Globalisation

What is globalisation?

The process of something becoming worldwide.

Defined by the IMF as ‘the growing economic interdependence of countries worldwide’.

What has caused the ‘shrinking world’?

TNCs → companies that invest abroad and build links between manufacturing and consming countries.

Lower transport costs → 19th century (railways) and 20h (containerisation + aviation), encourage international trade and migration.

International organisations → cross-border trade has increased, with organisations such as the UN forcing countries to work together.

What is containerisation?

• The system of transporting mass goods into large, standardise shipping containers.

• Introduced in the 1960s.

• Reduced unit cost from 30% to 1%.

• Saves 16 days in loading and unloading.

How has technology impacted globalisation?

E-retailing → forces traditional retailers to close by outsourcing tasks/sales to increase profit margins.

Online marketplaces → give small businesses access to a global customer base.

Telecommunications → establishing global brands and promotes free markets.

How do international organisations encourage globalisation?

International Monetary Fund → assists governments with balancing debt, members pay a subscription based on their wealth.

International Bank for Reconstruction and Development → provided loans to rebuild after WW2, has become part of the World Bank Group and now aims to reduce poverty.

What is the role of governments in FDI?

• Encourage FDI as it can boost economic growth, tax revenue and employment opportunities.

• Increased competition to gain access increase productivity and efficency.

• Encouraged by: tax concessions, preferential tariffs/SEZs, free/subsidised land or infrastructure.

What are trade blocs?

A type of intergovernmental agreement, where barriers to trade in a region are reduced/eliminated amongst participating states e.g. European Union.

What are the costs and benefits of trade blocs?

Costs:

• Interdependence created.

• Compromise and concession.

Benefits:

• Access to bigger markets.

• Protection from foreign competitors → in 2007 the EU blocked £50 million of Chinese clothes exceeding the quota.

How are trade blocs encouraged?

Privatisation → transferring ownership of a business from government control to the private sector.

Market liberalisation → reducing/removing rules restricting economic activity to increase efficiency and innovation.

What was the UK approach to attracting FDI?

Free market liberalisation → Thatcher lifted bamk operation restrictions, wealth increased through the trickle down effect a foreign banks were attracted to London.

Privatisation → allowed foreign investors to gain a stake in national services, relieves economic pressure on governance.

Tax subsidies → grants were given to small businesses that invest in targeted areas e.g. London Docklands were given lifelong tax breaks.

What was China’s approach to attracting FDI?

Open door policy → introduced in 1978, encoruagd FDI through trade liberalisation, reduced regulations and other incentives.

Special economic zones → businesses can import, process, manufacture and export raw materials with reduced tariffs.

Cheap skilled labour → trained, low cost employess maximise profit.

How can the KOF index measure globalisation?

• Measures the extent to which countries are socially, economically and politically linked with others.

• Scored from 1-100, with 1 being the least globalised.

• Ireland was ranked the most globalised, whilst Solomon Islands was the least.

• Socially (telephone traffic), economically (mean tariff rate), politically (number of embassies).

• Broad range of 24 variables, countries have internal variations.

How can the AT Kearney Index be used to measure globalisation?

• Measures political engagement, technological connectivity, personal contact and economic integration.

• Political (IGO membership), technological (internet users), personal (international travel), economic (FDI).

• Allows for comparison, only 64 countries listed.

How are TNCs important in globalisation?

• Can be described as the ‘architects of globalisation’.

• 50% of the top 20 TNCs were overseas operations.

What is the difference between outsourcing and offshoring?

Outsourcing → when there are contracts with other companies to complete part of the manufacturing process to reduce costs.

Offshoring → when a company moves part of its operations to another country to reduce costs.

How is Jaguar important?

• UK’s largest automotive manufacturer, owned by an Indian TNC.

• Hosts 3 UK manufacturing plants who employ over 17,000.

• Reduced costs and gained access to emerging markets by investing in international manuacturing sites (India 2011).

• Established a joint partnership with a Chinese company in 2011 to produce engines.

• Planned a factory in Rio, becoming the first UK vehicle manufacturer to do so.

What are the impacts of TNCs on host countries?

Positive:

• Raised living standards.

• Improved technology.

• Political stability.

Negative:

• Environmental degradation.

• Westernisation.

• Exploitation.

What is glocalisation and how does Disney utilise it?

Glocalisation: adapting goods/services to increase customer appeal.

Disney:

• US Parks do not serve alcohol, but serve wine in Paris.

• Typical of the ‘new economy’ as they rely on technology to create products and expand consumer base.

• Decisions are made in California, produced in China and have governing influence over Florida.

What are ‘switched off’ regions and what cause this?

Places isolated from globalisation with little global integration.

Environmental → harsh terrain, market proximity, low resource potential.

Political → high corruption, civil conflict, trade bloc exclusion.

Economical → over-dependent on specific industries, poor quality infrastructure.

How are North Korea and The Sahel switched off?

North Korea:

• Self sufficient ideology.

• Strong culture and patriotism.

• Dictatorship.

• Emigration/tourism is prohibited.

• Minimal internet access.

The Sahel:

• Area of West Africa desert.

• Harsh desert climate.

• Rural areas dominated by a substinence farming economy.

• Low literacy and poor infrastructure discourage FDI.

How did manufacturing shift to China?

• 1978 Open Door Policy encouraged globalisation.

• Low wages attracted initial FDI in the 1990s for cheap textiles, expanded to technology in 2000s.

• Reinforced in the 2008 global financial crisis due to trade balance in NEEs.

• Lifted 680 million Chinese out of extreme poverty since 1980.

How did services shift to India?

• 1991 economic liberalisation opened up to globalisation via the prime minister.

• Initially occured through outsourcing rather than manufacturing.

• Had an advantage of being English spoken.

• Early investment in Indian Institutes of Technology produced a large pool of IT workers.

What are the costs and benefits of the global shift?

Costs:

• Unplanned settlements often occur.

• Creates pressure on environment/resources.

Benefits:

• Waged work.

• Poverty reduction → one million have been lifted out of poverty since 1990.

• Infrastructure investment.

How are there environmental problems associated with the global shift?

• Rapid industrialisation and urbanisation has led to pollution and overexploitation.

• UN estimates one billion people live in urban slums.

• Megacities contribute to 75% of CO2 emissions.

How has there been environmental damage in China as a result of the global shift?

• Severe air pollution, as in Beijing, is regularly above WHO safe limits.

• 50% of China’s rivers and lakes are polluted.

• Air pollution in Northern China has caused life expectancy by nearly five years.

What problems are associated with deindustrialisation in Detroit?

Deindustrialisation: reduction of industrial activity or capacity in a region/economy.

• Fourth largest city in the US during the 1920s.

• Industrial restructuring to Japan resulted in dereliction.

• Population decreased from 2 million to 700,000 as skilled workers seeked employment.

• Reduction in tax led to the city declaring bankruptcy in 2013 with $18.5 billion debt.

• Over one third of families in the city have income below the US goverment poverty level.

What is the role of rural-urban migration in megacities?

• Fast population growth in rural areas causes scarcity and poverty.

• Higher productivity in cities attracts migrants (high wages and quality of life).

• In developing and emerging countries 60% of urban growth is caused by rural-urban migration.

Why has there been an increase in international migration?

Global hubs → highly globally connected cities.

Human resource draws → large labour force, affluence attracts service providers.

What are elite migrants?

• Highly skilled/socially influential individuals with excessive wealth.

• There are few obstacles and are typically welcomed by governments due to theo wealth/skills.

Russian oligarchs in London.

• 82% of London property is owned by foreign buyers.

• 1/3 of foreign property purchase between 2004-2014 was from Russians.

• This led to the inflation of property prices and native Londoners unable to purchase property.

• Oligarchs: Russians who bought industries in the dissolution of the Soviet Union.

What is low wage migration?

Illegal and legal migrants are drawn to global hubs in large numbers to work in low paid areas such as construction.

Dubai and low wage migration

• Less then one eigth of residents are UAE citizens.

• South Asian temporary workers make up 60% of the population.

• Many worker are trapped by debts to agents in their source countries.

What are the costs of migration on sources and host nations?

Host:

Economic → tax avoidance of TNCs, unemployment due to overcrowding.

Environmental → TNC degredation.

Political → cultural tensions.

Social → growing inequalities.

Source:

Economic → brain drain effect.

Environmental → derelict housing.

Political → mass migration can be seen as government failure.

Social → families broken up + elderly left vulnerable.

What are the benefits of migration for source and host nations?

Host:

Economic → TNCs invest in the area.

Environmental → higher pressures on TNC to be sustainable.

Political → stability generated.

Social → raised living standards.

Source:

Economic → remittances sent back, less unemployment.

Environmental → less demand for commodities.

Social → overpopulation evens out.

What is westernisation?

The spreading influence of Western culture.

Change in Asian Diets

• Spread of Western diet has been linked to rising obesity and diabetes.

• Is also linked to deforestation and excessive water use in industry.

• From the 1990s to 2015, meat consumption per capita rose from 5kg to 50kg.

How does globalisation create opportunities for disadvantaged groups?

• 1948 Olympics (London) had the first disability event.

• Western influences and IOC led to paralympic games by Seoul 1956.

How has cultural erosion impacted people in Papua New Guinea?

• Indigenous populations are becoming aware of Western culture.

• Migration is occuring to areas such as Manuas i search of jobs/education/healthcare.

Why is there opposition to globalisation?

• Dramatically increased resource consumption

• Increase in exploited workers

• Corruption as TNCs gain power

• Increased inequality

How can economic development be measured?

• Gross Domestic Product: total value of goods and services produced.

• Gross National Income: total amount of money earnt by people and businesses.

• Income per capita.

How can social development be measured?

• Human Development Index: life expectancy, income and education.

• Gender Inequality Index: reproductive health, empowerment and labour force participation.

• Environmental quality.

How has globalisation worsened the development gap?

• Luxembourg had incomes of US$110,000, whilst Burundi was US$264.

• Global economy has grown faster than the population.

Who are the winners of globalisation?

• 2,700 billionares globally, likely rich from TNC ownership.

• Developed countries have successfully maintained their wealth.

• Factory and call centre workers in Asia have increased their income.

Who are the losers of globalisation?

• Rural areas in Asia/Sub-Saharan Africa are still isolated.

• Industrial workers in Western countries have lost jobs due to the global shift.

• Sweatshop workers are exploited.

• Slums are increasing.

How has globalisation detrimented the environment?

• 40% of the world’s terrain has been cnverted into agriclture, threatening habitats and biodiversity.

• Intensive agriculture and cattle ranching can deplete groundwater sources.

How has international migration been encouraged by globalisation?

• Open borders e.g. European Uion.

• Deregulation

• FDI

How has the spread of globalisation attempted to be limited?

Censorship → governments limit access to online information.

Immigration laws → Australia only lets certain people in based on what is needed in the country.

Trade protectionism → restriction of international trade to help domestic industries.

What are the costs and benefits of local sourcing?

Costs:

• Increased cost of living

• Less demand from the UK for developing countries

Benefits:

• UK economy is boosted through internal growth

• Interdependence is reduced

What are transition towns?

• NGO - ‘Transititon Network’ encourages community gardens, reduced energy usage and recycling.

• E.g. Totnes, Exeter

• Have their own local currency to encourage local spending

Environmental concerns in Bangladesh

• 13,000 litres of water is needed to grow the cotton of one pair of jeans.

• Fertilisers and pesticides cause water pollution.

• Bangladesh’s 3.5 million textile workers earn £25 a month.

How does FairTrade and ethical consumption reduce environmental degredation?

• Pays farmers in developing countries guaranteed prices for their products and an additional premium.

• Aims to make farming a sustainable source of income.

How is recycling important in managing resource consumption?

• Increased from 17% in 2003 and 45% in 2019 in the UK.