Chapter 3
Commerce/Economy
Calvin Coolidge, a one-time president of the US, in his 1925 speech, once said: ‘Business of America is business’. Historycentral.com interprets the statement as meaning ‘…that government should interfere as little as possible with businesses and individuals.’ In other words, the US had always had a wholesome embrace for commerce.
Wikipedia has this to say: ‘that government should interfere as little as possible with businesses and individuals.’ The US capitalist system was brought about by the coming together of think-tanks and the government of the day (right from the Declaration of Independence of the country on July 4, 1776) to create unique business environment whose posterity would largely be dependent on individuals and private investments with the government merely participating by providing the geography for it.(Hypothetically, commerce is the bigger picture of business as economy is the bigger picture of commerce)Communist countries like China have computed the equation of allowing one- political party run commerce. The involvement of technocrats in government alongside concerned officials to decide the economy future of their nations via the creation of education-friendly philosophies as reflected in the policies formulated has paved way for their posterity. China is the world’s wonder when it comes to the area of commerce, beginning with the revolution in 1949 by Mao Zedong. Mao Zedong was equipped with education. According to Wikipedia, Mao Zendong was described as: ‘…one of the most important and influential individuals in modern world history. He is also known as a political intellect, theorist, military strategist, poet, and visionary.’ This would later pave the way for the trade liberalization of China.
Https://www.everycrsreport.com/reports/RL33534.html puts it this way: ‘Prior to the initiation of economic reforms and trade liberalization nearly 40 years ago, China maintained policies that kept the economy very poor, stagnant, centrally controlled, vastly inefficient, and relatively isolated from the global economy. Since opening up to foreign trade and investment and implementing free-market reforms in 1979, China has been among the world’s fastest-growing economies, with real annual gross domestic product (GDP) growth averaging 9.5% through 2018, a pace described by the World Bank as “the fastest sustained expansion by a major economy in history.” Such growth has enabled China, on average, to double its GDP every eight years and helped raise an estimated 800 million people out of poverty. China has become the world’s largest economy (on a purchasing power parity basis), manufacturer, merchandise trader, and holder of foreign exchange reserves. This in turn has made China a major commercial partner of the United States. China is the largest U.S. merchandise trading partner, biggest source of imports, and third-largest U.S. export market. China is also the largest foreign holder of U.S. Treasury securities, which help fund the federal debt and keep U.S. interest rates low.’What are the factors that led to the fast economic growth of China?
This is what https://www.tutor2u.net/geography/reference/factors-explaining-the-rapid-economic-growth-of-china-in-recent-decades has to say:‘China’s rapid path to economic development is well documented and even though growth rates appear to be slowing, there is no doubt as to the pivotal role China’s economy is playing in the global economy. China initially pursued an export-oriented path to industrialisation – similar to the Asian Tigers before them – but has begun to diversify into other sectors of the economy in the last ten years. It has done this with an unwavering determination to accelerate growth rates and expand its economic reach. As geographers, we need to understand the factors responsible for China’s economic success. Labour supply There is a plentiful supply of workers in China with a steady stream of rural-urban migrants in search of work. This is due to the mechanisation of agriculture leading to unemployment and under-employment in rural areas and concurrent growth in industrial work in urban areas. It is estimated that 500,000 million people will leave the Chinese countryside in search of work over the next two decades. Voluntary migration of the rural population has been accompanied by aggressive re-planning schemes in which rural villages are demolished and new manufacturing settlements built at rapid pace for former agricultural families to move in to. Wages and unemployment The unemployment rate has fallen in recent years to just over 4%, but high rates in the past drove down wages. If workers demand higher wages, there are many more who will take the jobs available. Wages in other East Asian countries earn up to 10 times more than Chinese workers. This has increased profit margins and attracted inward FDI (Foreign Direct Investment) as American, European and Japanese companies open factories under licence in China. Female participation in the workforce China’s workforce is characterised by a higher than average female participation in manufacturing industry. Western cultural analyses of gender divisions in the workforce have little relevance in Chinese economic growth. This, along with the One-Child Policy which has meant women were involved in child-raising for a much shorter period than in many other countries, has made a much larger workforce available. Political system The non-democratic and authoritarian political regime in China has meant that it has been possible to embrace western-style free market economics while maintaining control over the political system. In many ways, the planned economy of China (where the state controls economic activity rather than private business) has accelerated economic growth because the government has controlled all decision-making. Since Mao in 1953, the government has followed a series of Five Year Plans (or Guidelines, as they are now called, to reflect China’s transition towards a ‘socialist market economy’) which have enabled the government to enact any reforms it feels is necessary. The country is now in its 12th Five Year Plan (2011-2016) and policies include spending 2.2% of GDP on R&D (Research and Development) and moving coastal regions from being ‘the world’s factory’ to being hubs of R&D, top-end specialist manufacturing and services. Strong leadership Chinese politicians are said to feel a greater responsibility to the nation than to themselves. Strong leadership from the head of state has been a major factor contributing to economic success. Free market economics China first began moving away from a centrally planned economy towards a market-oriented system in 1978. Deng Xiaoping was Mao’s successor and he sought to bring an end to China’s relative economic isolation. Export-led growth This is the strategy which China initially pursued. The strategy is beginning to become phased out in favour of Import Substitution Industrialisation by which consumer products imported for China’s growing middle-class are increasingly being made in China, such as cars, domestic white goods and house- and office-furniture. Special Economic Zones and FDI Foreign investment was encouraged in the initial phase of economic growth. They tended to locate in one of 6 SEZs (Special Economic Zones) or 14 Open Cities in which a relaxation of regulation and government control created a more attractive business environment. These are designated zones where TNCs (Trans National Corporations) are offered incentives such as reduced tax rates to set up manufacturing operations. An example is a Taiwanese TNC, EUPA, which manufactures coffee machines in Xiamen (an Open City) and employs 25,000 workers. Private enterprise For many years all manufacturing in China was state owned and operated.
This has gradually been relaxed as the economy has been restructured and now up to 50% of businesses are privately owned. Energy supply Since the 1990s China has been developing its energy base, with new hydroelectric and nuclear power plants. China is also embarking upon a massive coal-fired power-station opening programme based on its own substantial coal reserves plus imports from Australia and Indonesia. However, serious urban air pollution together with a commitment to limiting carbon emissions after 2030 is leading to a less rigorous expansion of this electricity source. Investment in infrastructure The government has built many new roads, improved the rail system and made China’s major rivers navigable all year round. China has five of the ten largest container ports in the world (including Shanghai and Shenzhen). Urbanisation has also been encouraged. with a robust urban-construction programme. Economic diversification China has recently started to diversify into Research and Development, specialist manufacturing and hi-tech industry. It is investing labour and capital in innovation so that it can sustain its economic growth and reduce the risk involved in having a narrow economic base. Education Literacy levels of China have risen dramatically over the past 20 years and now stand at 95%. This has underpinned the economic development of the country. As a result, China has both large numbers of unskilled workers and a growing number of highly skilled workers. For instance, China trains 600,000 new engineers every year. ‘Going global’ China has started to globalise economically by buying up foreign companies in North America and Europe particularly. In fact, in 2010 China invested $56bn in in outward Foreign Direct Investment. With inward FDI averaging some $60bn per year, China had, by 2015, converted from a net recipient to a net investor in FDI, a marker of its economic maturity in many respects. Location China’s geographical location has geopolitical significance because of its proximity to consumer markets and trading partners. South Korea, Taiwan, Japan and Hong Kong are on major trade routes. It is no coincidence that the first SEZs were concentrated on the east coast facing Taiwan and the Pacific, particularly around Hong Kong. Raw materials China has a great wealth of natural resources, having vast reserves of coal, oil and natural gas. These are being used to fuel the industrial development of the country.
However, so large is the country’s requirement for raw materials to feed its manufacturing industries, that it is a major importer of oil, gas, coal, iron-ore, copper and other key commodities in world trade. Confucian values State and society are emphasized above the individual. There is a long history of submitting personal ambition to that of the community and state through Confucianism. The degree of control and authoritarian structures are more accepted in China than in most western cultures with their emphasis on individualism. Population growth Rapid population growth in China, despite the One Child Policy, has resulted in very large numbers in the economically active population, leading to rapid urbanisation. This has fuelled further industrialisation, allowing for further population growth. As geographers, we should categorise these factors (Social, Economic, Environmental, Political), rank them, draw links between them and consider the players and stakeholders involved. We will then have a detailed understanding of the factors which have enabled China to pursue an accelerated path to economic development.’The unmatched fast growth of China can be attributed to the prospect-driven vision of then Chinese leader, Deng Xiaoping. He was a man whose education enabled him depict the character through acquired education to transform China from the mediocrity of poverty to the excellence of global eminence. We can see the co-operation of the government of the day and the involvement of the people as the conceptualization of education-based policies is practically spelt out for concerned all and sundry to carry out, all for the collective interest of China.
Today, China has gotten past Germany, Japan but just slightly behind the US as the world’s most influential economy. A country who, some six to seven decades ago, was under the subjugation of poverty is now a nation found in the decision room of world economic affairs. Obviously, this feat can be made possible by the already-mentioned co-operation of the Chinese government and its people through the veritable tool of education towards making their nation great.Sheikh Mohammed bin Rashid al-Maktoum, the great leader of the UAE, has been indefatigably working together with his think-tanks to engender an economic robust economy. Read in part what http://www.melangemagazine.biz/sheikh-mohammed-bin-rashid-al-maktoum-a-vision-behind-uaes-transformation-into-world-attraction/ has to say: ‘…
In 2016, the Government of Abu Dhabi announced a long-term plan for the transformation of the emirate’s economy, including a reduced reliance on the oil sector as a source of economic activity over time and a greater focus on knowledge-based industries in the future.Entitled ‘Abu Dhabi Economic Vision 2030’, it identifies the following as the Government’s immediate economic priorities; building an open, efficient, effective and globally integrated business environment adopting a disciplined fiscal policy that is responsive to economic cycles, establishing a resilient monetary and financial market environment with manageable levels of inflation, driving significant improvement in the efficiency of the labour market, developing a sufficient and resilient infrastructure capable of supporting anticipated economic growth, developing a highly skilled, highly productive work force, enabling financial markets to become the key financiers of economic sectors and projects.The UAE will have achieved Abu Dhabi Economic Vision 2030, Environment Vision 2030 (Abu Dhabi), Plan Abu Dhabi 2030, Abu Dhabi Transportation Mobility Management Strategy’ Surface Transport Master Plan (Abu Dhabi), Dubai Autonomous Transportation Strategy, Dubai Industrial Strategy 2030, Dubai 3D Printing Strategy and UN’s 2030 Agenda.Based on the principles laid out in the Government’s Policy Agenda published in August 2007, the Abu Dhabi Economic Vision 2030 is a roadmap for the Emirate’s economic progress.Seeking to ensure the continued success of the Emirate’s development, the Government of Abu Dhabi has set guidelines and priorities for the Emirate’s socio-economic progress in its Policy Agenda.’
Today, Nigeria’s predicament can conspicuously be asserted to be an entity living under the shadowy glory of its esteemed past slogan: ‘The Giant Of Africa’. Come to think of it, the genesis of what made Nigeria great in the 60s and 70s would have to be looked into. Then, we’ll comprehend how downfall emanated from. Before the dependence on oil, Nigeria, endowed with abundance of natural and human resources, had a diversified economy. This was back in the 50s, 60s and 70s (colonial and post-colonial periods). The northern region had the great groundnut pyramid. The Eastern region was resourceful in terms of palm produce. The west had in abundance cocoa. It was crystal-clear agriculture was the main-stay of the Nigerian economy. The diversity gave room for sustainable economic development. The regional governments were able to lend their hands of co-operation with people whose character in the fields of agriculture were authority to create policies that would lead to the steady growth of the economy. We can see the role of education being played out.
Country Studies writes:‘As economic development occurs, the relative size of the agricultural sector usually decreases. Accordingly, Nigerian GDP originating in the agricultural sector shrank from 65.7 percent in FY 1959 to 30.9 percent by 1976. The overall economic decline reversed this trend, and by 1988, 39.1 percent of GDP was derived from agricultural activity. The contribution of the agricultural sector increased 3.8 percent yearly between 1983 and 1988, and the percentage of export value in agriculture grew from 3 percent in 1983 to 9 percent in 1988, although much of this growth resulted from the fall in oil export receipts. Food production also increased rapidly during the 1980s, especially after exchange-rate reform restricted food imports in 1986.’(http://countrystudies.us/nigeria/57.htm)
It is crystal-clear that the lack of continuity in maintaining the feat agriculture had contributed to economy (of course, due to the ‘disconnect’ in bringing about continued education-orientated policies to continually improve the economy through agriculture between the governments of the times and concerned experts). As a result, the economy of Nigeria is today on the brink of an apparent collapse as ‘The oil-price’ reports Focus Economics,’ shock blow to the country's FX earnings and fiscal revenues are major risks ahead. Focus Economics panelists see GDP contracting 2.5% in 2020, which is down 0.5 percentage points from last month's estimate, and growing 2.0% in 2021.’ With the devastating pandemic, the corona Virus, COVID-19, Focus Economics analyses the present economic situation: ‘Nigerian Economic OutlookThe coronavirus pandemic, lockdown measures put in place in major economic hubs, and depressed global crude prices have completely derailed the economy’s already-fragile recovery from its 2016 recession. On the heels of the oil price crash in March, the private sector PMI plunged to a survey record low in April as evaporated demand crushed output and new orders. Notably, disruptions to supply chains and tighter FX liquidity are also likely to stoke inflationary pressures. This, coupled with authorities’ indication of abiding to the OPEC+ agreement struck in April to cut output in May and June, will be pummeling the economy in Q2.
In a bid to ease the economic pain, authorities started to gradually lift the lockdown in early May. Although this should enable an improvement in activity in the vast informal sector, possible retightening due to continued health concerns could exacerbate the economic impact.’(https://www.focus-economics.com/countries/nigeria, May 26, 2020)