The State in the Global Economy

1. The State in the Global Economy

2. What role does the state have in the global economy? • They regulate their own economies e.g. laws, taxes. • Influence the imports and exports of the nation. • Influence the inward and outward investment that occurs. • Influence the location and types of industry within a country.

3. Free Market Economies • Competitive capitalism. Supply and demand drive the economy through private firms. • Government set the parameters that best allow the economy to function e.g. interest rates, taxes. • It provides the commodities that wouldn’t be supplied by a free economy e.g. infrastructure, armed forces.

4. Planned Economies • The state directs the economy and sets most of its economic and social goals. • Large number of public companies. Private companies do exist but they have the same national goals of the public firms. • A high priority placed on industrial policies and on promoting a structure that enhances the nations economic competitiveness.

5. Trade • Tariff and no-tariff barriers have influenced trade for hundreds of years e.g. the international depression of the 30’s was characterized by a retreat behind trade barriers. • The WTO now regulates most tariffs, which have decreased over the last 60 years. • However, non-tariff barriers are increasing. • Most barriers look to increase exports and decrease imports.

6. Foreign Investment • In general MEDCs are less restrictive in relation to inward/outward investment (Mainly because most FDI occurs between MEDCs). • LEDCs are keener to encourage inward investment. • Governments will often try and encourage FDI to certain peripheral areas that are stagnating using incentives such as tax breaks.

7. Industry • Governments apply policies to: • Help particular types of industry • Particular types of firm • To help specific geographical areas

8. Policies that affect FDI, Trade and Industry are becoming increasingly blurred. This is a result of the increasing inter-relationships between them. Partly due to the complexity of the global economy and also the TNCs that are driving it.

9. Japan’s Technopolis Program“It is strongly emphasised in Japan that due to limited resources; education, science, technology must be key resources for prosperity.”

10. Initiated by the state and specifically the Ministry for international trade and industry (MITI). MITI has been instrumental in Japan’s rapid post WWII growth. Creating and protecting certain indsutries (steel, car, petrochemicals), recently, concentrating on the technological industries (computers, biotechnology and robotics). The technopolis’s raison d’etre was regional development away from the pacific belt core region (Tokyo, Osaka, Kyoto). It began in earnest in the 1980’s because of the rapid relocation of manufacturing to areas with cheaper labour and this was known of the ‘hollowing out’ of the Japanese economy. It was funded by the government, but was to be a joint task with private businesses. It was hoped that they would be a magnet to attract business (based on Silicon valley) i.e. initially funded by the state and then it would snowball through the private sector.

11. To become a technopolis a site had to meet certain criteria: • An area of 1,300km² had to be available. • There needed to be existing enterprises with the potential for high-tech development. • Existing city of 150,000 • Access to universities and high-tech education. • Access to high speed transport and communication.

13. As a result, prefectures (similar to English counties) had to compete to be designated a technopole. • Many of the underdeveloped areas did not meet these criteria. • Those that did were often near to the core Pacific belt, meaning the islands of Kyushu and Hokkaido struggled to get sites designated. • Once designated, the ministry of finance and MITI would offer tax breaks to help set up.

14. Increasingly as a result, Kyushu is becoming an important peripheral region. At first its science cities were used as manufacturing areas, due to the availability of land and a cheaper female labour supply. The R&D facilities being located in the prefecture of Kanto. However, the more high-tech research facilities are increasingly moving out there, one of the successes of the program. • Other countries with science city programmes are China, Thailand, Hong Kong, Malaysia, Taiwan, India, Indonesia and Singapore.

15. Tsukuba Science City • It is a national research centre and is funded totally by central government. Till 1998, $21.8 billion has been spent. It is located near Tokyo and was started in 1963. Population of 200,000 of which 8% are research professionals and has 300+ major research facilities.

16. Tsukuba Science City • Tsukuba Science City aims to promote science and technology and become the center of advanced research and higher education based on national institutes and the University of Tsukuba. • Tsukuba Science City aims to relieve the overcrowded condition in Tokyo and contribute to a well-balanced development of the Tokyo Metropolitan Area.

18. Success It enables small companies to have access to facilities they could not normally afford. Relieves pressure on Tokyo. Relocates technology out of Tokyo. Failure Tokyo dictates research direction. Expensive to set up. Private vehicles cause traffic jams. Lack of cultural stimulus leads to depression and loneliness of the workers. Companies prefer laboratories in the main cities. Tight immigration policies and prevalent social attitudes reduces the non-Japanese workforce (Silicone Valley’s success was party due to highly trained immigrants). Success or Failure?