Edexcel A-Level Geography - Globalisation

Globalisation

Increasing inter-connectiveness of the world economically, culturally and politically

TNC

Trans-national corporation

MNC

Multi-national corporation

FDI

Foreign direct investment

Economic Causes for Accelerated Globalisation (4)

- Increase in number and influence of TNCs

- Online purchasing

- Countries invest into each other through FDI

- Trading stocks and exchange of currencies

Political Causes for Accelerated Globalisation (3)

- Trading blocs have become more influential

- IGOs work to harmonise economies

- Political views and ideologies are published in worldwide media outlets

Migration as a cause for Accelerated Globalisation (2)

- Spread of culture due to families living all over the globe

- International tourism has increased due to lower transport costs

Cultural Causes for Accelerated Globalisation (1)

Americanisation and Westernisation spreading to other parts of the world

Technological Causes for Accelerated Globalisation (2)

- Internet has allowed for rapid spread of information and knowledge

- Social media allows spread of culture, ideology and opportunities for migration and tourism

Flow of Commodities as a Cause for Accelerated Globalisation (2)

- Goods can easily be imported. Increases interdependence on countries

- Amount of manufactured goods increased due to low cost labour in SE Asia

Economic Globalisation (3)

- TNCs use outsourcing and offshoring to lower costs

- Industries moving to developing countries to lower costs

- Trading blocs create economic integration

Political Globalisation (3)

- Governments form trade connections through trade deals and trading blocs

- Deregulations allow markets to grow

- Western democracies have influence on political ideologies worldwide

Cultural Globalisation (3)

- Tourism allows experiencing of different cultures

- Media sources allows understanding of different cultures

- Westernisation (domination of western cultural traits in non-western areas)

Social Globalisation (3)

- International immigration is causing multicultural societies

- Social networks have allowed for instant communication between people across the globe

- NGOs and Charities involved in global improvements of education and health

Lengthening of Connections

People can now travel further afield and goods are brought in from further away

Deepening of Connections

Where connections are penetrating more in depth into most aspects of life

Faster speed of connections

People can now talk in real time from different parts of the world and you can travel much faster than previously between different countries

Increasing globalisation throughout history

1712 = steam engine

1866 = telegram cable

1876 = telephone

1985 = mobile phone

Containerisation

Movement of goods using ships/transport using standard containers

Costs fallen 100% since 1950s

Mass Air Transport

1970 = jumbo jet (524people)

Open Skies Agreement resulted in increased competition and lower prices

Air freight increased 15% since 1970

Flows in globalisation (5)

- Capital

- Labour

- Products

- Services

- Information

Capital Flows

Movement of money for the purpose of investment, trade or business production

Labour Flows

Movement of people who move to work in another country

Product Flows

Flows of physical goods from one country to another

Service Flows

Services are 'footloose' industries (can be located anywhere). They flow as they can be produced in a different country to where they are received

Information Flows

Data that moves from one place to another through the internet, SMS etc.

Global Shift

Relocation of industry that has moved towards Asia from 1980s

Due to open-door policy, TNC power and FDI

Imperialism

Country that doesn't directly rule another but influences economically (USA)

Sahel Region

Area of West Africa just south of the Sahara Desert

Long term political instability leading to poor investment

High levels of corruption and uncertainty makes it unattractive for FDI

Sahel Region GDP and HDI

Chad - GDP = $2100, HDI = 0.392

Burkina Faso - GDP = $1600, HDI = 0.402

Niger - GDP = $908, HDI = 0.348

Environmental Reasons for being Switched off - Sahel Region (3)

- Semi-arid climate of 200-400mm of rainfall annually. Agriculture dependent on a good rainy season

- Climate change is leading to desertification. Less available land for agriculture

- Harsh desert and extreme cold climates limit infrastructure development so areas are poorly connected

Physical Reasons for being Switched off - Sahel Region (3)

- Countries are landlocked so have to rely on neighbouring countries for trade

- High transportation costs make it unattractive for FDI

- Isolation of desert regions leading to poor connections to the world

Economic Reasons for being Switched off - Sahel Region

- Poor infrastructure and low literacy rates make FDI unattractive

- Low incomes means market lacks size making it unattractive for retail

- Rural Sahel region is dominated by subsistence farming

Why may global flows be a threat for some countries? (3)

- Importing raw materials and commodities could hurt domestic suppliers and industries

- Migrants from abroad could create tension as they may not be wanted

- Foreign information could be a threat (China's Great Firewall)

Functions of the IMF

- Based in Washington DC

- Loans money to developing nations

- Country receiving the loan has to open up its markets and industries so that TNCs can potentially take over

Cons of IMF

- LEDCs may be unable to repay debt

- Privatisation may lead to money leaving the country

- Potential environmental or workforce exploitation

Function of the World Bank

- Based in Washington, DC

- Loans money to developing nations

- Aims to improve development and enable globalisation

Cons of the World Bank

- Criticised as it promoted LEDCs to go into debt

- Limits the governments sovereignty

Function of WTO

- Based in Geneva, Switzerland

- Aims to liberalise trade by removing tariffs and quotas

Cons of WTO

- Criticised for failing to prevent EU and USA from implementing protectionist measures

- Failed to create equal opportunities for countries to trade

Free Market Liberalisation

The process of removing government control and opening up markets to private companies

Why does Free Market Liberalisation occur?

It is believed that government intervention in the markets hinders economic growth and development in the long term

Example of Free Market Liberalisation

- Thatcher in the UK

- Banking and Financial sectors were deregulated. Allowed London to become a global financial hub

Privatisation

When a private companies buys state owned services and operates them. Allows the government to raise a lot of money.

Encouraging Business Start-ups

When a government provides subsidies in order to attract businesses.

Offshoring

Setting up production facilities within another country. This is usually in countries with cheap labour forces.

Outsourcing

When a firm signs a deal to obtain a product or service from another supplier. This is done to lower production costs

Foreign Merger

When TNCs join together to make one larger company

Foreign Acquisition

When a TNC purchases another company. Usually done in a hostile way to reduce competition.

Transfer Pricing

TNCs transfer their profits through subsidiaries in tax havens

Censorship

Restriction of information and knowledge flows by the government by using state controlled media outlets and internet restrictions.

Limiting Migration

With an increase of extremist views, more countries are adopting strict migration control

Trade Protectionism

Implementation of subsidies, tariffs and quotas within a country to help protect domestic industries

Trade Bloc

A group of countries that work together in order to reduce restrictions of the flow of capital and goods

Benefits of Trading Blocs (3)

- Larger potential markets for businesses

- Positive feedback loop (As one business has a demand increase, they purchase more raw materials etc.)

- More reliability in terms of trading products and services

Disadvantages of Trading blocs (3)

- Only focus on trading between countries within the bloc so external countries are excluded from trade

- Can lower global output due to not taking full advantage of specialisation

- Can be unfair (Relationship between USA and Mexico not stronger despite NAFTA)

The EU as a trade bloc

- Has its own currency that 19 members use

- Freedom of movement of goods, services, capital and labour

- No tariffs or quotas between countries when trading

- Has a European Court of Justice (No such thing in ASEAN)

- Has a government that has the power to legislate

ASEAN as a trade bloc

- Movement of labour isn't free. Limited flows of people (businessmen, professionals etc.)

- More strict on trade but has little external trade agreements

- No common currency but 13 finance ministers promote financial cooperation

- Decision making agreed by a consensus

Similarities between the EU and ASEAN

- Organisations aim to promote peace

- Seek to integrate economies into a single market

- Share a commitment to human rights

- Hold regular political and economic dialogues with important external partners

Special Economic Zones (SEZs)

Areas in China where TNCs receive special tax. They are also tariff and quota free.

How are SEZs attractive to FDI? (5)

- Unions are banned (workers can't strike or complain)

- Infrastructure is already provided. Very attractive for offshoring

- All profit can be sent back to HQs

- Taxes are low and there may be tax free periods of up to 10 years

- Environmental regulations are limited

China Open Door Policy

Policy change = Free-market policies 1979 and joined WTO 2001

Impact of China's Open Door Policy

- 300m moved to cities

- 200 cities with over 1m

- 50% GDP from SEZ

- 300m middle class

- Earnings $227 in 1978 VS $7,591 in 2014

Why is trading expensive? (4)

Restrictions and controls which include:

- Tariffs

- Quotas

- Embargo

- Non-tariff barriers

Example of a trade agreement

NAFTA

- Lower/Removed tariffs depending on products

- Between USA, Canada and Mexico

- Criticised for effectiveness

KOF Index

Measures globalisation of countries for political, economic and social indicators.

Measured on a scale from 1 to 100. (100 = Most Globalised)

KOF Index - Political

39% of overall score.

- Membership of international organisations

- No. of foreign embassies in the country

- Participation in international treaties

KOF Index - Economic

37% of overall score

- Flows of FDI

- Long distance flows of goods, services and capital

KOF Index - Social

24% of overall score

- Information flows (Internet users per 1000 people)

- Cultural proximity (No. of McDonalds)

- Personal Contact (No. of Tourists, International phone calls)

AT Kearney Index

Measure of globalised cities. It considers economic, personal, technological and political factors.

AT Kearney Index - Economic intergration

- Imports and Exports

- FDI

AT Kearney Index - Personal contact

- Telephone Traffic

- Travel and Tourism

- Remittances

AT Kearney Index - Technological activity

- Internet users

- Internet hosts

- Secure Servers

AT Kearney Index - Political Engagement

- Membership of international organisations

- Signatories to international treaties

- Number of embassies in country

Simple Measure

Based upon one factor. Most commonly statistical measures of wealth and productivity.

GNI (Gross National Income)

Total value of money earned by individuals and businesses within a country. This also factors in values of imports and exports.

PPP (Purchasing Power Parity)

The buying power of income in a country

Income Per Capita

Average income of a person within a country. This method hides inequalities

GDP (Gross Domestic Product)

The total value of goods and services produced in a country

Issues with GDP as an indicator (2)

- Doesn't measure informal income

- Measured in USD so GDPs vary according to exchange rate value

Composite Measures of Globalisation (2)

- Gender Inequality Index (GII)

- Human Development Index (HDI)

Gender Inequality Index (GII)

Measures female participation and treatment in society and takes into account

- Reproductive Health (Maternal Mortality Ratio)

- Empowerment (% of MP seats held by women)

- Employment (Labour force participation)

Human Development Index (HDI)

Measure of social development within a country

- Life Expectancy

- Wealth (GDP Per Capita)

- Education (Literacy Rate + No. of yrs in education)

TNC Economic Activity and Employment

Account for 25% of World's economic activity

Only employ 1% of World's population

How do TNCs create links through FDI?

Investment within other countries

Provide jobs and contribute towards the economy

How do TNCs create links through integration?

TNCs expand by mergers with other companies or takeovers.

Horizontal Integration

Joining with a firm in the same stage of the production process. This can create monopolies.

Vertical Integration

Joining with a firm in another stage of the production process. This enables TNCs to expand into new markets

Implications of TNCs Example

Natural Disasters (2011 Japan Tsunami) can disrupt supply chains

Due to the interdependence developed by TNCs.

Lead to a decrease in productivity and profits.

Affected Nissan Sunderland due to lack of parts arriving from Japan.

Glocalisation

Adaptation of goods and services to meet local needs or tastes

Examples of Glocalisation (3)

- McDonalds created a beef and pork free menu in India (Hindus and Muslim population)

- Car makers switch the orientation of the car depending on left/right hand drive

- Grocery shops in Bangladesh don't wrap veg as customers purchase based on the feeling

Benefits of Outsourcing (3)

- Disposable incomes have increased due to workers receiving middle class wages

- Positive multiplier effect due to increases in spending

- Increase in profits for people running outsourcing companies

Costs of Outsourcing (3)

- Exploitation of workers due to long hours and poor working conditions

- Employees become demotivated due to repetitive nature of work

- Inequality between richest and poorest is increasing

Sweatshops

Previously accelerated China's economy. They have moved to countries such as Vietnam and Bangladesh due to China having a bad reputation. New, higher tech industries have developed in China

Benefits of Manufacturing in China (2)

- Locals are able to earn a wage rather than being dependant on subsistence farming

- New production methods brought by TNCs are able to be adopted by local businesses boosting productivity

Costs of Manufacturing in China (3)

- Employees are exploited as they work in dangerous conditions such as: chemical contact, long hours, limited human rights, lack of health and safety regulations

- China contribute to 30% of World's total air pollution

- Rivers have become polluted with arsenic and lead

Services in India

- Opened up to globalisation in 1991

- Initial globalisation arrived as outsourcing

- This includes call centres from TNCs such as Microsoft. This is allowed due to India being a largely English speaking country

Services in India - Economic Facts

- Technology workers earn $10 a day

- Inequality has increased between the richest and poorest

- New Indian technology companies developed (Infosys founded in 1981 has revenues of $9 billion)

- India ranked only 142nd country to do business in world due to bankruptcy laws

Why does Rural-Urban Migration occur?

People may move within a country to seek better employment opportunities or to experience a better standard of living

Urban Pull Factors (3)

- Greater Employment Opportunities

- Services

- Improved infrastructure