1.2.3 influence of actors in shaping global economy

What is a state and what are its 4 elements?

A state = territory within which the population is governed by some form of authority structure.

4 elements:
→ Population
→ Territory
→ Government
→ Sovereignty

How can states influence TNC operations through capital flows?

Monetary policy → regulate capital inflows/outflows; lower interest rates may attract TNC investment.

Fiscal policy → tax incentives attract TNCs.

Deregulation → fewer regulations → easier/more attractive for TNCs to operate.

Privatisation → state assets sold to private sector → investment opportunities for TNCs.

Example: Singapore deregulated its financial sector from the 1980s → attracted foreign banks.

How do states use infrastructure to attract TNCs?

States create specialised industrial locations with suitable infrastructure/incentives.

Industrial parks → manufacturing/heavy industries
Example: Jurong Island → petrochemicals.

Science parks → R&D/knowledge-based activities
Example: Kent Ridge, Biopolis, Fusionopolis.

EPZs → export-oriented manufacturing, often with tax incentives/fewer regulations
Examples: Shenzhen, Batam.

. How do states influence flows of goods/trade?

Tariffs = taxes on imports
→ imports become more expensive
→ protects domestic producers
→ may cause retaliation/trade wars.

FTAs = agreements to reduce/remove trade barriers
→ increase trade + investment + economic integration.

Example: AFTA promotes intra-ASEAN trade through low/zero tariffs.

How do states influence flows of labour?

Border regulation → controls who can enter/work.

Migrant labour policies → allow foreign workers to meet labour shortages.

Skilled labour development → education/training creates workforce needed by TNCs.

Example: Bangalore developed technical colleges → skilled IT workforce → attracted Microsoft, Google, Amazon etc.

How can states themselves participate in business/investment?

State-Owned Enterprises (SOEs) → directly owned/managed by state.
Example: China → Sinopec, China Mobile.

Government-Linked Corporations (GLCs) → state has direct/indirect stake but firms operate commercially.
Example: Singapore → SIA, SingTel, CapitaLand.

Sovereign Wealth Funds (SWFs) → government-owned funds investing national wealth to generate returns/stabilise economy.
Example: Singapore → GIC.

Why does state influence over TNCs vary?

Liberal market capitalism — USA/UK
→ less state intervention; TNCs have greater freedom.

Social market capitalism — Germany/Scandinavia
→ strong welfare + worker protection.

Developmental capitalism — Singapore/South Korea/Taiwan/Japan
→ government actively works with firms and promotes development.

Authoritarian capitalism — China/Russia
→ strong political control alongside business activity.

How do labour characteristics affect TNC location?

Cheap/unskilled labour
→ attracts labour-intensive manufacturing seeking lower production costs.

Example: Bangladesh garment industry → low wages + large labour supply → attracts TNC production e.g. Nike/Zara.

Skilled labour
→ attracts knowledge-intensive TNCs.

Example: Bangalore → large skilled IT workforce → Google, Microsoft, Amazon etc.

How do labour unions influence TNCs?

Developed countries: stronger unions
→ demand higher wages, better conditions + job security
→ labour costs ↑
→ may encourage TNCs to offshore/relocate.

Developing countries: weaker unionisation
→ less bargaining power over TNCs.

How can labour unions influence states?

Political influence → influence government policies/parties.

Industrial action/strikes → disrupt services/economy → pressure government.

Cooperation: Singapore tripartism
→ government + employers + unions (NTUC) cooperate
→ industrial stability → attractive environment for TNCs.

How have TNCs affected labour, especially women?

Feminisation of workforce = increased participation of women in paid employment due partly to TNC manufacturing.

Bangladesh garment industry:
→ ~4 million workers
→ ~80% women
→ employment + income + financial independence

BUT:
→ low wages
→ long hours
→ poor conditions/exploitation.

How can states protect/regulate workers?

Minimum wage = lowest salary employers can legally pay.

→ reduces exploitation/increases income.

BUT high minimum wages may cause firms to:
→ automate
→ relocate
→ reduce hiring.

Singapore → no universal minimum wage; uses Progressive Wage Model.

States also regulate migrant workers through employment laws, salary protection and accommodation requirements.

What are Multilateral Institutions (MLIs)?

Organisations created by multiple states to cooperate and regulate aspects of the global economy → form of global governance.

Key MLIs:
→ ASEAN
→ IMF
→ World Bank
→ WTO

How does ASEAN/AFTA shape the global economy?

AFTA reduces tariffs between ASEAN members.

→ intra-ASEAN trade ↑
→ investment ↑
→ ASEAN becomes integrated production base
→ attracts TNCs.

Toyota example: production spread across ASEAN:
→ Thailand = assembly/local suppliers
→ Indonesia = engines
→ reduced tariffs allow components to move between countries
→ regional production network.

How do the IMF and World Bank influence states?

IMF → loans to countries facing financial difficulties + promotes financial stability.

World Bank → financing/advice for development and poverty reduction.

Loans may require Structural Adjustment Programmes (SAPs):
→ currency devaluation
→ government spending ↓
→ privatisation
→ deregulation
→ improved tax collection.

Criticism: may reduce social spending and increase poorer countries' dependence on richer countries/institutions.

How does the WTO shape the global economy?

WTO → supervises/liberalises international trade.

→ establishes trade rules
→ settles disputes
→ negotiates agreements
→ reduces trade barriers.

Criticism: free trade may disadvantage developing countries.

Infant industry argument → new domestic industries may need temporary protection from foreign competition.

Example: Malaysia protected Proton.

Agricultural subsidies → developed-country farmers receive subsidies → developing-country farmers struggle to compete.

Example: EU CAP may disadvantage African farmers.