global systems and global governance

globalisation

the flows of capital, labour, services and information across the world

dimensions

1. flows of capital
2. flows of labour
3. flows of products
4. flows of services and information

flows of capital

1) FDI → foreign direct investment made mainly by TNCs into the capital of assets of a foreign country

2) reparation of profits → economic leakage, TNCs take back profits made from overseas production

3) aid → important financial support for poorer countries, can be in many forms e.g. bilateral, multilateral etc.

4) migration → majority of out-migration labour takes place from poorer to richer countries which increases disparities between developing countries as they lose tax payers AND their most talented workers

5) remittance payments → transfers of money made my foreign workers to family in a home country

flows of labour

migrants increasingly cross borders seeking employment

* much of this occurs from developing countries in South Asia, Africa and Latin America to richer areas of North America and Europe
* this can be restricted by immigration restrictions (e.g. Immigration Bill 2023), tariffs to reduce global trade and regional trading blocks

flows of products

demand from more affluent countries to developing countries with lower production costs allows for mass exportation of goods

* this can be restricted by transaction costs, tariffs, transport, time and trade blocks

flows of services and information

services:

economic activities that are traded without the production of material goods

* high-level services: services to businesses e.g. finance, investment, advertising etc.
* low-level services: services to consumers e.g. banking, travel, tourism, customer call centres etc.
* footloose services: transfer of information

there has been a decentralisation of low-level services from the developed to developing world

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information:

governed by the movement of people through migration and the speed of data/communication transfer

* has been enabled by: improvements to global telephone networks, mobile telecommunications industries, email, the internet, global media coverage

this contributes to the expansion of knowledge-intensive goods and services

CASE STUDY: CHINA’S PROTESTS BEING SILENCED (flows of information)

* there is ever-growing list of banned words relating to protests in China
* attempts are being made to deflect the narrative on both domestic and overseas platforms
* there has been no mentions of the protests in the Chinese media
* due to the growing censorship of words, pieces of blank paper have become a symbol of the protest
* state media may attempt to shape the media to blame foreign influence for the protests

CASE STUDY: UK SMALL BOATS (flows of people)

* Sunak has set out plans to reduce the number of people crossing the channel
* there is a huge backlog of asylum claims that the UK government are attempting to clear
* part of this has been a new agreement with Albania where the UK border staff are sending migrants as a ‘safe third country’ as well as Braverman’s new Immigration Bill
* it is becoming increasingly difficult to be granted asylum in the UK

factors influencing globalisation

1. transport systems
2. security systems
3. communications technologies
4. management and information systems
5. financial systems
6. trade agreements

transport systems

* increase size of aircraft
* growth of low-cost airlines
* use of standardised containers (containerisation)
* handling efficiency
* dry ports in landlocked countries
* erosion of frictional space

security systems

* reduction of traditional security allow for greater integration of people
* national boundaries are less of a barrier to a more mobile and better informed population
* supply chains have become less regulated
* cyber security becomes a new prominent issue
* biochemical security
* terrorism and threats of violence

communications technologies

* the internet and social networking allows for greater ease in sharing information
* mobile phones connect people, markets and trade in ways which were not previously possible
* online banking creates a whole new way of capital transfer (bitcoin)
* breaks down cultural governing boundaries
* business exposure through social media can lead to growth

management and information systems

* new low-cost telecommunications
* can monitor chains of production and distribution
* outsourcing less efficient business
* rapid growth of the logistics industry
* supply chains

financial systems

* banks and financial systems operate across the world, they are linked by vital transmission systems that allow lending and flows of money
* financial deregulation facilitates trade and foreign investment
* international trade
* countries rely on one another for financial security

trade agreements

* removal of barriers facilitates freer trade and markets
* tariffs and taxes
* more integrated economies
* financial trade, movement of people
* bilateral and multilateral agreements
* WTO puts out rules for more fair trading
* deepens independence with trade partners, economic benefit outweighs loss of control

containerisation

how the shipping industry has developed (at any one time there are between 5 and 6 million ships in transit)

* sea transportation costs are very low
* goods are transported in standard sized containers
* refrigeration enables transport of fresh and perishable goods over long distances
* computerised logistics systems enable goods to be transported to many destinations

patterns of production: THE GLOBAL SHIFT

‘the movement of economic activities from HICs to LICs’

* initially the movement of manufacturing in the 1960s but in the 1990s the service industry is also being moved

reasons for the global shift

* production costs can be lowered by gaining access to lower labour costs and materials
* can help TNCs get around trade barriers such as tariffs and quotas
* there can be greater flexibility due to favoured political climates or education levels of work forces
* transport revolution means that materials can be shipped around the world more easily (containerisation)
* information and communications revolution enables telephone and satellite communication
* development of free trade and fiscal policies allow for freer movement of products

global shift: HIC positives

* cheaper imports and labour keeps cost of living low
* promotion of labour market flexibility
* greater efficiency leads to new technologies
* loss of polluting industry improves environmental quality

global shift: HIC negatives

* rising job exports leads to job losses
* disparity between skilled and unskilled workers
* deindustrialisation and structural unemployment
* job losses are concentrated in certain industries

global shift: LIC positives

* greater income promotes growth
* tickle down
* reduces negative trade balances
* exposure to new technologies improves skill and labour productivity

global shift: LIC negatives

* disruptive social impacts
* over-dependence on narrow economic bases
* environmental issues
* can destabilise food supplies as people move away from the primary sector and agriculture

CASE STUDY: UK CAR MANUFACTURING

* in the 20th century around 40% of people worked in the car industry
* 10,000+ people lost their jobs in Coventry
* skilled engineers lost their jobs as car factories moved to Western Europe and China, non-transferable skills lead to unemployment

CASE STUDY: INDIA - THE GLOBAL SHIFT

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interdependence

two or more countries are dependent on one another in some way (increased by globalisation)

* e.g. developed countries can be dependent on developing countries to supply primary products such as steel and iron

economic interdependence

a rise in international migration as well as money being sent home by workers (remittances)

political interdependence

Friedmans theory of conflict prevention: two countries with a McDonald’s will never go to war because they are linked by that entity

social interdependence

migration, education, healthcare

* e.g. COVID vaccines

environmental interdependence

for our survival we must all work together on climate change

IMF (International Monetary Fund)

* formed after the Great Depression and now has 190 countries as members
* aims to promote international monetary cooperation, encourage expansion of trade and economic growth and promote greater prosperity
* provides loans and helps poorer countries
* but could enable reckless economic behaviour

The World Bank

* founded in 1944 to help rebuild post-war economies in Europe
* provides loads and investment, helps developing countries with projects such as education
* main goal is to prevent extreme poverty, it helps to decrease this by use of FDI and loads
* manages flows of capital
* criticisms include encouraging dependence, insufficient evaluation of projects and promoting harmful behaviours such as deforestation

WHO (World Health Organisation)

* formed in 1948, now has 194 members
* fight for human rights and believe that everyone should receive equal high levels of healthcare
* increases medical access and sharing of ideas and information
* although they attempt to manage health on a global scale, globalisation have increase the ease of spreading disease
* criticisms include that they generally fail to act on some outbreaks and wait too long before declaring epidemics, they also rarely challenge governments

WTO (World Trade Organisation)

* formed in 1995 (when it took over from the GTTA) and now has 164 members
* aims to regulate international trade by reducing trade barriers and opening up markets
* forming new fair platforms for negotiating trade stimulates interconnectivity, reduces uncertainty and removes tariffs
* criticisms include that they are not properly representative, small business and smaller countries are excluded as it is easy for developed countries to dominate world trade

the UN

* formed after WW2 with the main aim of promoting peace
* there are lots of different strands in which they deal with issues
* there are lots of different assemblies and councils that deal with different matters
* e.g. the security council deals with matters of security and global peace

unequal flows of people

remittances: money migrants send back to their home countries to support their family

* this has an unequal impact on GDP (e.g. India)
* Tonga has the highest percentage of their GDP created from remittances

positives of flows of people

* promotes growth and reduces dependence
* reduces inequalities as foreign workers gain wages
* reduces pressure on healthcare
* reduces unemployment
* remittances provide stability for LICs
* spread of skills and ideas
* combats ageing populations in HICs
* tax payers contribute to the economy

negatives of flows of people

* loss of skilled workers
* ‘brain drain’
* pressure on health and education from migrants
* families separated
* pandemics more likely
* segregation and cultural conflict
* over-dependence on remittances
* resentment towards migrants

unequal flows of money

if countries can’t pay back loans it forms issues of dependency

* the IDA (international development association) funds interest free loans to help with this

unequal flows of ideas

issues with privatisation, deregulation, free trade and multiculturalism

privatisation pros and cons

* resources are more efficiently used
* no political influence
* competition encourages economic growth

BUT

* can’t be held accountable (less transparent)
* higher costs of goods
* chances of bribery and corruption
* profits are retained so doesn’t benefit anyone

deregulation pros and cons

* encourages economic growth
* increased consumer choice and freedom
* lowered operation costs

BUT

* lower standards of goods
* market failure
* more intense and frequent pollution
* more relaxed social and environmental rules

free trade pros and cons

* economic efficiency
* improve rules around intellectual property rights
* attracts FDI into LICs

BUT

* without robust framework welfare standards and economies can collapse
* abuse and exploitation of labour increases
* some countries are excluded

multiculturalism pros and cons

* increased creativity
* minorities are considered
* new ideas and perspectives

BUT

* social tensions and threats to national identity
* integration difficulties
* cultures can clash
* cultural dilution

e.g. village phone, Bangladesh

supported by the World Bank, allows for access to the internet, improves quality of life and encourages greater interconnectivity e.g. farmers are able to communicate about extreme weather

* however, it is very small scale and temporary
* it also dilutes the local culture
* there are approx. 280,000 phones in 55,000 villages