C1 Economy

Sectors of economy

• Primary sector (agricultural, mining)

• Secondary sector (manufacturing)

• Tertiary sector (services, retail)

• Quaternary sector (banking, finance, education, R&D)

Trade

• Buying and selling of goods and services

• Increasingly international

Capital

• FDIs facilitated by rise of TNCs and their GPNs

Labour

• People who work for gain

• Location specific

GPNs

• Web of intra-, inter- and extra-firm connections through which commodities are produced, distributed, sold and consumed

• Geographically extensive and integrated across national boundaries

• there has been shift from “trade in goods” to “trade in value-added goods”

TNCs

• major business organisations that can coordinate and control operations in more than one country

How does GPNs of TNCs connect places?

• [Suppliers]: usually in CLLDs due to low costs, helps to maximise profits

• [Factories]: near home countries to monitor processes / CLLDs due to low labour costs / CHLDs due to skilled labour

• [Distribution]: sales offices in different parts of the world so that products can reach consumers quickly

• [Consumption]: sales offices in different parts of the world so that products can be tailored to suit consumers’ tastes

Economic impacts of TNCs on host countries

Good

• Inward FDI (creates jobs, boost economy)

• Industrial linkages (connections with diff businesses)

• Multiplier effect (injection of money leads to more money when it gets invested into the economy)

• Technology transfer (local workers gain skills from TNC)

• Tax revenue (firms pay states taxes)

Bad

• Economic vulnerability (TNCs are footloose)

• Economic leakage (profit repatriation)

Social impacts on TNCs on host countries

• bad working conditions as they violate labour rights through poor working conditions to maxmise profits

• long working hours with unsafe conditions

Environmental impacts of TNCs on host countries

good

• trading of ewaste between chlds and cllds

• corporate social responsibility, companies commit to env sustainability to boost image

bad

• accelerated cc

• waste generation

Positive impacts of TNCs on home country

• preserves jobs in home location

• skills are upgraded with higher value production

• higher skilled positions kept at home?

Negative impacts of TNCs on home country

• loss of jobs in industries linked to production

• lower wages to keep jobs at home