequently, borrowers were alarmed by higher interest rates as they anticipated their inability to finance their loans. Panic selling took place, causing the value of shares to plunge drastically.

By August 1990, the discount rate reached 6%. meanwhile, starting in 1990, the Bank of Japan sharply reduced the growth in the supply of money. Although Japanese officials were trying to engineer a soft landing by gradually deflating the speculative bubble, it burst with surprising speed. By October 1990, the Nikkei had fallen to nearly 20,000 yen. The price of real estate began its descent in 1991… Non-performing loans piled up at banks. Economic growth virtually ground to a halt, as it averaged only 1% per year from 1990-2003.

An excerpt from “Japan’s ‘Lost Decade’: Causes, Legacies and Issues of Transformative Change” by Miles Fletcher III, Peter W. von Staden.

What can we learn from this article?
Consider the following question:
– How far do you agree that the Japanese government was responsible for the ‘Lost Decade’?

Join our JC History Tuition to learn more about the development of the global economy. The H2 and H1 History Tuition feature online discussion and writing practices to enhance your knowledge application skills. Get useful study notes and clarify your doubts on the subject with the tutor. You can also follow our Telegram Channel to get useful updates.

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JC History Tuition Online - What was the Plaza Accord - Global Economy Notes

What was the Plaza Accord?

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Topic of Study [For H2 History Students]: 
Paper 1: Understanding the Global Economy (1945-2000)
Section B: Essay Writing
Theme II Chapter 1: Problems of economic liberalisation

New competitors; Trade deficits
Following the abandonment of the ‘gold standard’ in 1971, the United States (US) continued to experience severe trade deficits vis-à-vis Japan and West Germany. The Japanese Yen and German Deutsche Mark were relatively weaker than the US Dollar. This meant that these two advanced economies’ exports were cheaper than the American exports, fueling demand for the former group’s.

In the US, heavy manufacturers and automobile firms called for their politicians to embark trade protectionism. With American jobs at stake, the Reagan administration had to step in to manage this worrying trend.

At the beginning of the 1980s the American auto industry was reeling under pressure from foreign competition – deservedly so, as the quality of American-made autos from the Big Three was noticeably inferior to that of imports from Europe and Japan.

…Unable to meet this quality competition head-on, and having lost $4.2 billion in 1980, the Big Three American automakers pressed for the predictable solution: trade protectionism.

…After a heated debate at the White House, Reagan passively agreed to seek a “voluntary export restraint agreement” with Japan.

An excerpt from “The Age of Reagan: The Conservative Counterrevolution: 1980-1989” by Steven F. Hayward.

In addition to the voluntary export restraint (VER) with Japan that limited the number of imported automobiles, the US government oversaw the meeting with the G5 nations. The G5 comprised of industrialised nations, namely United Kingdom, Japan, West Germany, France and the US.

The Plaza Accord
On 22 September 1985, the G5 nations met at the Plaza Hotel in New York. At main outcome was the formulation of an agreement to depreciate the US dollar relative to the Japanese Yen and German Deutsche Mark.

The main purpose of the accord, however, was to address the United States-Japan trade imbalance by making American goods less expensive and Japanese goods more expensive, so that Japanese customers would buy inexpensive American goods and Japanese companies would have to raise their prices in dollar terms and therefore lose customers.

… The time from 1986 until the middle of 1990 in Japan is often referred to as the ‘bubble economy‘. This period saw massive expansion, primarily due to a rapid surge in domestic demand – a growth in capital investments and in personal spending. Stocks and real estate prices skyrocketed.

An excerpt from “Government, International Trade, and Laissez-Faire Capitalism: Canada, Australia, and New Zealand’s Relations with Japan” by Carin L. Holroyd.

Although the Accord did manage to reduce trade deficits, the repercussion on the Japanese economy was severe. As the Japanese Yen appreciated relative to the US dollar, individuals and firms purchased real estate and stocks, pushing up the prices artificially. Speculators used their newly-purchased real estate as collateral to buy more. Eventually, the expanding asset bubble burst, ushering the ‘Lost Decade’ in Japan.

What can we learn from this article?
Consider the following question:
– Assess the view that the Plaza Accord of 1985 was key in explaining the decline of the Japanese economy in the 1990s.

Join our JC History Tuition to learn how to write essays effectively. The H2 and H1 History Tuition feature online discussion and writing practices to enhance your knowledge application skills. Get useful study notes and clarify your doubts on the subject with the tutor. You can also follow our Telegram Channel to get useful updates.

We have other JC tuition classes, such as JC Math Tuition and JC Chemistry Tuition. For Secondary Tuition, we provide Secondary English Tuition, Secondary Math tuition, Secondary Chemistry Tuition, Social Studies Tuition, Geography, History Tuition and Secondary Economics Tuition. For Primary Tuition, we have Primary English, Math and Science Tuition. Call 9658 5789 to find out more.