A Level Edexcel Globalisation Enquiry Question 1

[3.1A] What is globalisation?

Globalisation is known as the ​increasing interdependence​ between countries through flows of ​capital, trade (commodities), goods and services​ as well as ​culture and knowledge​. Increasing movement of people also players a key role.

[3.1A] How has globalisation increased interdependence?

- This means that the success of one place depends on the success of other places.

- Economic problems in one country can quickly spread to its trading partners and affect them,

e.g in 2011, a Nissan Factory in Swindon cut working days due to a tectonic disaster in Japan.

[3.1A] What are the types of globalisation?

Economic, political, cultural, social and environmental.

[3.1A] What is economic globalisation?

This refers to the increasing integration and interdependent of economies across the world through the strengthening of cross-border movement of goods, services, technologies and capital. TNC drives this significantly.

- TNCs largely outsource and offshore to lower costs.

- The global economic shift.

- Trade blocs create economic integration.

- Global transactions of money, (e-commerce).

[3.1A] What is political globalisation?

The growth of free table blocs, free trade agreements and global organisations, and the emergence of inter-governmental organisations that watch over governments and have increased their influence.

- Western democracies have had a global influence on how economies should be.

- Deregulation (removal of state regulations) policies allowing markets to grow with an international reach.

- International organisations exist to harmonise national economies, e.g the UN, World Bank.

[3.1A] What is social globalisation?

This refers to how population structures have changed as a result of changes to the population's characteristics due to migration, immigration, and emigration.

- Immigration leading to multicultural societies.

- Social networking has revolutionised human interactions.

[3.1A] What is cultural globalisation?

This refers to the transmission of ideas, meanings and values around the world in such a way as to extend social relations. This normally consists of western cultural traits. It impacts art, media, sports, clothing, and much more.

- Exposure to media sources such as TV and social media allow people to experience other cultures.

- The ability to travel internationally and experience cultures.

- Westernisation which dominates many non-western areas.

[3.1A] What is environmental globalisation?

This refers to a holistic approach to natural problems and issues like climate change which requires a global response, creating a large interdependence between country to country.

- Paris 2015 agreement is a prime example.

[3.1A] What does deepening, widening and faster connections mean?

Deepening:

- The number and type of connections increase, and volume of flows grows.

Widening:

- Links to new places, often further away.

Faster:

- Time reduced to make connections is reduced as the speed has increased.

[3.1A] What is a flow?

This is when countries share things with another.

[3.1A] What are examples of flows?

Capital:

- The flow of movement for the purpose of trade, business and remittances.

Labour:

- Flows of labour are the movement of people who move to work in another country.

Commodities:

- Raw materials such as fossil fuels being traded.

Information:

- Any type of information, which can be transferred over the internet and communication technology.

Migrants and Tourists:

- People migrating from countries, or travelling via air travel. Encourage by budget airlines.

[3.1B] What transport developments have there been that has accelerated globalisation in the 19th century?

Railways, telegraph, steam-ships.

[3.1B] How did steam power accelerate globalisation?

In the 19th century, transport technology developed, steam power improved which paved the way for railways and steamships.

- This reduced the costs of moving goods internationally.

- Replaced sailing ships, and increased speed and cargo capacity dramatically.

[3.1B] How did the telegraph accelerate globalisation?

In the 1860s, the first telegraph cables were laid across the Atlantic - enabling for almost instant communications and revolutionised how businesses operated.

- It replaced a 3 week boat journey.

[3.1B] What transport developments have there been that has accelerated regeneration in the 20th century?

Containerisation and the jet aircraft.

[3.1B] How did containerisation accelerate globalisation?

Containerisation allowed transport to be cheaper and in greater quantities due to economies of scale, and how they could be easily transported off the ships.

- 95% of all global goods are carried in containers today, so it increased trade.

- Container ships are so efficient that the transport costs of moving an iPhone or television from China to the UK are less than £1.

- Can be used for mobile storage, reducing storage costs for the business.

- More good and commodes can be transported.

- Cheaper transport costs more will be traded.

[3.1B] How did the jet aircraft accelerate globalisation?

In the 1960s, jet aircraft was introduced, cutting transport times and lowering the cost of international air travel.

- It allowed foreign tourists to visit countries like never before, e,g Boeing 747 jumbo jet.

[3.1B] What is the shrinking world?

The physical distance between places remains unchanged, but new technologies reduce the time take to transport different flows.

[3.1C] What ICT and mobile communication developments exist that can accelerate globalisation in the 21st century?

Mobile phones, internet, social networking, electronic banking and fibre optics.

[3.1C] How have mobile phones accelerated globalisation?

- These have become a common within the 21st century.

- With the introduction of smart phones, it has extended the information flows to locations.

- Used even in countries with a lack of communications infrastructure.

- Enables faster connections.

[3.1C] How have the internet and fibre optics accelerated globalisation?

Internet:

- The internet access became common from the 1990s.

- Close to 50% of the world's population use internet.

- The internet has enabled platforms like Twitter to be established - increasing connections.

Fibre Optics:

- Broadband and fibre optics enable large amount of data to be transferred very quickly, making faster connections. Placed on ocean floor.

- More than 1 million kilometres of flexible undersea cables carry the world's data.

[3.1C] How have social networking and electronic banking accelerated globalisation?

Social Networking:

- Social networks allow people to communicate instantly and without charge.

- In 2014, 5 billion Facebooks 'likes' were registered each day.

- This has led to a time-space compression.

Electronic Banking:

- Electronic banking extends capital flows beyond the physical banking network.

- Electronic banking allows migrants to transmit remittances back to their own countries - increases interdependence.

- Huge benefit for businesses.

[3.1C] What is time-space compression?

This is an effect of increased connectivity with more distant place, and an effect of the shrinking world.

[3.2A] What economic organisations have contributed to globalisation?

World Bank, World Trade Organisation, and IMF.

[3.2A] What is the role of the World Bank, and how has it promoted free trade policies and foreign direct investment?

This organisation provides loans, grants, and technical assistance to help countries develop economically and tackle poverty.

- It aims to reduce poverty by promoting foreign investment and international trade.

- It promotes trade liberalisation policies, and the opening up to FDI by removing legal restrictions.

- Assistance can often involve the privatisation of state-owned firms, and opening up to foreign competition.

[3.2A] What is the role of the World Trade Organisation, and how has it promoted free trade policies and foreign direct investment?

This organisation regulates global trade and was formed upon the signing of the GATT.

- Over time, more countries signed up to the organisation, and participants agree to further reductions in tariffs and more standardisation of products.

- It works to reduce tariffs and trade barriers, and establish free trade links between all countries.

[3.2A] What is the role of the International Monetary Fund, and how has it promoted free trade policies and foreign direct investment?

This organisation supports countries that gets into financial difficulties, so that they can continue to participate in global trade and keep the global monetary system stable.

- The idea is by supporting countries, they are less likely to resort in protectionism seen in the run up into WW2.

- One of the key conditions is for recipient nations to open up its markets and industries from government control, leading to privatisation.

- Allowing TNCs to now enter these markets.

- Worked to encourage more open economies.

[3.2A] What is foreign direct investment?

Foreign direct investment (FDI) is the financial capital flow from one country to another by a business or individual in a different country.

[3.2A] Why do national governments encourage foreign direct investment?

The influx of capital can boost economic growth, employment opportunities, and tax revenues for the host country. It often leads to improvements in infrastructure.

[3.2A] How do national governments encourage foreign direct investment?

- Low corporation tax.

- Special economic zones.

- Free or subsidies land.

- Subsides for infrstructure.

[3.2B] How can national governments accelerate globalisation?

Privatisation, market liberalisation, trade blocs, encouraging business start-ups, special economic zones, and encouraging business start-ups.

[3.2B] What are trade blocs and how can they accelerate globalisation?

This is an intergovernmental agreement, where barriers to trade in a world region are reduced or eliminated among the participating stages.

- This increases political end economic intentions within the trade bloc.

[3.2B] What are the pros and cons of a country joining a trade bloc?

Pros:

- Businesses have a larger potential market to sell to, so there is a larger potential for more revenue.

- The bigger markets offer no extra taxes, or very cheap forms of taxes.

- National firms can merge to form TNCs.

Cons:

- Loss of sovereignty, as a nation gives up determination of some areas of economic (and in single market, immigration) policy.

- Countries become interdependent on each other. A disruption in one country can have severe consequences on the other countries of the bloc.

- Compromise, as countries entering into a trade bloc must allow foreign firms to gain domestic market share at expense of local companies.

[3.2B] What are examples of trade blocs?

EU:

- The European Union is a bloc with 28 members, and a population of 512 million.

- The Schengen area countries (26) have removed barrier countries.

- Much legislation is determined by the European Parliament, and some foreign policy.

ASEAN:

- A free trade area with 10 members with a population of 625 million.

- A uniform low tariff is applied between members for specified goods.

- Aims to coordinate a response to regional political issues.

[3.2B] What is market liberalisation, and how can it accelerate globalisation?

This involves the promotion of free markets, and reducing government intervention in the economy.

- It is the belief that government interventions in markets would hinder economic growth, and development in the long-term.

- With the restrictions, it could make businesses inefficient and reduce motivation.

- An example of this was the deregulation of the financial services in London.

- It aims to allow businesses to be more competitive and innovative.

[3.2B] What is market privatisation, and how can it accelerate globalisation?

This is when public sector organisations are no longer, or fully under the control of the government, so they come private sector.

- It is believed it can increase economic growth, and be more competitive with foreign TNCs.

- It may increase efficiency as there is more of a profit motive, as government may be reluctant to do things like dismiss workers.

- Foreign ownership can be permitted with privatisation allowing the injection of foreign direct investment.

[3.2B] How can encouraging business start-ups accelerate globalisation?

Governments can provide incentives such as grants, tax breaks, infrastructure constructed to attract businesses.

- This is especially the case for globally important areas such as ICT and pharmaceuticals.

- There could be low business taxes, minimum regulation, and good legal protection.

- This ultimately encourages foreign direct investment.

[3.2C] What are special economic zones, and how do they accelerate globalisation?

SEZs are large areas of land set aside by governments in locations well placed for international trade. These areas usually have relaxed regulations, including lower taxes and tariffs.

- Due to the relaxed regulation, it gives TNCs an incentive to set up there, boosting FDI.

- Unions and environmental regulations are usually limited here.

- Close proximity to trade routes.

- Infrastructure is usually subsidised.

Example: Shenzhen.

[3.2C] What are government subsidies and how do they accelerate globalisation?

National governments may subsidise the costs of TNCs and local companies so they will locate in certain places within the country to attract FDI.

- Tax incentives, tax exemptions.

- Investment in infrastructure to subsidise the cost for businesses.

[3.2C] How have attitude towards foreign direct investment contributed to the speed of globalisation?

- Many countries were adamant on self-sufficiency.

- Following the decision of the Asian Tiger countries who chose export led growth, they saw huge economic growth.

- By the 1980s, most countries had changed their attitudes towards FDI and globalisation.

- They viewed FDI as positive - creating new jobs with reliable wages and better working conditions.

[3.2C] What is China's 1978 Open Door Policy?

- At first, China was very "switched off" from the global economy.

- Many people lived in poverty, particularly within rural areas.

- In 1978, an open door policy was introduced that gradually allowed economic liberalisation and opening up to FDI, with the formation of 4 SEZs, one of which being Shenzhen.

- Exports soared from $2 billion in 1980 to $200 billion in 2000.

- Enabled China to receive $135 billion in FDI per year.

- China joined the WTO in 2001, guaranteeing other countries would lower tariffs on exports from China.

[3.2B] What is a TNC?

A very large business with factories and other operations in more than one country around the world.

[3.2B] How do TNCs contribute to the spread of globalisation?

Global production networks, glocalisation, and the creation of new markets.

[3.3B] How do TNCs accelerate globalisation?

TNCs import and exports goods and services, and in the process they make significant investment in foreign countries, sometimes by buying and selling licenses for production or sale in foreign markets.

- When a firm changed from a national company to a TNC by opening operation in another country (FDI), it creates international connections, spreading culture.

[3.3B] What are global production networks and how do they help accelerate globalisation?

A chain of connected suppliers globally of parts and materials that contribute to the manufacturing or assembly of the consumer goods.

- This creates a significant interdependence and increases flows with countries.

[3.3B] What is the developing of new markets and glocalisation and how do they help accelerate globalisation?

Developing of New Markets:

- This is simply opening new outlets in another country that increases revenue for TNCs.

- Spreads culture into new markets.

Glocalisation:

- This is the process of adapting brands and products to suit the local market conditions, such as taste, laws or culture.

- Global branding remains the same, but their identity is tailored.

e.g Disney sells Alcohol in Paris, but not the US.

[3.3B] What is economic liberalisation and how does it help TNCs accelerate globalisation? What are the types?

The relaxation of governmental regulations and restrictions in an economy.

Outsourcing:

- This is when a business makes a contract with another company to complete some of the work, with the aim to reduce its costs because other companies can do the work at a lower cost.

Offshoring:

- This is when a company moves part of its operations to another country, often because labour costs are low, or because the economic situation is more favourable for profit making.

[3.3B] What are the pros and cons of TNCs?

Pros:

- Raised living standards, as FDI increases productivity of developing nations, leaving to higher wages.

- TNCs have provided employment, and have reduced the conflict between rural and urban populations.

- TNCs bring technology from their parent companies, helping economic development in emerging economies.

Cons:

- GPNs may make TNCs more vulnerable to shocks in different parts of the world that halt production, e.g 2011 Japanese tsunami halted supplies in Nissan factory UK.

- Exploitation of workers, such as Rana Plaza textile factory.

- Environmental degradation.

- Job losses in the host country as a result of outsourcing and offshoring.

- Tax avoidance, through channel profits through subsidiaries.

[3.3C] Why are some nations "switched-off" from globalisation?

For political, economic, and environmental reasons.

Physical/Environmental:

- The distance from the market discourages FDI.

- Wilderness such as a desert making it difficult for infrastructure to be built.

- Low agricultural potential.

- Lack of resources for energy or raw materials, so businesses cannot develop.

Political:

- Corruption in government, or disruption by crime such as the presence of OCG.

- The national government is not committed to development, such as making trade links.

- Exclusion from trade blocs or disadvantaged by trade blocs.

Economic:

- High levels of governmental debt.

- Weak education levels and poor workforce skills.

- Poor transport and telecommunications infrastructure.

[3.3C] What are the reasons behind the North Korea and the Sahel countries being "switched off" to globalisation?

Economic:

- The Sahel region has poor infrastructure, such as its roads.

- It has low literacy levels of the working age population, 57% in fact.

Physical Environment:

- All four Sahel regions are landlocked, and rely on the passage of neighbouring countries for coastal ports. This rises transports costs, making FDI unattractive.

- Sahel has a semi-arid climate, with only 200-400mm of precipitation a year, making it not suitable for agriculture. This will be exacerbated by climate change.

Political:

- North Korea is an autocracy ruled by Kim Jong Un with a communist system.

- Relies on China heavily to feed its population.

- Mismanagement of resources.