Chapter 2、The theory of globalization and human capital flow
2.2 The globalization theory and human capital flow
2.2.1 Led by financial capitalism
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Section 2、The globalization theory and human capital flow
Since the phenomenon of globalization has been existed from ancient era, the watershed concept of globalization that most people think is from the computer invention in the 1970's by the information revolution. The origins of the term of "globalization" was first introduced by Theodore Levitt13 in 1983, used to describe the significant change in the international economy from 1965 to 1985, that is, goods, services, capital and technology in the global proliferation of phenomena in the fields of production, consumption and investment. The Organization for Economic Cooperation and Development (OECD) Economist S. Estuary in 1990 have also adopted this concept that refers to the production factors in speed and on a scale unprecedented in the global movement to seek an appropriate location and configuration14. Ohmae, the Japanese management master, noted in 1990 that the globalized economic activity through the transnational activities such as production, trade and financial integration. The enterprise or region plays a major push to build a new way of social organization that means the globalization eventually replacing the nationalization.
When capitalism entered the period of globalization in the late 1970, each country faces the fierce competition with each other and the third world country is to survive the crisis in this transitional phase. However, the trends of world globalization including the three characteristics are as follows15:
2.2.1 Led by financial capitalism
With the globalization, the funds of financial markets have the plenty of hot money between movements, like "casino capitalism". When the funds quickly flow between
13 Theodore Levitt, 1985. "Globalization of Markets" in the May–June 1983 issue of Harvard Business Review.
14 David Held 著，陳淑玲譯，《全球化大轉變（台北：偉伯文化事業出版社，2001 年 1 月）》，頁 2-13。
15 Suzanne Keller，《Sociology（台北：雙葉出版社）》。
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the country to country that will lead to the manipulation funds of Investment Company to create the beautiful earnings and profit by the short-term operation strategy replaced the long-term investment. Moreover, the industrial production investment will be reduced for their long-term strategy. This is the reason why the financial credit problems repeatedly and the financial crisis recurrence time shortened that brings the major trauma for the global economy such as the Lehman Brothers debt crisis of the United States in 2008.
2.2.2 The world division and North-South hemisphere differences
Although the funds are rapidly moving everywhere, they do not make the global benefit. In 1980, the international funds still focus on their three main sections that are North America, EU and East Asia. In 1960 and 1970, the western countries would like to reduce the production cost to invest overseas that indirectly caused third world countries becoming the newly developed countries. In the past, the lower price products from the East Asia and Latin America made the industrial products from Europe and the United States losing their competitiveness and causing
"de-industrialization" and massive unemployment eventually. The enterprise competitiveness of the advanced country is no longer dominated by the low cost, instead of the knowledge and innovation of information technology. All countries began to strengthen the personnel training and development.
2.2.3 Regional trends
Due to the Globalization, the funds movement also caused the regional economic association formed. There are two types of associations. One is formed of the Association by the neighbor countries, such as NAFTA, EU, ASEAN, TPP, APEC, TIFA, ECAP, and CJKFTA. When facing the strong competition between country and
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country, many countries take the neighbor cooperation to strengthen their regional competitiveness. The regional association is cooperated by economic way. Another association refers to area association in the country, such as the California Silicon Valley, and Peking Zhong-Guan-Cun（中關村）, Hsin-Chu Science Park, Taipei Nei-Hu Technology Park and New York Wall Street. In the globalization process, the regional association gathered special properties and special industry capacity that the local government can skip the central government and attract the external investment. Due to the human capital needs increased, it can combine the regional universities and research institutions to strengthen the human capital development and related commodity research which formed a special economic area based on the knowledge and information. Thus, it is the global industry innovation area, global flow, logistics, movement of financial and information flow to become the area of global localization.
The point of globalization is occurred by the period of the "post-industrial society". When the industry development was not the main structure of the economic development anymore, it was replaced by the formation of service industry and mass consumption. The white-collar workers are replacing the blue-collar workers and the knowledge economy becomes the important sources of social productivity, which is the character of so-called "post-industrial society". What are the differences between the
"industrial society" and "post-industrial society"?Bell, a sociologist, stated in 1973 that had five differences including the period occurred, industrial stages, means of production, social levels and productivity （ Tabl-3 The differences between the
"Industrial society" and "Post-industrial society"）.
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Table-3 The differences between the "Industrial society"and "Post-industrial society"
Industrial society Post-industrial society Period occurred 18 century - 1970 1970-present
Industrial stages Industry Service industry
Means of production Machines IT
Social levels Blue-collar workers White-collar workers Productivity Normal education Knoledge econmics
Ref Resources: The organization by myself.
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Section 3、The theory of knowledge, creative economy and human capital flow
Following by the perspective of globalization, the OECD proposed the view of
"Knowledge economy" in 1996. Gross domestic products（GDP） at present of the members of the OECD are over 50% coming from the knowledge-based industries16.The human resources development will go to the international division of labor and specialization through the knowledge economy happened. The theories of the human resources development and human capital flow are as follows.
2.3.1 Neo-classical Economic Theory17
Neo-classical Economic Theory is from the economics angle to analyze the migration behaviors. The migration is caused by the supply and demands of global labour imbalances due to the individuls hope to obtain maximize profits through migration. The wage differences between countries is produced human capital flows.
When the benefits obtained are greater than the consumption cost and migration happened.Massey (1993) pointed out that the wages differences will cause the human market heavy distribution continuously to reach the balanced because human resources based on self-consider who will migrate to the high-income areas. The larger wage differences induce the higher human capital flows.
The neo-classical economic theory was encountered the difficulty in the 1990's because the theory is based on the wage-gap as the main reason of migration. It does not explain there is an obvious phenomenon of the wage-gap of the European countries
16 周八俊，迎向新世紀國際經濟一體化（上海：上海人民出版社，1999 年 6 月），頁 182-183。「知識經 濟」係指直接建立在知識與信息生產、分配與使用上的經濟，知識為主要生產要素與構成社會經濟發 展主體。
17 張靜文（2007），《我國專技移民政策及制度之研究》。國立政治大學行政管理碩士學程，頁 8-9。
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that show the migration only occurred by upper middle levels with more inforamtion and rarely occurred by the low-income levels. Thus, the wage-gap is not the only reasons of human capital flows.
2.3.2 The theory of global division of labour force and international trade
The maximum change of the economic globalization is to promote the world resources to the most propriated configuration. A country is limited by the national resources and market limit regardless how high efficiency of its economic growth. It is the only way to integrat the global resources and market limited by the national resources and market insufficient. The economic globalization caused the phenomenons of the international division, industry transfer, funds and technology flows, and transnational mutual deepened after 1990.
Adam Smith in his book "The Wealth of Nations" stated that the theories of globalization illustrated a country's economic growth is from its productivity, which means maximum increase attributed to the result of the division of skilled labour productivity. Thus, the division of labour and development will raise the workers' professional skills and progress the labour productivity. The productivity also depends on the specialization of labor. Allyn Young (1928) stated the "Young Theory" to solve the question of the division of the labor in the article of the increasing returns and economic progress. This theory stated that increasing return scale depends on the evolution of division of labor and market size determines the division of labor standards.
Houthakker (1956) made it clear that trade efficiency determines the market size affect the division of labour standards18. Peter Munz.Kemp said that the developing countries in the globalization increase economic development opportunities as the industrialized
18 胡鞍鋼主編，《全球化挑戰中國（北京：北京大學出版社）》，2002 年 6 月，頁 15-18。
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countries19.
With the economic globalization, countries by the economic integration of legal, regulatory and market globalization through the international division of labor made labour classified, levels upgraded, professional upgraded from the theory of international trade. Yang and Borland (1995) stated the "International Trade Theory"
that the three modes of the economic growth by the progress of the dicition of the labor.
Firstly, the undeveloped division of labor not will decelerate the econimic growth. Next, the well-developed division of labor will progress the econimic growth. Then, the fully developed division of labor will slow down the econimic growth. According to the above theory, it can found the division of labor and transactions efficiency is major factors related to a country’s economic growth20. P.M.Romer stated that the developed country entered the period of economic growth and the developing country still in the low stage. Their economic growth differences will be expanded and gradually have more divergence21. Sala-Martin staed that the developed country entered the period of economic mature (division degree high but division progress slowed) and the developing country entered the period of economic growth. Both economic growth rates will appear convergence22.
According to World Bank（WB） in 2002 research displayed that the global economic of trade, funds and immigration were continued growth after 187023. It can be divided ito three stages including the period of 1870-1945, 1945-1980 and 1980-present , which the developed countries in third time migration activly participate
19 張驥，《經濟全球化與當代社會主義的發展（北京：中央編譯出版社）》，2002 年 6 月，頁 168。
20 胡鞍鋼主編，《全球化挑戰中國（北京：北京大學出版社）》，2002 年 6 月，頁 15-18。
21 P.M.Romer, "Increasing Returns and Long-Run Growth", p1030-1035.
22 Sala-Martin, "Convergence", Journal of Political Economy Vol 100, No.5, 1992, p223-251.
23 World Bank, "World Development Report（New York: Oxford University Press, 2002）", p23-30.
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the international division of labor, such as China, India, Malaysia, Philippines and Thailand. They gradually play an important role in the global market. Due to the differences degree of the economic and development, the global human capital migration has the trend of migration from the backward to the advanced regions, Southern hemisphere to Northern hemisphere, lower development to the higher one and developing to developed countries. Thus, the degree of participation globalization and resources effective distribution are the important factors to promote and shorten countries into modernization. The division theory in the economic growth plays an important role.
2.3.3 Specialized division of labor and endogenous growth theory
Theodore W.Schultz, Nobel economic Prize laureate, clearly stated on "Human Capital Theory" that human capital is the most important of the four factors of production including land, human force, capital and technology. The levels of the human capital depend on education, while human resources with high quality attracting other countries poaching human resources. Human capital is the main factor to progress the national economy growth. The human future is decided by the population quality and knowledge investment, in which the most important factor is human resources. The economic development depends on personnel quality improved, and the quality of personnel can be improved only through knowledge education, which is divided into
"professional knowledge" and "general knowledge". The professional knowledge refers the knowledge to help upgrade the material capital quality. In economic modernization, the professional human capital of accumulated is to upgrade the professional
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knowledge24. Michael E.Porter said in the Competitive Advantage of Nations that affecting the production factors are divided into higher and lower categories. The national competitive advantage must be reached by advanced, professional, and creative factors25.
From the perspective of human resource, the higher factor means the human force from the higher education. In other words, the countries own more high-quality human capital, which will be able to achieve leading position in the world after 1990 of the economic globalization. Therefore, a country's economic growth relied on division of labor not only levels of refinement, but internal specialization of human capital. Thus, to upgrade human qualities meets the economic development needs of the countries.
"Theory of international division of labour" for the developing countries can promote the economic growth, but for the developed countries of the stages of economic maturity have been insufficient to respond to the development needs of the country. Thus, “New Grow Theory" becomes the developed countries pursuing the economic growth theory. "New Grow Theory" started in the mid of 1980, was based on neo-classical growth theory that mainly increasing the scales of returns and internal mining technology are the major factors for a country's long-term economic growth.
2.3.3.1 External, increasing returns and economic growth
Arrow (1962) explained firstly that the endogenous technological progress in economic growth, technological advances and productivity gains for capital accumulation effects, the outputs the overflow effect of that investment26.
24 王瑞琦，《全球化與兩岸應與人才開發策略比較分析》，中國大陸研究，2002 年 11 月，頁 85。
25 Michael E.Porter 著、李明軒譯，國家競爭優勢（上）（台北：天下出版有限公司，1997 年），頁114-115。
26 Arrow, "The Economic Implication of Learning by Doing", Review of Economic Studies, Vol 29, 1962, p155-173.
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P.M.Romer (1986) on "Knowledge Overflow Model" assumed that knowledge is an endogenous factor in the economic system that the knowledge overflow can improve the social productivity and economic growth27.
R.Lucas further explained P.M.Romer theory that the global economic and external human capital overflow caused by external effects of human capital to improve the productivity and economic growth of all factors of production28. When the government does not intervene in the economy equilibrium, the investment in human resources will be reduced, especially in the high level of human capital in developed countries. Based on increasing returns of capital, it makes human capital migrate from the developing countries to the developed countries. Barro illustrated the importance of government intervention, because the government is the key factor of economic growth through provided by various government services and infrastructure, which will represent the production rendering "increasing returns to scale and endogenous economic growth" effect29.
2.3.3.2 Division of labor and economic growth
Adam Smith30 has seen the division of labor as a source of economic growth first. Allyn Young31 deepened this statement further that the economic division of labour is a professionalized economics. G.S Becker. and K.M.Murphy(1992) further stated the division of labor as a professional process in the "Becker-Murphy Model".
The identity model illustrated that the division of labor and technological progress
27 P.M.Romer, "Increasing Returns and Long-Run Growth", p1030-1035.
28 Lucas, "On The Machanics of Economic Development", Journal of Political Economy, Vol 98, No.5, 1990, p103-125.
29 Barro,R., "Government Spending in a Simple Model of Endangerous Growth", Review of Economic Studies, Vol 29, 1962, p155-173.
30 譚崇台，《發展經濟學（台北：五南圖書出版有限公司，2004 年 1 月）》，頁 86。
31 朱鳳，《技術進步與經濟的內生增長》，中國社會科學，1999 年第 1 期，頁 27。
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does not have a direct relationship, but the interaction relationships. One is promoting function of productivity is from the economic knowledge. On the other hand, the division of labour can promote the knowledge accumulation driven by the degree of specialization of workers with the proprietary technical standards.
When the knowledge economy is increasing, the accumulation of knowledge can reduce the cost of economic coordination, evolving and sustained economic growth will enable the division of labor, specialization and economic growth through the accumulation of knowledge, human capital and technological progress as the economic sources of growth. In the globalized market, due to international trade frequently, it makes widely disseminate knowledge and human capital to accelerate the country's economic growth by the overflow effect, which is the phenomenon of "Brain Drain". Therefore, it is only through government intervention to reduce the loss of investment in knowledge by the effect of overflow.
According to above statements, many researchers said that the economic growth is by the technological progress, the accumulation of knowledge, the progress of human capital and increasing returns reached. When the overall economy raises, human capital and specialized knowledge will be upgraded to further accumulation and higher levels. Thus, it will contribute to the economic growth and endogenous technological progress mutually into the virtuous cycle of development. Analysis of today's human resource development in the globalization,
"New Grow Theory" view is the basis of the countries on human resources development since the beginning of the 1990s, but also for developed countries, developing countries and undeveloped countries start thinking about how to promote the country's economic growth and to win the competition.
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Chapter 3、The development of Taiwanese industries and human capital
Section 1、The business cycle32 and stages of economic development33
Section 1、The business cycle32 and stages of economic development33