Topic 3 - Globalisation

Globalisation

The increasing interconnectedness and interdependencies of countries around the world through movement of goods, services, capital, and ideas.

4 key aspects of globalisation

• Economic

• Social

• Cultural

• Political

Economic globalisation

Increase of TNCs and ICT

Social globalisation

International migration, improvements in education and healthcare, social interconnectedness

Cultural globalisation

Through western cultural ideas, increasing speed ideas and information are spread

Political globalisation

The increase in trading blocs, free trade agreements, and global organisations

Transnational Corporations (TNCs)

Companies that operate in many countries

Glocalisation

Changing a product to meet local tastes or laws

Trading blocs

Group of countries/organisations that work together for trade

3 factors influencing modern globalisation

• Lengthening connections between people and places

• Deepening connections to others

• Fast speed of communication

Examples of flows of movement

• Capital

• Commodities

• Information

• Migrants

• Tourists

Shrinking world effect

When places take less time to reach due to developments in technology, therefore feeling closer together (AKA time-space compression)

Technologies that contribute to globalisation

• Telephone/telegram

• Broodband and fibre optics

• GIS and GPS

• The internet

• Mobile phones

Foreign Direct Investment (FDI)

Financial investments into a country’s economy made by a TNC

World Trade Organisation’s (WTO) role in globalisation

Promotes trade liberation

International Monetary Fund’s (IMF) role in globalisation

Transfers loans from HIC’s to countries that apply for help

• Recipients must agree to run free market economies and allow TNCs

World Bank role in globalisation

• Lends money on a global scale

• Gives direct grants to developing countries

Negatives of the WTO

Failed to stop USA and EU from subsidising their own food producers (farmers) which hinders farmers in developing countries

Negatives of the IMF

Strict conditions on borrowing which can reduce spending on healthcare and education in the countries

Negatives of the World Bank

• Very strict conditions on loans/grants

• All presidents have been US citizens (neocolonialism?)

National governments strategies to help grow TNCs

• Free trade blocs

• Special Economic Zones (SEZs)

• Tax incentives

• Free-market liberalisation

• Privitisation

Free-market liberalisation

Lifting restrictions on companies/banks, reduces cost for TNCs to operate in the country

Privatisation

Allows companies to take over national services to reduce government spending, potentially gives TNCs stake in important services

Encouraging business start ups

Aims to increase profits for businesses by changing laws and lowering taxes

Special Economic Zones (SEZs)

Industrial areas near coast with favourable conditions for TNCs

Government subsidies

Reduce coasts for businesses, very attractive to TNCs

China’s open door policy

• Opened up to FDI, lead to rapid urbanisation and creation of SEZs

• Became very attractive to TNCs and is now the worlds largest economy

Factors affecting levels of globalisation in areas

• Variation in poverty

• Resource availability/accessibility

• Government policies/attitudes

Ways to measure globalisation

• KOF index

• AT Kearney World Cities index

KOF index

Measures the level of globalisation in social, economic, and political aspects

• Uses wide range of data (eg UN participation)

• 0-100 (most globalised)

Issues with KOF index

• Only available for 122 countries

• Some indicators are outdated

• Cultural bias in some factors

• Doesn’t account for environment

AT Kearney World Cities index

Looks at how countries cope with population growth and shrinking world

• Ranks cities according to business activity, cultural experience, and political engagement

• Includes number of TNC headquarters, museums, and foreign embassies

Issues with AT Kearney World Cities index

• Only 156 countries

Offshoring

Moving parts of production process to other countries to reduce costs

Outsourcing

Contracting with other companies to produce needed goods and services

Global production networks

Chains of connected suppliers that contribute to the manufacture/assembly of goods

Switched off places

Countries/regions that abstain from globalisation, weak flows of trade and investment to other places

• Eg. North Korea and the Sahel region

Global Shift

The relocation of different types of industry, currently from Europe and North America to Asia and South America

Causes of the global shift

• Offshoring

• Outsourcing

• New business start-ups

Negatives of the global shift in Asia

• Unplanned settlements

• Loss of productive land

• Pressure on environment and resources

• Increase in unethical practices

Positives of the global shift for Asia

• Poverty reduction

• Waged work

• Infrastructure investment

• Education and training

Environmental impacts of global shift (Developing countries

• Air and water pollution

• Land degradation

• Resource over-exploitation

• Loss of biodiversity

• Loss of farmland

Negatives of deindustrialisation

• Dereliction

• Depopulation

• High unemployment

Stages of inner city decline

Megacity

Has a population of 10 milllion+

• Only 3 in 1970, now 34

Pull factors (migration)

Factors that “pull” people to a new area

Push factors (migration)

Factors that “push” people out of their current location

Social challenges of rapid urban growth

• Not enough affordable housing

• Limited access to education and healthcare

Environmental challenges or rapid urban growth

• Water pollution from sewage

• Air pollution from vehicles and industry

• Loss farmland

Global hub

A highly globally connected city (AKA world cities)

Elite international migration

Migrants are highly skilled or socially influential, many live as global citizens

• Eg. Actors, bankers, computer programmers

Low waged international migration

Migrants work low paying jobs, both legally and illegalyy

• Often found in global hubs

Internal (rural-urban) migration

Citizens move to larger cities and global hubs in their country

Benefits of migration for the host country

• Migrants can fill work shortages

• Economic migrants often willing to do physical labour

• Migrants pay taxes and spend their wages (boosting economy)

• New business mauy be opened, helping boost employment

Benefits of migration for source country

• Remittances contribute to national earnings

• Reduced spending on healthcare and housing

• Migrants may return and bring new skills or knowledge

Costs of migration for host country

• Social tensions (especially in America)

• Policy changes to address these concerns

• Shortages of school places

Costs of migration for source countries

• Reduction in working population

• Reduced economic growth

• Increasing percentage of dependents

Remittances

When migrants send part of their wages back home to support their family

Cultural diffusion

Influential civilizations throughout history bringing cultural change to other places

Cultural imperialism

Spread of culture to other places (similar to cultural diffusion) but through coercion and violence

Impacts of cultural diffusion

• Use of english as the dominant language on the internet and in technology, business, and education

• Changes of diet (eg in Asia)

• Cultural attitudes to disability changing

Cultural erosion

Westernised culture spreading to countries and removing the current culture of the place

Concerns about cultural erosion

• Result in loss of languages due to English spreading

• Worry ecosystem is become devalued in favour of economic growth

Gross Domestic Product (GDP)

The total financial value of goods and service produced in a country

Gross National Income (GNI)

Total amount of money earned by the people and businesses in a country

Purchasing Power Parity (PPP)

Measures the price of certain good sin different countries, can be used to compare power of different currencies

Per Capita

The average per person, often applied to GDP and GNI

Economic sector balance

Estimation of the contribution by each sector to national income

Human Development Index (HDI)

Ranks countries accoring to economic and social criteria

• Life expectancy, income, and education are all scored 0-1 then averaged

Gender Inequality Index (GII)

Countries are scored 0-1, higher the value to more unequal

• Uses 3 aspects, reproductive heath, empowerment, and labour force participation rate

Economic measures of development

• Income per capita

• Economic sector balance

• HDI

Social measures of development

• HDI

• GII

• Environmental quality

Gini Coefficient

Measures inequality in the distribution of household income, scored between 0-100, higher scores mean greater income inequality

• 0 means everyone makes the same

• 100 means one person has all the countries income

Factors limiting globalisation

• Censorship

• Strengthening anti-immigration laws

• Trade protectionism

Trade protectionism

The restriction of international trade to help domestic industry

Resource nationalism

Government takes measures to make sure domestic industries and consumers have first access to the countries resources

Benefits of local sourcing

• Products are ensured to adhere to countries regulations, may be healthier

• Countries farmers earn more

• Can reduce peoples carbon footprint

Costs of local sourcing

• Can be much more expensive

• Can have an impact on developing countries economies

• Some products require conditions that have to use a lot of energy to meet

Ethical consumption strategies

• Fairtrade

• Supply chain monitoring

• NGO action