Rivoli Part II

The fluctuation in the central location of the cotton industry illustrates how the global economy is ever changing. Considering that success in the cotton industry is highly dependent on a cheap and sustainable labor force, this fact is not surprising. A country is not able to compete unless it is willing to take advantage of desperate workers, i.e. Asia, or if the country is able to lower costs through unfair trade practices that are supported by the government, i.e. the United States.

My beliefs on the matter of industrialization are best outlined by pg. 119 of Rivoli's book, "The countries that have lost the race to the bottom are some of the most advanced economies in the world today, but they share a common heritage in the cotton mill and the sweatshop as the ignition switch for the urbanization, industrialization, and economic diversification that followed, as well as for the economic and social liberation of women from the farm." Industrialization is a necessary evil in the world today. Yes, it has its downsides such as pollution and the exploitation of workers in some countries, but through industrialization comes innovation and in turn a better world for the country as a whole. Additionally, through the implementation of a strong, central government (with these ideals in mind) it is possible to eliminate much of the pollution associated with industrialization, which is why the level of pollution is much higher in countries such as China than it is here in the United States. Although it is not reasonable to think that a country will always choose the more righteous path of being "greener", the sheer possibility furthers the case for industrializations benefits outweighing its costs.


The passage that was most interesting to me was when Rivoli raises this interesting point, "The argument that the economic development and income gains that result from trade will lead to better outcomes for labor and for the environment relies first on the assumption that higher incomes will lead citizens to demand these greater protections--a reasonable assumption that had empirical support. But it also relies on the assumption that someone is listening to the citizens’ demands. In brief, without some way of making their voices heard, that is, in the absence of democracy, it is more difficult for citizen demands, whether for cleaner water or minimum wage, to work their way into law”. This point that he raises directly connects to my belief that as long as their is a strong central role by a relatively uncorrupt government in the implication of these restrictions and guidelines, the potential gain from industrialization is far greater than the potential cost.

Transportation in Hong Kong

Water transportation:

• The Port of Hong Kong is one of the leading financial centers in the world. It is one of the largest capitalist areas in the region, since it was owned by Britain until 1997. It now has the 6th largest stock market in the world. Most of Hong Kong's imports are food and raw materials, while most of their exports go to mainland China.

Railroad transportation:

• Freight railroads: as of now there are no longer freight railroads in Hong Kong.
• Passenger railroads: the first tram opened in Hong Kong in 1904. Shortly after in 1910 the Kawloon-Canton British railway opened. Then in 1979 the first rapid transit system in Hong Kong opened, the MTR and it still exists today.
• Highway: the main highway in Hong Kong is Route 9. It was originally constructed to connect the new territories together.

Air transportation:

• International airports: the international airport in Hong Kong is Hong Kong International Airport and it is located in Chep Lak Kok.
• Other airports: their is also an airfield in Shek Kong which is known as the Shek Kong Airfield.

How the Shipping Container Made the World Smaller and the World Economy Bigger

Throughout the many interesting points that were raised by Marc Levinson in Chapter 1, the most interesting to me was how the ability to be able to support the transferring of the shipping containers furthered the emergence of some now very booming cities such as Seattle and Busan, while at the same time it took away much of the shipping traffic from cities such as New York City and Liverpool. Not only did the container revolution help cities grow due to this reason, it also helped other cities such as Hong Kong and Los Angeles rise into huge industrial cities because of the sudden and dramatic decrease in shipping expense, whether it was shipping raw materials in or shipping finished goods out. In addition to the this change lowering prices due to the shipping side of the equation, it also helped to lower the prices due to shipping firms being able to go from "armies" of workers to smaller, sleeker specialized groups who were able to ship through constantly expanding supply chains.

The connection between globalization and shipping containers is relatively obvious on some levels. It is very easy to understand that the ability of the world to be able to transport raw materials and finished goods far more efficiently around the world directly connects to the idea of making the world a "smaller place". By being able to do what would once take vastly more man power, as well as capital, with a much smaller and more productive system causes an obvious reduction in shipping costs and thus creates an environment that is much more world-trade friendly.

When considering the national income and employment of a country we must look at the equation for G.D.P. which equates to G.D.P.= Consumer spending + Investment spending + Government spending + Net Exports-Imports. In terms of the short run the container era led to a large increase in consumer spending, due mainly to the abundance of much cheaper goods now. In accord with the rise of consumer spending would also come to a large increase in investment spending due to the start up cost of purchasing the shipping containers. These two factors combined would lead to an overall rise in the total G.D.P. of the participating country. On the other hand in the long rung, it would be reasonable to assume that employment would decrease due to the new ability to do what once took a large number of people to do with a few specialized individuals. Additionally, the ease of world trade would lead to an increased number of exports, so if a nation was not able to keep up with the rest of the world in terms of trade this nation would also experience job loss due to the increase in goods coming from other countries, instead of from within.

The Travels of a T-Shirt in a Global Economy Part 1

In the typical idealized, pure market there are a large number of firms in the market all with homogenous goods, and thus all competing fairly and for a profit that is not off the charts. The market Rivoli discusses differs from this because with the help of the government the United States cotton farmers are able to compete in a market that they would otherwise not be able to. They are able to operate inefficiently (i.e. much higher labor and land prices in the United States in comparison to other agricultural nations) and still  not have to worry about the consequences due to these enormous subsidies. Thereby ensuring their place of dominance in the cotton industry.

An interesting example of how culture can sometimes interact, and at the same time interfere, is in the story of Eli Whitney and his revolutionary machine for the cotton industry. At this time in the United States, thanks to Mr. Whitney's machine, the United States was able to further itself from its cheaper competitors in India and China. But one would wonder why China and India didn't choose to accept the same technology and thus advance right along with the United States at the time. The answer is simple; India and China are two countries who are very rooted in their old ways, which eventually led to their choice to lose efficiency in the name of remaining loyal to their originality, and at the same time resistant to the ever changing new world, much like Schweder mentions in his prophecies as well.

What comes as the biggest surprise to me is even after international scrutiny of the unfair use of subsidies by the American government, there has been no falter. In fact, as mentioned in class, after being sued by Brazil over unfair trade practices due to these subsidies the United States did not stop or even slow down, rather they chose to issue more subsidies in the United States, and shockingly to Brazil too. A sort of large scale bribery one might say. It is shocking that in a country so adamantly supportive of the free market system that we would support something like this as much as we have. But I guess in the end, cash is king.

"HK Island Home Prices Hit Record"

This article describes the surge in the Hong Kong flat market, which they say can be attributed to the European Central Bank pumping 10.14 HK$ into the economy. Considering that Hong Kong is home to many middle to high class families it is no surprise that the effects are seen here. The article also details that these families in an attempt to get rid of the risk of holding on to something as sensitive as cash are investing it real estate around the area. This sudden interest has caused prices to go from HK$9,500 per square foot in the end of 2011 to HK$10,400 per square foot in this past March.

http://www.scmp.com/portal/site/SCMP/menuitem.2af62ecb329d3d7733492d9253a0a0a0/?vgnextoid=e18db6aa24386310VgnVCM100000360a0a0aRCRD&ss=Companies+%26+Finance&s=Business

This issue relates to the idea of government and investment spending having an effect on the total GDP of the area, and thus having an effect on the GDP per capita as well. By pumping a large amount of money into the economy the government has caused an increase in investment spending from the population of Hong Kong, and thus an overall better well being for some people not to mention a higher overall GDP per capita.

This issue is interesting because it is furthering the gap between the very wealthy and the less fortunate. Not everyone can be wealthy enough to accept these climbing housing prices, which results in a deeper segregation between the upper class in Hong Kong, and those who are not able to live there. This problem could be solved by taking steps to insure that this economic stimulus is finding its way to not only the upper end of the spectrum, but also to the people who may need it more. By doing so it would allow lower class citizens to live in Hong Kong, thereby increasing diversity, and eventually leading to a more prosperous and well balanced area.

The Social Responsibility of Business

Friedman's major themes connect to the idea that a business' ultimate goal is to increase profits and nothing more. He believes this so strongly in fact that he considers using any source of revenue for anything other than to pursue higher profits is "fraud". Not the fraud that we have grown so accustomed to in the business world, but even using this money in a charitable sense would also fall under this category of fraud. Friedman's new category of fraud refers to the central idea of his paper in which the executive of the company's ultimate goal is to increase profits and thus increase value to the stockholders, and any straying away from this path (whether for decent or immoral reasons) falls under the category of fraud. Friedman's cultural values are clearly on display here, which is already displaying one of his most flamboyant values which is: directness. Throughout the paper he does not smother his beliefs in kindness and sensitivity rather he goes add far as to refer to his colleagues as "schizophrenic". In fact the entire idea of his paper is one of the most easily debated topics I could imagine. Another value effortlessly on display is his belief in collectivism. Throughout the entire paper he makes countless references to the idea that it is the executive's responsibility to look out for the people in his corporation and not society as a whole. Higher profit margins equals happier stockholders, and that's the goal of his collectivist view and apparently of business as a whole, right? Personally I do in fact see a conflict between one's ultimate social responsibility and what is best for them in terms of the business world. If there wasn't such a conflict there would not be euphemisms such as "don't mix business with pleasure" and "don't do business with family" because inevitably every business person is faced with the choice of either doing what is best for the world or their social life, or what is best for their firm, and more often then not the choice is not one in the same. Higher profit margins will always come at a high price, and that is just the cost of living in the scarce world we live in. Adam Smith may be the father of modern economics, but the scarcity of Mother Nature will always reign supreme and due to that fact executives will be faced with the choice of helping the world, or helping their exclusive club for the unforseeable future.

Richard Schweder

In Richard Schweder's writing entitled, "Moral Maps, "First World" Conceits, and the New Evangelists", he lays out three prophecies forthcoming to the new world. The first being the prophecy labeled as:
"Prophecy 1: The West Is Best and Will Become Global (or at Least It Should Try to Take Over the World". This prophecy entails that by the ever growing process of globalization Western ideas and aspirations such as "a desire for liberal democracy, the decentralization of power, free enterprise, private property, individual rights, gender equality..."will begin to spread out all around the world, and eventually lead to economic growth in these now globalized nations.

The second prophecy that Schweder describes is titled "Others Will Have a "Piece of the Rock" and Hold On to Their Distinctive Culture Too". This section describes the idea that one does not have to give up their own spiritual values and cultural values if they choose to place value in the material world. This point on a broader scale refers to the belief that areas do not need to "Westernize" in order to be more productive, rather areas such as Africa can hold onto their own customs while at the same time integrating new technology. Thus implying the idea that globalization as well as economic growth would both be possible in this world without having to succumb to the cultural invasion of the Western world.

His third and final prophecy named "A Liberal Ottoman-Style Empire with Two "Castes" (Cosmopolitan Liberals and Local Non-Liberals)" describes a society operated on a "stance of neutrality" in the cultural world. A society he describes as similar to the Ottoman empire in which the world system is designed in such a way that it supports decentralized control in terms of cultural issues, which inevitably leads to promoting local culture expansion. This society will also be maintained by two groups of people whom he dubs as "castes". One group, similar to today's aristocrats, will be from a variety of world nationalities and will represent the world as the new global elites. Their role will be to run the global institutions and value cultural diversity as well as neutrality. The remaining caste in the world will play the role of separating their group from the world as a whole in order to further diversity at the same time. And last but not least,  a person would find themselves moving from one caste to the other, moving from one side of the spectrum (global liberalism) the the other (non-liberalism) several times in the course of their life.

Resources, Trade, and National Income

Natural resources:

• The natural resources of Hong Kong can be divided into three categories:

1. Metalliferous minerals and non-metalliferous minerals
2. Quarried rock
3. Sand deposits

Labor:

• Hong Kong has a population of roughly 7 million people, but despite this small population they came in ranking 15th in total exports in comparison to the rest of the world. The last statistics were in 2007 but at that time 3.46 million of the possible 3.65 people in the labor force were employed and of that only 117,800 were unemployed and only 75,500 were underemployed.

Capital:

• Not available

Exports:

• Hong Kong exported $362.1 billion of goods in 2008, and $92.3 billion in services

Imports:

• Hong Kong imported $387.9 billion of goods in 2008, and $45.8 billion in services

Exchange rate:

• One American dollar is worth seven Hong Kong dollars or HKD for short

Consumption:

• Not available

Investment:

• In 2010 the amount of investment on an inward flowing basis in Hong Kong was 8473.2 billion HKD

Government:

• Not available