Political and Economic Systems Compared - PDF

## Politische und Ökonomische Systeme im Vergleich ### 8.1 Wirtschaftsbündnisse und Freihandelsabkommen **NAFTA** - The North American Free Trade Agreement includes the economic space between the USA, Canada, and Mexico. - It was established in 1994 (renewed in 2018/2019) as a free trade zone. - I...

## Politische und Ökonomische Systeme im Vergleich ### 8.1 Wirtschaftsbündnisse und Freihandelsabkommen **NAFTA** - The North American Free Trade Agreement includes the economic space between the USA, Canada, and Mexico. - It was established in 1994 (renewed in 2018/2019) as a free trade zone. - It has shaped the economic structure of the involved countries in the following way: The competitive situation for Mexican farmers has worsened dramatically due to their inability to compete with subsidized agricultural exports from the USA. - The outsourcing (offshoring) and near-shoring of production-intensive industries to Mexican Maquiladoras has increased. **Maquiladoras** - These are factories in the Mexican border region to the USA where international corporations organize the final production of their goods for the global market under miserable working conditions. - Factors that make this location attractive for international capital are the low wages, the lack of or limited trade unions, and harsh working conditions. - Most employees are women. **Regionalismus trotz Globalisierung** - GASP, WWU, the European Financial Stabilization Facility (EFSF), and the European Stability Mechanism (ESM) are important for understanding the creation, functioning, and current developments in the EU. - It’s not a question of whether this applies to the world, but also to EU citizens. - The European Union is the most well-known economic alliance and an example of regional integration. - Around the world, various regional associations exist, but cooperation between countries is usually less intensive than for the EU. - These economic alliances can be organized in different ways with varying intensity of integration. - Some form a common market (single market) while other alliances encourage trade by agreeing on common tariffs. - The most important alliances are the EU, NAFTA in North America, and ASEAN in Southeast Asia. - The integration of the member states within these regional blocs strengthens their interconnectedness, but it also makes it more difficult for non-member states to access their markets. - The goal of all these alliances is to maintain political stability and to increase economic growth through trade facilitation and to achieve the goals of free trade (in contrast to protectionism). **NAFTA and NAFTA 2.0** - The space of NAFTA forms the core for a complete trade zone for North, Central, and South America (FTAA = Free Trade Area of the Americas). - According to US plans, the FTAA should stretch from Alaska to Tierra del Fuego. - However, its implementation hinges on the varying visions and priorities of the 35 potential member states. - Especially Venezuela and Bolivia see it as an instrument of US imperialism and, along with Cuba, have created a “Trade Agreement of the Peoples” with other Latin American countries. - Thus, they are trying to establish a counter-project to the FTAA. - Beyond mutual trade and trade agreements with Sucre, a “Bank of the South” has already been established as a counterbalance to the IMF and the World Bank. - Recent developments in US trade policy include criticism of the NAFTA agreement. - The US President Trump’s slogan “America First” also affects the North American Free Trade Zone. - The USA is seeking a renegotiation of the trade agreement with Mexico and Canada. - The goal is to reduce the US trade deficit. **MERCOSUR** - The Mercosur (Mercado Comun del Sur) was founded as a common market of the South in 1991. - After the European Union, it is the most important regional organization in South America. - It comprises a customs union and permanent members Argentina, Brazil, Paraguay, Uruguay, and Venezuela (currently suspended). - Chile, Bolivia, Colombia, Ecuador, and Peru are partner countries and form a customs union since 2000. - Free movement of goods and services should strengthen both the economic and political integration processes of the member states. - It should also serve as a springboard for their participation in global free trade. - However, due to the differences in structures among member states and numerous solo initiatives, the expected economic dynamism has failed to materialize. - This is particularly evident in currency crises such as the one in Argentina in 2001, when the trade balances of the member states were thrown into chaos. **ASEAN** - The Association of Southeast Asian Nations is a group of states, which includes several organizations. - The AFTA (ASEAN Free Trade Area) was established in 2003 as a reaction to the Asian financial crisis in 1997/98, when the ASEAN states were severely affected by the crisis. - Brunei is a sultanate, Malaysia a constitutional Monarchy, Singapore is a city-state republic, Burma/Myanmar features a democracy with military influence, Cambodia features a constitutional Monarchy, Vietnam is ruled by a communist single-party state, and the Philippines is a democracy. - The economies are very diverse, ranging from the Tiger state Singapore, the oil producers Brunei and Malaysia, to Cambodia as an agricultural state or Vietnam’s model of a socialist market economy. - The common goal in the AFTA is to remove trade barriers to create an economic area encompassing about 600 million inhabitants, which is attractive to international investors. - Many ASEAN states are members of the APEC (Asia-Pacific Economic Cooperation). - This Asia-Pacific economic community is working to establish a free trade zone in the Pacific region. - Together, its 21 member states form the fastest-growing world economic area and already generate half of global economic output. **ECOWAS, COMESA – Zarte Versuche in Afrika** - The African continent is also trying to strengthen the position of its member states in global competition through regional economic alliances. - ECOWAS (Economic Community of West African States), COMESA (Common Market for Eastern and Southern Africa), and SADC (Southern African Development Community) are the largest associations. - However, they are not comparable with other global examples. - The model is the EU, but African states are often politically divided and economically structured quite differently. - The principles of a customs union do not apply to all members. - The idea of a common currency in the form of the Eco has not been implemented. - The multitude of institutions and the frequent parallel membership of member states are obstacles to progress. - In some cases, individual states like Nigeria in ECOWAS or South Africa in SADC dominate too strongly. - The West African Economic Union is the most progressive institutionally with a common West African Parliament, a Court of Justice, and a regional military force (ECOMOG) for intervention in potential civil wars. - Are these alliances useful and helpful in solving African problems? **CETA and TTIP** - A free trade agreement (CETA = Comprehensive Economic and Trade Agreement) was concluded between Canada and the EU in 2016 and came into force provisionally in 2017. - The agreement still needs to be ratified by the national parliaments of the EU member states for full implementation. - The agreement offers businesses in the involved countries significant trade and tariff facilitation. - The core of the agreement is the harmonization of laws and standards in the involved countries. - Critics see it as a major disadvantage to agriculture, environmental and consumer protection. - They fear the import of meat produced with hormones and the weakening of labeling regulations for genetically modified foods. - Particularly controversial is the investment protection for companies. - As such, lawsuits against states are possible when an investor is not “fairly and justly” treated in a certain country. - The definition of “fair” and “just” is subject to interpretation. - Special courts are the ultimate arbiters of investor-state disputes and must determine the proportionality of damage compensation and, if necessary, grant it. - These investment special courts are not obliged to refer to national legal principles. - As things stand, many aspects are unclear, and legal uncertainty is feared. - It is believed that CETA could pave the way for the similarly contested trade and investment agreement (TTIP) between the USA and the EU. **TTIP (Transatlantic Trade and Investment Partnership)** - Aims to simplify trade between the USA and the EU. - Companies based in the USA or the EU should be able to sell their goods in the transatlantic space without restrictions. - Tariffs, quotas, and bureaucracy should disappear. - Expectations are for higher export figures, greater economic growth, and fewer unemployed. - The criticism is similar to the one concerning CETA. **Politische und ökonomische Systeme im Vergleich** **Handelskriege und ich? Sieger und Verlierer** - When we shop we rarely think about the origin of our products, who produced them, and under what conditions. - When we talk about trade wars these are not meant to be military confrontations on land or at sea, but rather economic trade measures between countries or economic blocs. - The reasons for these trade wars can vary. - Countries could: - Aim to protect local industries from foreign competition through protectionist measures. - Build up a domestic export industry before opening up to international competition. - Act against dumping (selling goods significantly below cost), where products flood the global market at a loss. - There are numerous examples of trade wars, but those between the USA, Europe, and China are particularly important: - The banana regulations favored banana imports from African, Caribbean, and Pacific states (AKP-states as former European colonies) and disadvantaged the large South American exporters Chiquita, Dole, and Del Monte. - This resulted in the EU being condemned to pay fines several times. - The EU prohibits the import of hormone-treated meat from third countries due to scientific evidence showing the potential for health risks. - The WTO ruled against this assumption and allowed the USA to impose tariffs on EU products. - However, hormone-treated meat is still not being exported to the EU. - After the economic crisis following the September 11 attacks, the Bush administration imposed high tariffs on steel imports to the USA. - It was designed to protect the domestic iron and steel industry from foreign competition. - Textiles and anti-dumping between the EU and the People’s Republic of China: - Since China’s accession to the WTO, the country has also flooded the EU and USA with textiles. - This led to the implementation of import quotas for certain types of textiles from China. - EU and US accuse China of dumping their goods. - European trade unionists see this as an even greater threat to the domestic textile industry. - Globalization critics also speak of social and environmental dumping. - This means that there is a special competitive relationship between goods in the global market. - European goods are produced in workplaces with social and labor laws, while cheap products are manufactured on the basis of the absence of these safeguards. - Environmental dumping describes the cost savings achieved by exploiting different environmental standards in different countries. - Those who benefit from such developments are international traders and consumers through the offer of cheap products. - Those who lose out are those in low-wage jobs worldwide, including in industrialized countries. - The minimum standard would thus be social standards. **8.2 USA – Supermacht mit „angekratztem“ Image** **Kometenhafter Aufstieg** - The rise of the 13 former English colonies on the edge of the English world empire to the major economic power in the 20th century and, ultimately, to the superpower, is unique. - The adaptable democratic system, abundant natural resources, and the hard work of immigrants made the USA the world’s leading economic and military power. - Even above the dusty surface of the moon blows the U.S. flag. - The USA became the only superpower after the end of the Cold War and the collapse of the Soviet Union, and the Western-democratic, market economy principle prevails. **Stars and Stripes** - This is the nickname for the flag of the United States of America. - The 13 stripes stand for the 13 English founding colonies, and the 50 stars stand for the current states of the USA. **Nach der Unabhängigkeitserklärung** - The 13 English colonies declared independence from Great Britain in 1776. - The USA became victorious over the English colonial troops in 1783. - The main focus was first on expansion westward. - The Mississippi was reached after the displacement of Native Americans and the purchase of the French colony of Louisiana. - The newly introduced means of transportation, the railway, facilitated the rapid development of the Pacific coast. - In wars against Mexico, the USA conquered the southwestern states from Texas to California. - The border with present-day Canada was defined in disputes with the British. - In 1867, Alaska was purchased from Russia. - At the end of the 19th century, with the acquisition of the Hawaiian Islands, Cuba, the Philippines, and Puerto Rico, the USA expanded outside the American continent for the first time. - They began to exert massive influence in Latin America. - The rest of the world was already largely colonized by the Europeans. - In both World Wars, the USA played a decisive role in liberating Europe from advancing Japan. **Kalter Krieg und Rüstungswettlauf** - After World War II, Eastern Europe was occupied by the Soviet Union and forced into the Warsaw Pact (WAPA). - Western Europe and the USA felt threatened by communism and protected themselves through NATO. - On 4 April 1949, the twelve founding members signed the North Atlantic Treaty. - The “Iron Curtain” separated the two systems in Europe (→ Кар.1.1). - The ideological contradictions between the superpowers led to a continuous arms race. - Nuclear deterrence prevented direct confrontation, but wars were fought in other countries. - The USA intervened with weapons or military aid, even deploying troops in Korea and Vietnam on the side of communist underground movements. - The communist side received support from the USSR, its Eastern European satellites, and the People’s Republic of China. - Military spending had reached a level not seen again until 2005. **Zeitraum** | Zeitraum | Staaten | |---|---| | 1960-1969 | Bolivia, Brazil, Dominican Republic, Indonesia, Cambodia, Congo, Cuba, Laos, Vietnam | | 1970-1979 | Angola, Argentina, Chile, El Salvador, India, Jordan, Pakistan, Peru, Timor | | 1980-1989 | Afghanistan, Argentina, Grenada, Haiti, Iraq, Iran, Lebanon, Libya, Nicaragua, Panama | | 1990-1999 | Haiti, Iraq, Yugoslavia, Colombia, Kuwait, Saudi Arabia, Serbia, Somalia, Sudan | | 2000-2009 | Haiti Iraq, Venezuela | | ab 2010 | Haiti, Iraq, Afghanistan, Libya, Syria | **Michail Gorbatschows, reform efforts led to the dissolution of the Soviet Union in 15 successor states, thus ending its dominance over the countries of Eastern Europe. Therefore, the United States of America remained the only superpower. In their new self-understanding as “World Police”, the USA focuses on the fight against emerging terrorism and the states that support it – especially since the destruction of the World Trade Center on September 11, 2001, with more than 3,000 fatalities. ** - Due to their actions, such as in North Korea or Iran, the USA is viewed as an enemy in many Islamic countries even more so than due to the decades-long support for Israel in the Middle East conflict. - Secondly, the USA is trying to stop the development of nuclear programs in other countries, such as North Korea. - The approach of the US, which often takes place without the consent of the United Nations, is criticized. - This applies to the relentless pursuit of economic interests, such as control over the oil reserves of the Middle East. - In Islamic countries, but also increasingly in Europe, this policy is met with growing opposition. - The 2022 Russian invasion of Ukraine threatens to return to a time long considered over. - The USA is by far the largest military and financial supporter of Ukraine. **Der Handel mit Waffen – ein gutes Geschäft** - More than 2.1 trillion USD has been spent on armaments globally in recent times, with 40% going to the USA. - This is 13 times the value of international development aid or 330 times the amount spent by the UN on peacekeeping measures. - The USA spends more on armaments than the following eight states taken together. - Besides Russia, the USA is also one of the largest arms exporters in the world. **Rüstungsexporteure** | Rang | Staat | Weltmarktanteil in % | |---|---|---| | 1 | USA | 39,0 | | 2 | Russia | 19,0 | | 3 | France | 11,0 | | 4 | China | 4,6 | | 5 | Germany | 4,5 | | 6 | Italy | 3,1 | **Rüstungsimporteure** | Rang | Staat | Weltmarktanteil in % | |---|---|---| | 1 | India | 11,0 | | 2 | Saudi Arabia | 11,0 | | 3 | Egypt | 5,7 | | 4 | Australia | 5,4 | | 5 | China | 4,8 | | 6 | Qatar | 4,6 | **Noch unangefochtene Wirtschaftsmacht Nummer 1** - In 2022, the USA’s real GDP amounted to almost 25 trillion USD, putting it in second place behind China, which has a GDP of slightly over 30 trillion USD. - The EU, with a GDP of 24 trillion USD, has fallen to third place due to Brexit. - The USA continues to be in the top 10 in terms of GDP per capita. | Rang | State | Nominal GDP per capita | Rank | State | GDP in PPP per capita | |---|---|---|---|---|---| | 1 | Luxembourg | $127,672 | 1 | Luxembourg | $141,587 | | 2 | Singapore | $131,425 | 2 | Ireland | $131,034 | | 3 | Norway | $92,645 | 3 | Ireland | $113,674 | | 4 | Switzerland | $92,434 | 4 | Qatar | $113,674 | | 5 | Qatar | $82,886 | 5 | Switzerland | $84,468 | | 6 | Singapore | $79,426 | 6 | Norway | $78,127 | | 7 | USA | $75,179 | 7 | United Arab Emirates | $77,272 | | 8 | Iceland | $73,981 | 8 | USA | $75,179 | | 9 | Australia | $66,407 | 9 | Brunei | $74,195 | | 10 | Denmark | $65,713 | 10 | San Marino | $72,069 | | 11 | Australia & New Zealand | $63,250 | 11 | Hong Kong (SAR) | $69,987 | | 12 | Canada | $56,794 | 12 | Denmark | $69,845 | | 13 | Sweden | $56,361 | 13 | Netherlands | $69,714 | | 14 | Netherlands | $56,297 | 14 | Taiwan | $69,500 | | 15 | Israel | $55,358 | 15 | Austria | $66,680 | | 16 | Austria | $52,061 | 16 | Iceland | $66,466 | | 17 | Finland | $50,818 | 17 | Andorra | $65,371 | | 18 | Belgium | $50,597 | 18 | Sweden | $63,877 | | 19 | Hong Kong (SAR)| $49,699 | 19 | Germany | $63,834 | | 20 | Germany| $48,397 | 20 | Australia | $62,191 | - Among the 20 largest companies in the world in 2021, nine were US-American – Walmart being the largest with a revenue of 573 billion USD, which is about 14 times the revenue of the largest company in Austria, OMV, (ranked 386). **Middle Class Squeeze** - In the past decade, there has been “squeezing of the middle class" in the USA. - The result of rationalization measures in industry - e.g., the ailing auto industry - has left many people unemployed or simply losing ground in terms of wealth as the cost of living and healthcare has risen faster than wages. - Large companies increasingly feel responsible to their shareholders and pursue maximum profits, which can lead to job losses or stagnant wages for workers and employees. - Top managers benefit most from the recent developments, with their income rising significantly faster than average. This is a trend that can also be observed in Europe. **Staatsschulden und Importüberschuss** - The high level of government debt and the persistent trade deficit in theUSA are cause for concern. - The high budget deficits can be attributed to increased defense spending and war budgets, tax cuts for businesses introduced during the Bush Jr. and Trump administrations, the financial and economic crisis of the 2000s, and the COVID-19 crisis. - The Obama healthcare reform increased spending. - In 2021, government debt was more than 28 trillion USD, an increase by more than 50% within just six years. | | USA | Austria | |---|---|---| | Total Debt | $28.110 trillion | €334 billion | | Budget Deficit| $2.508 trillion | €23.9 billion | | Deficit calculated as percentage of GDP | 10.3% | 5.9% | | Debt calculated as percentage of GDP| 127,0% of GDP | 82,8% of GDP | | Debt per capita | $84,618 | €37,304 | **Who benefits from the wealth?** - With a GDP per capita of $75,179 in 2021, the USA was the eighth richest country in the world, seven places ahead of Austria. - However, the distribution of this wealth is highly unequal. - The land of unlimited opportunity has the most millionaires and billionaires, but many people also have to fight for survival on a daily basis. - The richest 20% of the population earns about half of the total income, while the poorest 20% earns only 3.5%. - The real income of the latter has actually fallen over the past twenty years. - The gap between rich and poor has widened. - The minimum wage in the USA has been fixed at $7.25 / hour since 2010. - However, this minimum wage can be exceeded by individual states. - It’s $15 / hour in California in 2022. - Many workers often need a second or third job to make ends meet. - People of color, especially African Americans, are most affected by poverty, followed by Hispanics. - According to official figures, 13% of the US population lives below the poverty line set by the state. - In reality, however, close to 20% are affected. - In contrast to Austria, there is no compulsory health insurance in the USA. - As a result, almost 50 million Americans were uninsured. - If an uninsured person needed medical treatment or hospitalization, they had to pay for it themselves. - This was simply unaffordable for many people. - The healthcare reform initiated by President Obama, aimed at achieving universal healthcare, needs to become more efficient. - The USA spends almost twice as much on healthcare per head of population as Austria or Germany. - The nation was deeply divided on this issue, as the reform efforts coincided with the financial crisis of 2008 and the huge public debt. **Wer profitiert vom Reichtum?** - With a GDP per capita of $75,179, the USA was the eighth richest country in the world in 2021, seven places ahead of Austria. - This wealth is unevenly distributed. - In the land of unlimited opportunities, there are the most millionaires and billionaires, but also a large number of people who are struggling to survive on a daily basis. - While the wealthiest 20% of the population earns roughly half of the national income, the bottom 20% only earns about 3.5%. - For the latter, their real income has actually fallen over the past two decades. - The gap between rich and poor has widened. - The established minimum wage in the USA has been $7.25 / hour since 2010. - But this minimum wage can be exceeded by states. - In California, for example, it is $15 / hour in 2022. - Many workers often need a second or third job to make ends meet. - People of color, especially African Americans, are disproportionately affected by poverty, followed by Hispanics. - Based on official statistics, 13% of the U.S. population lives below the poverty line established by the government. - However, in reality, nearly 20% are affected. - Unlike Austria, the USA has no compulsory health insurance system. - As a result, nearly 50 million Americans were uninsured. - If an uninsured person needed medical treatment or hospitalization, they had to pay for it themselves. - This was simply unaffordable for many people. - The healthcare reform initiated by President Obama, aimed at achieving universal healthcare, needs to become more efficient. - The USA spends almost twice as much on healthcare per capita as Austria or Germany. - The nation was deeply divided on this issue, as the reform efforts coincided with the 2008 financial crisis and staggering government debt. **Die Arbeitslosigkeit** - Unemployment peaked during the COVID-19 pandemic in 2021 but has reached a fairly low level of 5.4% (EU: 7%). - Half of the newly created jobs are McJobs, poorly paid positions for the less qualified. - Opportunities for social advancement often lie with professional sports and the music industry. - Athletes can earn tens of millions of dollars in basketball and American football. - Ghetto music, rap, and pop music produce stars from the fringes of society. - This “American Dream” comes true for very few, however. - The constant increase in government debt and the persistent trade deficit are cause for concern in the USA. - The high budget deficits stem from increased defense spending and war budgets, tax cuts for businesses introduced by the Bush Jr. and Trump administrations, the financial and economic crisis of the 2000s, and the COVID-19 crisis. - The Obama healthcare reform also increased spending. - The debt level was over $28 trillion in 2021, and it has increased by more than 50% within the past six years. | | USA | Austria | |---|---|---| | Total Debt | $28.110 trillion | €334 billion | | Budget Deficit| $2.508 trillion | €23.9 billion | | Deficit calculated as percentage of GDP | 10.3% | 5.9% | | Debt calculated as percentage of GDP| 127,0% of GDP | 82,8% of GDP | | Debt per capita | $84,618 | €37,304 | Often, the US budget is exhausted one or two months before the end of the year, leading to the following political procedures: - The government has to request an increase in the budget from Congress. - The opposing party attempts to attach conditions to its approval. At the end of 2018, a disagreement led to weeks of negotiations, during which government officials went without pay. - Rating agencies consider a “downgrade”, a lowering of the USA’s creditworthiness. - This would result in higher interest rates. - China is now the largest foreign creditor, holding about 1.2 trillion USD of US government debt. **Weakness in the American economy include** - the steadily increasing imports. - There is already a large and growing trade deficit with major trade partners. - Almost 20% of imports come from China, which has overtaken the USA as the world’s largest exporter over the past few years. **End of the Supermacht USA?** - The USA seemed like an unbeatable military, economically competitive, and diplomatically dominant superpower in a unipolar world after the collapse of the Soviet Union. - But gradually, a multipolar world is taking shape a world with numerous economic poles and a higher degree of interdependence. **The challenges facing the USA** - especially its role in the Ukraine war, are being closely observed by the rest of the world, especially by China and US allies, as it is also about whether the democratic order of values or authoritarian systems will prevail. ### 8.3 VR China und Indien – Zwei neue Wirtschaftsmächte **Indien and the People’s Republic of China (VR China)** - are two emerging economic powerhouses of the 21st century. - They have been experiencing continuous economic growth for years, even during the global financial crisis. - Together, they are responsible for a substantial portion of global economic growth. - Their combined population is roughly 2.7 billion people. - It is unclear whether there will be intensified competition between these two economic powers in the future or whether cooperation will be intensified by means of trade agreements. **The Economic Development of Both Countries** - **VR China**: The People’s Republic of China was established in 1949. - The Communist Party of China (CPC) closely aligned itself with the USSR. - In the economic sphere, this meant the collectivization of agriculture, nationalization of banks and industries, and introduction of five-year plans. - In 1978, agriculture was reformed. - Farmers were now allowed to sell their surplus production on nearby markets. - This successful model was applied to industry within a few years. - This resulted in significant growth and further confirmed the success of this model. - The next major change occurred in 1992 with the establishment of the “Socialist Market Economy”. - The expansion of the private sector and the admission of foreign investors into special economic zones (Shenzhen, Xiamen, Hainan, Zhuhai) in the form of joint ventures further ignited economic growth. - **India**: - The Indian economy was shaped by British colonialism, which prevented industrialization and only extracted raw materials. - After the British withdrawal in 1947, India was an agricultural country. - Five-year plans were used in an attempt to stimulate the economy from the 1950s onwards. - The “New Economic Policy” (NEP) focused on agriculture in the early stages. - Plans 2 and 3 aimed to drive industrialization. - Heavier industries and basic industries were prioritized by the state. - Meanwhile, a simple private domestic “cottage industry” developed alongside. **Problems and Challenges in India** - Many of the problems affecting India’s economy today have existed for a long time. - Examining the country’s current population reveals a high illiteracy rate. - The state’s education system does not yet reach all segments of the population. - Poverty is placing a heavy burden on the state as nearly 22% of Indians live below the poverty line. - The rapid population growth continues to pose a serious threat. - Agriculture remains highly dependent on the monsoon, resulting in an economic dilemma for 600-700 million farmers who comprise a small portion of the GDP. - The situation in the agricultural sector has become particularly drastic in recent years. - Farmers are increasingly going into debt as rising costs for seeds, fertilizer, and pesticides are exceeded by dwindling income. - The consequences of the Green Revolution have led to an estimated 10,000 suicides per year due to the desperate situation: Loans can no longer be repaid. - The problems of agriculture are responsible for a major rural exodus to urban centers. - New arrivals often end up in slums. - Several factors hinder the economic development of the country: - Widespread corruption (India is ranked 86th out of 180 countries in the 2022 "Transparency International” ranking). - Slow and cumbersome bureaucracy also hinders economic growth. **Problems and challenges facing the People’s Republic of China** - Strong economic growth also creates many difficulties. - The high demand for raw materials and intermediate goods cannot be met in all cases. - This leads to price increases and, consequently, to domestically triggered inflation. - In attempts to solve this predicament, the VR China launched a large-scale economic “invasion” of Africa. - Following the USA and the EU, it has quickly become the third most important trading partner for Africa. - The People’s Republic of China is quickly concluding agreements with African governments and private companies and providing billions in loans. - Chinese companies play a preferential role in major projects: - VR China builds roads and railways but also schools, hospitals, government buildings, football stadiums, and airports. - As many as 1 million Chinese workers are estimated to be in Africa. - VR China needs Africa as both a market to sell its mass-produced goods, and to meet its own high demand for raw materials. - China’s activities are particularly concentrated in Angola and Ethiopia, where it receives more crude oil from Angola than from Saudi Arabia. - Another problem is the low efficiency of Chinese state-owned enterprises, for which reason they are increasingly being transferred to private hands. - This exception does not apply to the entire media sector as well as energy and telecommunications. - Over 150 million construction workers and factory workers, mostly from the economically underdeveloped rural areas of central and western China, are employed in the country. **Regional disparities** - Regional disparities are pronounced in the VR China. - The eastern coastal regions (Shanghai and Fujian, for example) enjoy a high per capita income, while the value declines steadily toward the west. - Per capita income in Shanghai is five times higher than in the western provinces. - Regional disparities also exist in India, but they are less pronounced than in China. - The rich areas are in northwest India, especially Mumbai and Delhi, and in the south, with its emerging cities of Hyderabad and Bangalore. - There are many poor regions in the north and east. - The development gap is getting wider in both countries. **The Future** - The ongoing economic development and current problems of "Chindia” are naturally of great interest. - The question is in which direction both countries will develop in the future and what plans their respective governments have. - One major concern is the deepening of the social gap. | | | |---|---| | 0.0 | Absolute Equality| | 100 | Absolute Inequality | - The GINI coefficient in China is the second highest in the world, so it is not surprising that only 1% of the population owns 40% of national wealth. - Instead of building houses, office buildings and shopping centers are being built. - As a result, more challenges are expected in the housing market in the future. - The situation in India is similar, but not as extreme. - However, about 30% of the Indian population lives below the poverty line, while it is about 6% in China. - Both China and India must take care that inflation does not rise too sharply. - Strong economic growth often leads to price increases, especially in the food sector. **Politische und ökonomische Systeme im Vergleich** - India faces a similar need to carry out reforms. - Infrastructure, particularly a reliable power supply, needs to be improved across the country. - The bloated bureaucracy, with its countless regulations, must be streamlined to facilitate successful business start-ups. - The already well-functioning Indian IT service industry, with the addition of thousands of new engineers each year, is to be expanded through even greater software production. - Communication, financial services, and business applications will be prioritized. - Tens of thousands of new jobs are being created in this industry every year, and companies such as Tata Consultancy Services and Wipro Technologies, both operating in the information technology sector, are well-known. - Alongside numerous new domestic