Global gov/systems

globalisation

a process by which national economies, societies and cultures have become increasingly interconnected through the global network of trade, communication, transportation and immigration

periphery areas

poorer and may experience exploitation, economic leakage and out migration - LDEs

core areas

economically important and attract investment, capital and people - HDEs

semi-periphery areas

emerging economies

loans

money borrowed from someone

capital

money or assets invested for production, trade, and business, functioning as a key flow in economic globalisation

Foreign Direct Investment (FDI)

investment mainly made by TNCs (or governments), based on one country, into the physical capital or assets of foreign enterprises

can be inward - investments made in a country

or outward - investments made by domestic companies in a foreign economy

patterns of FDI

• volumes have risen as globalisation has increased

• 2023 top recipients of inward FDI were USA, Brazil, Canada and Mexico

• top sources of outward FDI were USA, China and Japan

• sustainable + ethical investing has increased as companies seek long term profitability from socially + environmentally responsible projects

factors affecting levels of FDI

company profits, political stability, skilled workforce, infrastructure, technology, access to financial/legal services, trade agreements, historical relationships, access to natural resources, tax, level of disposable income, market size, level of economic growth

debt repayment

paying back of money that you’ve borrowed

aid

providing support/help. May be giving money/loans or providing technology and expertise to providing food + rescue teams

remittances

money sent home by foreign workers to friends/family living in a different location (often abroad) - second most important source of income in developing countries

repatriation of profits

TNCs operating in foreign countries will normally send any profits made back to the TNC headquarters. Sometimes knows as economic leakage. Flows usually return to companies based in richer countries

shrinking world theory

process of globalisation making the world more accessibly, interconnected and interdependent

social globalisation

• international immigration - creates family networks

• global improvements in education and health - increasing life expectancy/literacy levels

• social interconnectivity - grown over time due to spread of universal connections (internal, mobile phones etc.)

economic globalisation

• growth of TNC - accelerates cross-border exchanges of raw materials, components, finished goods, shares, investments + purchasing

• ICT - supports growth of spatial divisions of labour for firms + a more international economy

• Online purchasing - eg. Amazon on a smartphone

cultural globalisation

• western cultural traits dominating some territories - eg ‘americanisation’ or ‘mcdonaldisation’ of tests + fashion

• globalisation + hybridisation - takes place as old local cultures merge/meld with globalising influences

• circulation of ideas/information has accelerated - due to 24hr reporting + keeping in touch using virtual spaces eg. twitter

political globalisation

• growth of trading blocs (eg. EU/NAFTA) - allows TNC to merge/make acquisition of firms in neighbouring countries, while reduced trade restrictions + tariffs help markets grow

• global concerns - free trade, credit crunch, global response to natural disasters (eg. 2011 Japan tsunami)

• World Bank, IMF, WTO - work internationally to harmonise national economies

core periphery model

global power is concentrated in core areas (HDEs) and less developed countries (LDEs) are the periphery whose development has been impeded by the middle income trap

_____% of Somalia’s population rely on remittances to meet basic needs

40

remittances support ___% of GNI and ___% investment in Somalia

50

80

soon there will be ______ economic migrants in the world

quarter of a billion

typical flows of product from LDEs, emerging economies, HDEs

• LDEs - agricultural

• Emerging - manufacturing

• HDEs - high tech/cars

global GDP in 2015 was just short of ____ in value

US$80 trillion

___of global GDP in 2015 was generated by trade flows in agricultural and industrial commodities between nations

1/4

by ___ India is expected to be the ___ largest economy in the world

2040

second

some reasons for India’s economic success

call centre services which Indian workers provide for large US and EU companies

high level services

for businesses - banking, finances, investment and advertising

low level services

for consumers - banking, travel/tourism, call centres

flows of information

• information such as news spreads very quickly + easily via email, the internet and social media

• ai

• internet has brought real-time communication between distant place + allowing good/services to be bought easily and quickly

• Responsible for the transfer of cultural ideas, language, technology, design and business support

• eg. facebook + on demand tv

Facebook had ____ users in 2015

1.5 billion

monoculturalisation

spreading culture to other countries rather than adapting the product - ‘westernisation’

eg. Coca Cola - Super Bowl adverts sang in different languages

glocalisation

adapting a product to suit other places/cultures

eg. Coca-Cola - different languages on coke cans, holiday messages suiting different Indian states

Coca Cola spent ___ annually on global marketing, which is more than ____

$4 Billion

Microsoft and Apple combined

Coca Cola 2019 revenues

over US$37 Billion

if Coca-Cola was a country, it would be the ___ economy in the world

84th largest

Coca-cola is sold in over ___ countries

200

___% of the population recognise the Coca-Cola brand logo

94

in 2023 there were over ____ McDonald locations globally

41,800

McDonald’s serves around ___ customers each day

68 million

__ billion mobile phone subscriptions

7

__ billion internet users

3

emergence of English as accepted global language

has eroded language and trade barries

factors accelerating the speed of globalisation

• communications

• collapse of communism

• capital/investment

• travel

• migration

• transport

• TNCs

• global marketing

• containerisation

• trade

containerisation

transporting goods in standardized, reusable steel containers

government support at increasing exports from their countries

national level trade departments easing + facilitating reports - eg UK trade and investment department

government guidance in Pakistan for exporters

encourage them to use dry ports located inland and nearer to their business as it saves time + transport costs as shipment arrangements + customs documentation are completed locally before the goods are shipped

deregulation of financial markets

allowed removal/relaxing by governments of barriers to movements of finance

reasons trade was hindered by finance

problems in exchanging finance for goods + exchange rate concerns

concerns surrounding finance were removed by

communications technology making international trading easier and faster.

high speed electronic trading systems + global exchange connectivity means financials transactions can be completed quickly and securely

transport methods helping ease international trade

• increasing size of aircraft

• standardised containers (sea/rail/road/air)

• computerised logistics systems

• high speed rail networks

security issues within trading community

• supply chain security

• crime + anti-terrorism

• food + bio-security

• anti smuggling

initiative to alleviate security threats in trade

• World Customs Organisation (WCO)

• EU

Initiative to introduce ‘secure operator’ label awarded to operators meeting EU minimum security standards

reasons for tightening trade security

terrorist incidents in recent years

economies of scale

concept of increasing profits by producing a larger amount of products, as overall the average price to manufacture each product is lowered

cost advantages a company gains when it increases the size/scale of its operations

organisation of global production networks

• fast fashion - reliant on sufficient/fast transport from suppliers

• computer manufacturers (eg. Apple) - coordinate production network that spans America, Europe + Asia and are reliant on outside suppliers

• automotive industry - relies on components/sub-assembled parts arriving simultaneously for assembly in large production plants

trade agreements

been formed by countries joining together to form trade blocs to stimulate trade between themselves + to gain economic benefits from cooperation

trade bloc

agreement between states, regions or countries to reduce barriers to to trade between the participating regions eg NAFTA

opponents believe they are detrimental to global free trade

free trade

International business not restrained by government interference or regulation, such as duties (tax on imports/exports)

regional advantages for Nations of Group Trading Entities

• share technological advances

• spread of democracy, human rights + possible political and legal integration eg. EU

• helps members develop their economies + standards of living

• ability to negotiate trade advantages as a group with other groups

• possibility of developing a common currency to prevent currency fluctuations and simplify transactions

• remove regions/declining industrial regions can receive support from larger organisations eg. EU helping Southern Italy

• raise in standards in Education and Healthcare across the region

• pressure to adopt central legislation eg. Europe food standards + labelling

• possible bigger representation with World Affairs

• helps support particular sectors of a national economy eg. agriculture within the EU

• allows people seeking work to move between countries more easily

• allows freedom of movement and trade

regional disadvantages for Nations of Group Trading Entities

• some loss of sovereignty - decisions are centralised by an undemocratic democracy

• some loss of financial controls to a central authority eg European Central Bank overseeing monetary policies in Eurozone

• certain economic sectors are damaged by having to share resources eg UK sharing its Fishing ground with other EU nations (Spain and France)

global advantages for Nations of Group Trading Entities

• improves global peace and security reduces conflict

• increased global trade and co-operation on trade issues

• compete on a global level with other trading entities

sovereignty

Control over a country's own laws and regulations

NAFTA stands for___ and was founded in __

North American Free Trade Agreement

1994

why NAFTA was started

driven by the challenge presented by trade blocs from other parts of the world, particularly Europe

Mexico was in debt in 1970s/80s and hoped to boost economic growth and employment

NAFTA was replaced by ___ in ___

United States-Mexico-Canada (USMCA)

2020

why was NAFTA replaced

to address contemporary trade issues

modernise trade between the 3 countries

strengthen labour + environmental protections

updated NAFTA/USMCA rules

stricter rules for origin of cars

updated provisions for agriculture

new protections for intellectual property + updated labour standards

higher % of auto parts made in North America

content comes from high wage factories - to encourage more production in US + Canada and raise wages in Mexico

pros of NAFTA

• lowered prices - eg cheaper oil, food, farm products

• economic output in the trade area grew - 0.5%/year boost in US growth - benefitted agriculture, automotive and services

• foreign investment tripled

• reduced government spending

NAFTA created ___ jobs

5 million

NAFTA ___ trade between Canada, Mexico and US as it eliminated tariffs

quadrupled

cons of NAFTA

• job migration suppressed wages

• put Mexican workers out of business - local farmers couldn’t compete with US farm products being taken into Mexico

• Mexicans lost their farms

• allowed Mexican trucks access into the US - they don’t have same standard as American trucks

NAFTA led to the loss of _____ US jobs

500,000-750,000

interdependence

mutual dependence at a global level - one country depending on another for something, that country depends on another for something, which eventually creates global interdependence

1974 Modern World System model

treats the world as a single unit, examining interrelationships between countries

view that looking at countries in insolation is simplistic + suffers from developmentalism

developmentalism approach assumptions

• each country was economically + politically free

• all countries follow the same route to development

food commodities

raw or processed products that are sold for human consumption eg coffee, cocoa, grains, sugar, fruit

bananas are the ___ most important food product within least developed countries

4th

bananas are a staple food for ___ people

400 million

___is the largest producer of banana globally

India

ideal climate for bananas to be grown in

hot, rainy lowlands

bananas can make up __% of total monthly household income for small-scale banana farmers

75

banana industry has one of the largest agrochemical input into the environment due to ___

• large TNCs applying around 30kg of active ingredients (fungicides, insecticides, herbicides) per hectare, per year

• fertilisers are applied regularly

• after harvesting, fruit is washed with disinfectant

every 1 tonne of bananas produced, there are __tonnes of waste

2

__% of total bananas are exported to EU and USA

27

spatial distribution of banana TNCS

• 4 main large ones

• integrated vertically up the chain

• own/contract out plantations to other produces, have their own sea transport + ripening facilities, have their own distribution networks in consuming countries

• allows them economies of scale gains - can sell bananas in US and EU markets at low prices

• profits are repatriated to their counties of origin

bananas - 1975 trade agreement

• between EU countries and former EU colonies

• made up of 71 African, Caribbean and Pacific countries

• they were given special and differential treatment (SDT) with tariff-free import quotas to supply EU markets

• idea was to enable these colonies to develop independently without the use of overseas aid

• aim to protect the smaller, family run farms in the Caribbean/Africa from competition with large Latin American producers

• US TNCs were controlling the Latin American crop and supplying 75% of the EU market, only 7% came from Caribbean suppliers

bananas - 1990s trade wars

• TNC filed a complaint to the WTO than the EU practice was unfair trade

• WTO ruled against the EU + ordered it to cease discrimination

• dispute not resolved - EU proposals didn’t satisfy the larger producers

• led to trade war between USA and EU - USA government related under pressure from TNCs + imposed sanction on EU products

bananas - 2000s trade wars resolution

• compromise reached in Geneva

• between EU and 11 Latin American countries

• EU agreed to gradually reduce tariffs on Latin American bananas - ratified in 2012

fair trade - goals

to empower marginalised people and improve the quality of their lives

benefit vulnerable farmers/workers in less industrialised countries

fair trade - actions

businesses offer producers favourable financing, long term relationships, minimum prices and higher labour/environmental standards

supply chain has fewer parties - more direct trade

fair trade benefits

• smallholders get guaranteed minimum price + fair income

• additional money paid into a communal fund for workers/farmers to use

• encourages cooperatives so farmers have more buying power + reduce costs through economies of scale

• stable income = reduction in poverty

• training in new methods/technologies

• empowerment of local communities

• environmentally sustainable practises encouraged

fair trade limitations

• fairer price of product

• expensive for lower income groups

• not all fruit produced is sold in Fairtrade markets

• costs of certification and administration

• some farmer incomes have improved, but a large share of profits remain with TNCs and HDEs

free trade - goal

to increase nations economic growth

benefit multinational corporations, powerful business interests

free trade - actions

countries lower tariffs, quota, labour and environmental standards

supply chain has many parties between producer and consumer

ethical investment

investors make the deliberate choice to invest capital based on the activities of the firm/organisation they are investing in

personal principles/beliefs are the main filter for investment decisions

usually seen as a socially responsible choice - most make their decisions based on environmental/social concerns

examples of TNCs

Apple, Google, Coca-cola, GM motors in Hamtramck

reasons TNCs choose not to relocate their HQ’s to avoid paying taxes

• brand origin + authority

• social responsibility

• protection and support

• human resources

• time consuming + expensive

natural risks making TNCs vulnerable

• 2010 Iceland volcano - flights grounded, Kenyas farmers out of business, car production halted

• 2010 Japan tsunami - businesses disrupted (eg Toyota), no flights in or out

human risks making TNCs vulnerable

• Global credit crunch 2007/8 - banks brought to brink of collapse, falloff in demand for luxury goods

• Reports of child labour/suicides - destroys reputation eg primark - fire in Bangladesh (Rana Plaza) killed 1100

• Suez Canal blockage 2021 - completely stopped trading for 6 days