Virtual China Satellite Program: Notes & Resources
Author: Richard L. Hannah, Professor of Economics, MTSU
Email: rlhannah@frank.mtsu.edu
Homepage: www.mtsu.edu/~rlhannah/homepage.html
This document is a supplement to the satellite program on December 8,
1998. It is written in non-technical form for comprehension of K-12
teachers, students, and the general public. Suggested Internet links are
embedded in the document. The narrative from the program is only repeated
in outline form. Additional resources available from the Center for
Economic Education are The Economic Educator newsletter, a video tape of
more detail of several segments of the live telecast, which also includes
a 30 minute cable TV interview on the program, Inside Academia, with an
MTSU MBA student, Martin Murray, who recently completed a very interesting
study of the General Motors-Shanghai joint venture.
For further information, contact via email above, or:
Director, Center for Economic Education
Economics & Finance Department, Box 27
Middle Tennessee State University
Murfreesboro, Tennessee 37132
Tel: 615-898-2228 Fax: 615-904-8370
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THE GLOBAL ECONOMIC CONTEXT
1) NAFTA, GATT, & WTO
Keeping these three in context is important in understanding the
global evolution in trade. NAFTA obviously captured the American
emotional response to trade, but this agreement is only one of several
regional agreements negotiated among nations around the world. NAFTA was
thus a part of the historic process of GATT (General Agreement on Tariffs
and Trade) that has been evolving for decades. GATT has been replaced by
the WTO (World Trade Organization) with a more formal structure governing
trade relations among nations. China is not part of the WTO. The U.S. is
the main objector to China's inclusion, arguing that China must first do
more to lower trade barriers.
2) U.S. Jobs, Income & Trade
These are emotional issues for the American public. Conventional
economic theory argues that individuals and nations are better off by
trading. But this in turn means that many jobs will be lost and gained.
Economists take the position that there is a net gain in jobs for all
nations through trade. This is known as the theory of comparative
advantage, and is a core principle in economics. However, issues arise
with respect to who gains and loses what kinds of jobs. American policy
seems driven by the acceptance that we are a high tech, high value added
society and the jobs created by trade will thus be high income jobs.
Our lower paid (especially manufacturing) jobs are thus very vulnerable to
being lost to nations with low cost labor. The falling incomes in low
skill jobs are a fact, not theory. A second policy related issue is what
kinds of education will sharpen our global competitiveness. Understanding
these causal links is vital to realizing the emphasis given to
globalization.
3) Telecommunications
This of course has changed landscape to cyberscape. This
presentation--i.e., this web page and satellite link-- can technically be
just as easily sent to China as to the next county. Such possibilities
have profound impacts not only on economic interactions, but on other
dimensions of our lives, such as education. I don't think anyone has a
lock on how these changes will play out, but one thing is certain, there
is no good sense in ignoring these events, and there are good
opportunities in exploring them.
TODAY'S PROGRAM EXAMPLE:
THE IMPORTANCE OF CHINA
1) Size matters
With approximately 1.2 billion people, almost one quarter of the
world's population, China is a world force. U.S. foreign policy and
economic policy are almost inseparable from China's economic success or
economic failure. China's economy has experienced one of the strongest
periods of growth in modern history, with double digit real growth in GDP
for nearly two decades (recently falling to the 7-10 percent range). This
has caused some (in my opinion overly optimistic) predictions that China's
economy will be larger than the U.S. economy within very few years.
Still, China's current economy is only about one third that of the U.S.
and the per capita income is only about one tenth of the U.S.
Under any scenario, a large nation the size of China amongst much
smaller Asian neighbors can be a stabilizing or destabilizing influence.
The degree and nature of U.S. involvement in Asia greatly hinges on this
reality. Thus far, the U.S. policy of economic engagement is the path
we've chosen. The answer to one of the great questions of history will be
how, or if, Chinese political freedoms (i.e., democracy) is to evolve from
economic freedoms. Essentially, this is the line of reasoning that runs
from our end of the Pacific.
2) Economic accommodation is better than military confrontation
The alternative to the above scenario is a retraction of our economic
policy of engagement. The steps are short and direct to the potential
conflicts this might generate, especially with respect to the U.S.
protections of Taiwan, which China wants reintegrated economically and
politically. A military build-up in the Pacific by either China or the
U.S. would surely call forth a reciprocation and further escalation. Such
a poor policy option would no doubt envelop Japan, South Korea, the
Philippines, and other Pacific powers.
3) Uniqueness of U.S.-Chinese relations
Historically, the U.S. has not had the reputation with the Chinese of
imperialism that other western powers have. In centuries past, China was
one of the most advanced civilizations on earth, but in recent centuries
the country has been abused and plundered by western powers and Japan.
The policy of isolating the Communist regime was relatively short, and
since Nixon's re-opening of China, relations with the U.S. have steadily
improved. Large numbers of Chinese are educated by U.S. universities and
there are many other opportunities of social and cultural exchanges that
seem to have emerged from the economic ties.
RELATED INTERNATIONAL POLICY ISSUES
1) Hong Kong freedoms
The Basic Agreement that guarantees Hong Kong political freedom for
50 years, dating from the British handover in 1997, is a real test of Chinese
intentions. Hong Kong maintains considerable autonomy and its citizens
have one of the highest standards of living in the world.
2) Taiwanese democracy
Diplomatically, the Taiwan question is an even larger test than Hong
Kong. China wants Taiwan folded back into Chinese control. But Taiwan's
democratic institutions, like Hong Kong's, are a real sticking point. The
significant difference between Taiwan and Hong Kong however is the U.S.
protection of Taiwan (more immediately by the 7th Fleet).
3) The "Greater China" policy
The "Greater China" policy is the vision that settles the Hong Kong
and Taiwan questions in China's favor. Included in this scenario are also
the ability to assert a stronger leadership role in Asia, and possibly
project military power with the development of a credible ocean-going
navy.
4) Human rights
Appearances are that the U.S. has abandoned this as the centerpiece
of Chinese relations. Human rights issues were set aside in order to
pursue economic engagement. There was a brief utterance of workers'
rights as a weak substitute for human rights, but this has all but
subsided. However, a fair assessment of this U.S. policy choice requires
considering the political liberalizations by the Chinese. Evidence is
spotty and anecdotal, but there do appear to have been some significant
changes by China on this matter.
RELATED INTERNATIONAL ECONOMIC ISSUES
1) Asian financial crisis
The causes of this problem are much too complicated to describe here.
I only offer an interesting aside with respect to China's role.
Essentially, China has decided not to devalue its currency (Yuan) in order
to stabilize the Asian situation. If this gambit works, the esteem of
China's leadership in Asia will rise, and favorable economic relationships
may follow as well. Those interested in this topic are advised to read
recent issues of The Economist.
2) Trade barriers and imbalances
One of the most difficult points of contention between the U.S. and
China is the balance of trade. China sells almost $40 billion more to the
U.S. than it buys from us. This one of the reasons the U.S. wants Chinese
trade barriers lowered before admission into the WTO. The most
significant types of our imports are toys, textiles, and consumer
electronics.
3) Foreign investments in China
Because of China's history of bad experiences with western power
intervention, there is a suspicion of a large presence of foreign firms.
Thus, most large projects are joint ventures between Chinese organizations
and foreign firms. These are very complicated arrangements. See the
video interview with Martin Murray for several insights.
The reason foreign money keeps pouring into China is the market
potential. Size matters.
CHINESE DOMESTIC ISSUES
1) Conversion of State Owned Enterprises (SOE's)
This is no doubt one of the toughest domestic issues faced by Chinese
authorities. How can it either shut down or make SOE's more efficient?
Remember, under the old Communist regime government owned everything,
including the losers. To simply shut down inefficient plants would put
tens of millions of workers on the street, not an inviting scenario for
political stability.
2) Economic growth
Thus far China's solution to the SOE problem has been accelerated
economic growth. But the absorption of surplus workers and new workers
into the economy requires a minimum of 8 percent annual real growth. This
is why the Chinese are so fixed on 8 percent in 1998. Anything less means
significant adjustments to policies friendly to the ideas of capitalism.
3) One country-two systems philosophy
As mentioned above, how this plays out is historically intriguing.
The view of western democracies is that there is a long-run impossibility
in promoting economic freedoms without simultaneous political freedoms.
In other words, the question is, can a nation have a totalitarian
government and economic freedoms? Hong Kong presents a special case, but
what if Taiwan were re-integrated under a similar agreement? If so, why
not grant mainland special freedom zones--e.g., Shanghai, Tianjin, etc...
If this could be done, would Chinese central authority cease?
MY OBSERVATIONS ABOUT CHINA
1) Entrepreneurial activity
I think there is something innate in humans about the desire to
engage in entrepreneurial activity. For example, my wife went to China in
1994 and saw no street vendors (under Communism such activity used to be
punishable by imprisonment or worse). One year later I was swamped by
them from the streets of Beijing to the Great Wall. The poor Chinese
never had a class in economics, but they knew the name of the game--"make
a buck." I remember reading somewhere that the first loyalty of the
Chinese was not to Communism or Democracy, but to Commerce. After a half
a century of repression this innate behavior still flowered. I suppose if
there is a historical analogy, it may be America in the early 20th
century. Economic hunger made us a world power. Two questions seem most
important in this juxtaposition. Will the same happen to China? What
does America hunger for in the 21st century?
2) Higher education
The presence of western universities in Shanghai and other major
Chinese cities is very significant. China wants MBA's. My advice to our
students here is, learn Mandarin.
3) Scale and speed of economic change
Whatever standards of progress or comparison we may apply to China,
one fact is of utmost importance--size matters. Our measures of economic
activity in the U.S. must be kept in this perspective. Everything from
the magnitude of construction projects to the unemployment rate is not
within our recent realm of experience. If economic growth of the future
mirrors the recent past, it will surely take China where she has never
been, and the U.S. is a part of this dramatically and rapidly unfolding
transition.
COMMENTARY ON THE USE OF INTERNET RESOURCES
The best analogy I can offer about the use of the Internet for teaching
and learning is to think of it as TV with infinite channels. There's
good, bad, and ugly. Our job as educators is to find the good channels
for our purposes. Rest assured that students will find the bad and the
ugly on their own. Doing this without being an Internet user yourself is
impossible. At a minimum, teachers must use email and browse the net
enought to know which sites are credible, reliable, and accessible for
educational purposes. University professors can help, as I try to do
below, but we can not substitute for a concerted and integrated K-12
learning network.
SUGGESTED INTERNET SITES ABOUT CHINA
The first two sources below are links to credible U.S. sites. The Hong
Kong site is a good overview. I have not information on PRC control. The
next three are PRC controlled, and thus are promotional from that
perspective, but nonetheless informative.
MTSU's Business and Economics Research Center
U.S. Census Bureau: U.S. International Trade in Goods & Services
Hong Kong Special Administrative Region of the People's Republic of China
China Council for the Promotion of International Trade
Embassy of the People's Republic of China in the U.S.
China Daily
CONCLUDING REMARKS ABOUT CHINA AND THE GLOBAL CONTEXT
1) Not only U.S. economic interests, but also the perpetuation of American
democratic values into the 21st century are entwined with Chinese economic
fortunes.
2) China is but one example. How does our economic prosperity and
democracy depend on the many other possible examples? E.g., Japan, India
& Pakistan, Latin America, and the emerging European Union.
3) How are your students to learn about the global economic forces
impacting their lives?
CONCLUDING REMARKS ABOUT TEACHING & LEARNING IN THE ELECTRONIC MEDIA
1) What does this example demonstrate about K-12 and higher education?
2) Emphasis on technology is misplaced if there is no philosophy of use.
3) Higher education & K-12 collaborative projects are extremely important
building an teaching and learning model for the 21st century. This may
well be one of those advantages of competitive supremacy in the global
economic game. The idea is to be in a position to craft the rules of the
game. After that, playing is not as difficult.