global gov

globalisation

the process of the world's economies, political systems and cultures becoming more strongly connected with each other

what has facilitated globalisation?

reduced cost of transportation, technological advances, open markets e.g. no tariffs

KOF index of globalisation

calculates overall level of globalisation of a country based on economic, political and social aspects
--\> lower value \= lower level of globalisation and vice versa

global patterns of globalisation

least globalised countries are in Africa and parts of Asia
most globalised countries are in Europe and North America
globalisation has increased most in Asia over last 50 years

what are the dimensions of globalisation?

flows of capital, labour, products, services, and information

flows of capital

- capital \= all money moving between countries used for investment, trade or production
- makes the world more interconnected as most countries' economies are dependent on flows of investment to and from other countries
- capital used to be restricted to investment within a country
- deregulation of world financial markets \= companies no longer confined to their own country
- capital has been invested into foreign countries by TNCs
- remittances - capital flows back to home countries from migrants
- technology has encouraged this as money can easily and quickly be moved via the internet to anywhere
- rapid growth of BRIC and MINT countries \= LICs that used to lack investment and were exploited are less so now

flows of labour

- movement of people who move to work in another country
- makes the world more interconnected as people bring different aspects of their culture with them and have connections with people in different places
- people may move to more developed countries for increased work opportunities with better wages or between developed countries for higher pay
--\> bulk of economic migrants \= some education and money

why are labour markets not as free flowing as financial markets?

restrictions on immigration

flows of products

- movement of physical goods between countries
- makes the world more connected as products are exported/imported to/from other countries
- traditionally manufacturing was in HICs but more recently manufacturing has moved to LICs with low labour costs and then products are imported to HICs
- international trade in manufactured products is increasing
--\> enabled by containerisation, reductions in tariffs, reduction in time and cost of transport

flows of services

- economic activities that are traded without the production of material goods
--\> high level \= finance and investment
--\> low level \= things like call centres
- people can be connected just by bank accounts
- financial deregulation in 70s and 80s \= easier for banks to do business in other countries
- improvements in tech \= services can be anywhere in the world to serve customers anywhere in the world
- high level services are concentrated in HICs and low level services are moving more to LICs due to cheap labour

flows of information

- movement of cultural ideas, language, ideas, tech etc.
- internet \= lots of information can be spread instantly \= different countries can communicate and work together
- tech flows used to be from HICs to LICs but NEEs are becoming centres of tech development
- world is more connected as ideas are shared and people learn about different countries/cultures
- facilitated by global telephone networks, internet etc. \= information spreads quickly around the world

marketing

process of promoting and selling of products and services

how has marketing become global?

products and services are now sold all over the world

what does global marketing involve?

treating the world as a single market

how does this benefit companies?

it's cheaper to have 1 marketing campaign that's used globally
--\> economies of scale

what makes global marketing successful?

creating a brand awareness where global consumers can identify a company by name/logo

what does global marketing still need to do?

glocalisation
--\> adapting to regional markets based on different areas' laws and cultures

why is Coca-Cola's marketing so successful?

- have 1 product that they tweak for different markets
- use the same formulas for all markets
- bottles and ads are recognisable in every country
- bright red logo/ads are memorable and eye-catching

what has globalisation lead to divisions in?

patterns of production, consumption and distribution

global patterns of production and consumption over time

- manufacturing used to be concentrated in HICs
- products were also consumed in these countries
- deindustrialisation in 80s/90s and FDI by TNCs \= developing countries took over manufacturing with cheaper labour \= production mainly in LICs and consumption in HICs
- countries developed and became richer \= started to demand similar products to those they were exporting to HICs \= production and distribution has to adapt
--\> consumption is still mainly in HICs

global division of labour

- more developed countries \= highly skilled, highly paid, decision-making, research and managerial jobs, tertiary sector
- developing countries \= unskilled, poorly paid, assembly corporations

how is this changing?

countries that were developing/LICs are becoming NEEs
--\> developing their own industrial and commercial bases
--\> developing their own global TNCs

what are the 3 groups of NEEs to know?

- 4 Asian Tigers
- BRIC
- MINT

4 Asian Tigers

Hong Kong, Singapore, South Korea, Taiwan

BRIC

Brazil, Russia, India, China

MINT

Mexico, Indonesia, Nigeria, Turkey

where do TNCs tend to make their products and why?

LICs \= where labour costs are cheaper and environmental laws are less enforced

global shift

the movement of manufacturing from HICs to cheaper production locations in LICs

what has the transfer of technology by TNCs enabled?

developing countries to increase their productivity (without raising wages)

consequence of global shift for HICs

deindustrialisation \= loss of jobs in manufacturing

what percentage did employment in manufacturing fall by between 1983 and 2013 in the UK?

50%

what else has caused a decline in manufacturing in HICs?

outmoded production methods
products at the end of their life cycles
poor management

what factors affect location choice of TNCs?

- availability of a skilled and educated workforce
- cheap labour
- fewer environmental regulations
- opportunity to build factories with the most productive technology
- government incentives e.g. tax breaks
- trade agreements \= access to large markets without tariffs

product consumption

- predominantly in HICs
- products manufactured in emerging economies are largely exported to developed countries
- this is changing - emerging economies develop \= populations become more affluent \= begin to demand products they're exporting

factors that have allowed globalisation to occur

financial, transport, security, communications, management and information systems, and trade agreements

financial

- deregulation of financial markets \= removal/relaxation of barriers to movements of finance between countries
- communications technology has made international trade easier and faster
- high-speed electronic trading systems and global exchange connectivity \= quick and easy financial transactions between importers and exporters
- banks/financial services operate globally

transport

- increased size of aircraft and integrated air traffic networks
- growth of low-cost airlines and air freight companies
- use of standardised containers (containerisation)
- handling and distribution efficiencies
- computerised logistics systems
- high-speed rail networks
\= products can be shipped quicker and in larger quantities \= easier international trade

security

trading community has security issues e.g. crime
--\> initiatives to alleviate threats \= world customs organisation and more regional measures e.g. EU "secure operator" label
--\> recent terrorism \= governments have tightened security for the benefit of business and have facilitated trade

communications

transmission of information between places \= increased connections
--\> communication satellites \= allow cheap wireless communication between 2 devices (inc. remote or rural areas)
--\> fibre optic cables \= can transmit more info. than any other cable \= speeds up communication
--\> large increase in the software that allows free communication between anywhere in the world

what is the effect of globalisation on countries?

become interdependent

what have evolved to reflect this interdependence?

global systems

examples of economic global systems

World Bank, WTO, IMF

examples of political global systems

UN

examples of social global systems

WHO, UNESCO

examples of environmental global systems

UNEP, IPCC

role of the UN

- to keep peace globally
- to develop friendly relations among nations
- to help nations to work together to improve poverty, world hunger, disease, illiteracy etc.
- to encourage respect for each other's rights and freedoms

role of the World Bank

- aim to end extreme poverty
- promote shared prosperity by fostering income growth of bottom 40% of each country
- source of financial and technical assistance for LICs
- provide low-interest loans and grants for development
- provide policy advice, research and tech support to inform investments
- works to improve coordination of aid
- millennium development goals

role of IMF

- aims to preserve economic stability and tackle financial crises
- funded by a quota paid by member nations
--\> main source of financial resources
- can provide loans to member countries in debt
- helps to design and fund country adjustment programmes
- provides tech assistance and training to help countries build economic institutions and strengthen human capacities

role of WTO

- upholds rules of international trade
- settles trade disputes
--\> members file complaints and WTO makes a verdict
- relies on compliance (no punishments)

role of IPCC

- assesses science related to climate change
- provides policymakers with regular assessments of scientific basis of climate change, its impacts and risks
- underlie negotiations at climate conferences
- present projections of future climate change, risks and implications of responses
- BUT don't tell policymakers what to do
- reports are written by hundreds of scientists and reviewed by experts before being passed to panel for decisions

what is the main issue with interdependence?

creates inequality - between and within countries

who does interdependence tend to benefit more?

HICs and richer people

why is this?

flows of money, people, ideas and technology are unequal

what is closing the gap between developed and developing countries?

communication and transport

what is used to indicate inequality of income distribution in a country?

Gini coefficient
--\> 1 \= country's entire income goes to 1 person
--\> 0 \= country's income is equally divided among population

what is this based on?

Lorenz curve - graph of cumulative share of household income against the cumulative share of households
--\> straight line \= complete equality between households

positives of unequal flows of people

- migrants boost productivity in a country
- migrants send remittances back to their families \= boosts local economies
- migrants tend to be young, educated and innovative \= bring skills and a hard work ethic
- migrants fill the jobs that others don't want
- migration allows people to escape war, famine etc.

what fraction of people are supported by remittances?

1/9

what percentage of Qatar's population is migrant workers?

90%

how has this boosted productivity?

$0.3 billion in 1970 to $206 billion in 2014

positives of unequal flows of money

- money flows to LICs as aid \= improves living standards
- FDI allows the foreign countries to access raw materials and lower labour costs
- FDI benefits host countries by bringing capital, expertise, opportunity to develop infrastructure and income from trade

positives of unequal flows of ideas

tend to flow to less developed countries \= allows development
--\> neoliberalism \= privatising state owned companies \= increases global free trade \= more development within countries and less conflict

positives of unequal flows of tech

concentration of tech in a place can lead to rapid innovation e.g. Silicon Valley, USA

negatives of unequal flows of people

- less developed countries have brain drain \= skilled people leave and take their knowledge with them \= reinforces inequalities
- low skilled migrants work for less money \= lower wages for local population \= conflict between migrants and locals
- migrant workers are sometimes made to work in dangerous conditions for little money

how many highly educated Poles migrated to another EU country in 2017?

600,000

how many migrant workers died building for the world cup in Qatar?

1000

negatives of unequal flows of money

- flow of foreign aid into less developed countries can create dependency and doesn't incentivise governments to improve their countries
- aid can fund conflict if it gets to armed groups
- FDI can force out local businesses as they have superior capital and technology to make products more efficiently
- TNCs pressure governments of less developed countries to pass laws that make it cheaper to invest there

negatives of unequal flows of ideas

- neoliberalism has spread globally but concentrates wealth for only a few people
- conflict can arise when private companies in less developed countries are threatened by decisions of governments
- TNCs argue that free trade and privatisation help a country develop and that this justifies poor working conditions and environmental degradation caused

negatives of unequal flows of tech

developed countries can afford everything, can make products cheaply and have better access to information/services - whereas less developed countries can't

what percentage of the Netherlands has access to the internet?

97%

what percentage of Myanmar has access to the internet?

20%

what do unequal power relations enable?

some states to drive global systems to their own advantage and to directly influence geopolitical events whilst others are more constrained

unequal power - conflict

- shortages of food, water and energy brought about by global growth may lead to conflict between nations
- globalisation hasn't brought equal prosperity \= some feel a sense of injustice and opposition to richer nations
- civil conflicts can arise within countries due to uneven power between richer and poorer residents
--\> rapid global communication can speed up spread of conflict

what is an example of an unequal power conflict?

anti-government protests against low standard of living in Tunisia in 2010
--\> quickly spread across Tunisia and Middle East

unequal power - trade

trade can be used as a weapon in conflict (between nations or between trading blocs) due to uneven power in trade

what is an example of unequal power in trade?

UN imposed trade sanctions against Iran because they refused to suspend their uranium nuclear programme

unequal power - climate change

- biggest contributors to climate change are richest nations \= can be reluctant to agree to proposals on limiting climate change as they don't want to harm their economy
- countries most affected by climate change are the poorest

what is an example of an LIC being badly affected by climate change?

Bangladesh is likely to be impacted by rising sea levels but lack the power to influence other countries to reduce emissions

potential solutions to unequal power

- HICs aid development in LICs to make them equal
- give countries equal voting power
- price cap on energy, food and water \= more accessible
- adhere to WTO
- make sure countries attend COP meetings

advantages of globalisation

- greater economic growth and higher standards of living for LICs due to more jobs
- increase in technology sharing
- extensive cultural integration
- TNCs gain access to a larger market, lower labour costs and higher profits

disadvantages of globalisation

- growing inequality e.g. low wages in LICs with large profits in HICs
- higher structural unemployment
- environmental costs
- trade imbalances
- less cultural diversity e.g. places become westernised
- workers are exploited
- increased security \= expensive
- increased transportation \= expensive
- TNCs cause places to lose uniqueness

trade

the action of buying and selling goods and services

why do countries trade?

allows them to access things they aren't good at producing

what does this mean that countries specialise in?

producing goods and services they excel at producing

what is a barrier to trade?

a government imposed restraint on the flow of international goods and services

what did trade used to be limited by?

regulations, high transport costs, protectionism

protectionism

shielding a country's domestic industries from foreign competition by taxing imports

are these processes still limiting trade?

not so much anymore
--\> transport costs are much lower
--\> free trade \= fewer barriers \= eroded protectionism
--\> governments still have regulations in place for trade

what are the current regulations on trade?

import licenses, import quotas, subsidies, voluntary export restraints, embargoes, trade restrictions

import licenses

issued by a national government authorising the importation of goods from a specific source

import quotas

set a physical limit on the quantity of goods that can be imported into the country

subsidies

grants or allowances usually awarded to domestic producers to reduce their costs and make them more competitive against imported goods

voluntary export restraints

offered by exporting country to appease importing country and deter it from imposing trade barriers

embargoes

the partial or complete prohibition of commerce and trade with a particular country

trade restrictions

import restrictions may be put in place based on technical or regulatory obstacles e.g. quality standards of goods

trends in volume and pattern of international trade

- emergence of free market ideas \= removed trade barriers \= increased trade
- global crisis in 2008 \= multilateral trade agreements have been difficult on a global scale
- inter-regional trade is dominated by Europe, Asia Pacific and North America

Foreign Direct Investment (FDI)

person/company spends money in another country to generate a profit

why is FDI important?

important source of funding for development in all countries
--\> injection of capital is needed for economic growth

what is the global share of FDI like?

unequal

how much FDI flows into countries around the world annually?

$1 trillion