Geography - Globalisation

globalisation

the process by which people, their cultures, money, goods and information can be transferred between countries with few or no barriers

transnational corporations (TNCs)

companies that operate in several countries e.g. Shell in Nigeria and McDonalds have nearly 30,000 restaurants in 109 countries

economic globalisation

• the worldwide, economic system allows quick and easy movement of goods, production, money and resources (allowed by free trade)

• capital flows through the world stock markets, as well as a range of businesses like investment banks and pension funds

financial globalisation

• the worlds financial system is becoming more interconnected e.g. stock markets, which in turn mean there is more of a connection between large cities than nations

• the flows of money within a TNC through online purchases and sales as ell as the world stock markets

technological globalisation

• connection between nations through technology, such as TV, radio, telephone, internet etc.

• it has become widely available to the poor, as well as the rich, whilst also requiring less infrastructure

political globalisation

countries are adapting their political policies and styles of government in order to allow other forms of globalisation to occur such as free-trade agreements

cultural globalisation

• merging or washing down of the worlds cultures e.g. food, entertainment, language etc.

• heavily criticised and disliked due to its destructive nature (especially when destroying local cultures)

social globalisation

• exchange of information between people through social media and other forms of technology

• flows of ideas e.g. westernisation and the increase of western cultures found all around the world

off-shoring

part of the operations of a company is relocated to another (low wage) country)

out-sourcing

a TNC will ‘contract’ another company in a low-wage economy to manufacture a part of its product/service

flows of capital

the flows of money within a TNC through online purchases and sales as well as the world stock markets

a range of businesses, including investment banks and pension funds, buy and sell money in different currencies to make profits

flows of commodities

valuable raw materials such as fossil fuels, food and minerals have always been traded between nations

flows of manufactured goods have multiplied recently, fueled by low production costs and even lower-waged economies

flows of information

the internet has brought real time communication between distant places allowing goods and services to be bought quickly

communication on social networks and messaging apps like Snapchat

flows of tourists

budget airlines have brought places in easy reach for the high income tourists of developed nations (more accessible)

increased disposable incomes as well as increased technology means its quicker

flows of migrants

the permanent movement of people still faces the biggest obstacles in terms of facing border controls and immigration laws

governments often embrace trade flow but try to resist migrant flow unless there is a specific need

remittances

money is sent from migrants back to their families living in LICs

interdependence

countries becoming more reliant on other countries due to finances/flows from globalisation

‘shrinking world’

the idea/feeling like the world is getting smaller as communication around the world becomes faster and we are able to navigate it more quickly

how does improvements in transport cause globalisation (x5)

• can travel to places more easily and quickly as well as allowing TNCs to ship their products/material to different countries

• steam power: moved goods and armies quickly along trade routes in Asia and Africa

• railways: the Trans-Siberian railway connecting Moscow with China and Japan (9000km), HS2 (e.g. London to North England in just 2 hours)

• jet aircrafts: bigger, faster, can travel further as well as developments of more airports + budget airlines e.g. RyanAir

• container shipping: c

  • inter-modal containers - transferred between different modes of transport easily e.g. truck, train and boat

  • containerisation = the process of creating a more standardised procedure for container shipping by creating steel containers of the same shape and size

  • computers able to scan codes so they can track the containers meaning there is a guaranteed time of delivery, reducing costs and complications

  • 90% of all trade is carried for at least some part by sea on a fleet of over 50,000 ships, carrying over 8 billion tonnes of cargo each year

how does improvements in communication cause globalisation

• the internet and mobile technology has allowed greater communication between people in different countries

• increased TNCs as can have quick communication between different factories/offices which decreases labour costs due to cheaper labour

consumerism

excessive production and over consumption of short-lived or disposable items

throw away society

we replace items by throwing old ones away and buying new ones (items lose their worth)

the spatial division of labour

they shift lower skilled work overseas to where labour costs are low whereas more important roles such as ICT and management remain in the TNCs country of origin

time-space compression

heightened connectivity changes our conception of time, distance and potential barriers to the migration of people, goods, money and information

economies of scale

goods can be made cheaper when they’re produced on a larger scale

the race to the bottom

the race to deliver even cheaper goods

Amazon info

1. continually innovating and experimenting has caused the company to not only attract attention from customers but also raises customer expectations as wide range of products available and delivered in a short time

2. 5.5. million orders on Black Friday in the UK

3. 117,000 employees

4. ‘aggressively avoiding’ £75bn of global tax over the pst decade (Amazon’s tax rate was 12.7% over the last decade when headline tax rate was 35%) by shifting revenues and profits through tax havens and low tax countries

5. boasts over 270 million active accounts and claims to have more than 2 million third party vendors

6. 43.5% of all online spending in America is on Amazon

7. generated $386 billion in US retail e-commerce in 2020

8. high level of automation minimises recruitment costs, wages and can work 24/7 e.g. robots

protectionist

the theory or practice of holding a country’s domestic industries from foreign competition by taxing imports

e-tailing

electronic retailing → sale of goods online

economic advantages of e-tailing (x4)

1. reduced need for a high street retail space (reduces costs)

2. small businesses have access to a global market

3. associated industries benefits: packaging, transport, warehousing and postal/courier services

4. costs to consumers lower (“buyers market”)

economic disadvantages of e-tailing (x4)

1. loss of high street function/retail presence in developed countries

2. manufacturing has shifted towards Asia, due to cheaper labour costs, leading to loss of industry in more developed nations

3. dominance of retail by major TNCs rather than small retailers

4. jobs in distribution at mega hubs are sometimes poorly paid and/or zero hour contracts

social advantages of e-tailing (x3)

1. wider range of goods available leads to greater cultural diffusion

2. ease of access to goods → one-click purchasing and next-day/same-day delivery

3. access not limited by location (e.g rural/remote area)

social disadvantages of e-tailing (x3)

1. the elderly/those without web access have limited access

2. westernised ideas and cultures spread globally → cultural loss

3. true costs of human rights issues (e.g. sweatshops) often overlooked by consumers

environmental advantages of e-tailing (x1)

1. potential for reduced transport impacts if goods are transported direct from supplier to customer

environmental disadvantages of e-tailing (x4)

1. cost cutting leads to use of non-recyclable materials for packaging

2. increased carbon footprint attached to goods due to ‘transportation miles’ increasing

3. wider impacts of shipping: dredging of deep ports etc.

4. true costs to the environment often ignored/not considered by consumers

role of IMF (international monetary fund) in globalisation

• channels loans (short term + medium) from rich nations to countries that apply for help

• participants must agree to run free market economies that are open to the outside investment allowing TNCs to enter more easily

• USA exerts significant influence over IMF policy despite the fact that it has always had a European President

evaluation of IMF

• their rules and regulations can be controversial

• their strict financial conditions imposed on governments who borrow money means they have to cut back on key areas e.g. education and healthcare

key points of IMF

• aim to raise living standards in their member countries

• prompt international monetary cooperation and provides policy, advice and capacity development support to help countries build and maintain strong economies

• works very closely with the world bank to identify macroeconomic and sectoral issues, the division of labour and work needed in the coming year

role of the World Bank in globalisation

• lends money on a global scale e.g. in 2014 a US$470 million loan was granted to the Philippines for a poverty reduction plan

evaluation of the world bank

• promotes long-term economic development e.g. in 2014 the world bank distributed US$65 billion in loans and grants

• strict regulations are put on loan s

• all world bank presidents have been American citizens

key points of the word bank

• aim to reduce debt burdens (cooperating with IMF) for the most nearly indebted poor countries through programmes like the Multilateral Debt Relief Initiative

• promotes long term economic development and poverty reduction by providing technical and financial support to help countries reform certain sectors or implement specific projects such as building schools and health centres, providing water and electricity, fighting diseases and protecting the environment

role of world trade organisation in globalisation

• took over the General agreement on trade and tariffs in 1995

• advocates trade liberalisation especially for manufactured goods and askes countries to abandon protectionist attitudes in favour of untaxed trade

evaluation of world trade organisation

• failed to stop the world’s richest countries such as the USA and the UK from subsiding their own food producers

• this protectionism is harmful to farmers in developing countries who went trade on a level playing field

key points of the world trade organisation in globalisation

• only global international organisation dealing with the rules of trade between nations

• goal is to help producers of goods and services, importers and exporters conduct their business

• enforces regulations formed from the general agreement on tariffs and trade

• regulates international trade with the foal of helping it flow as freely and easily as possible

• increasingly global economy and bringing prosperity to developing nations through trade

• believes in free trade which has no tariffs, quotas or subsidies

• provides framework for countries negotiating trade deals and does dispute resolution

advantages of free trade (x6)

1. reduced protectionism (restricting imports from other countries through tariffs and quotas etc.) depending on imports for LICs

2. increased power to LNCs

3. ‘fair’ competition for LICs

4. increased access to goods for consumers

5. cheap products for consumer → competitive pricing

6. increased levels of trade → allows LICs to access markets

disadvantages of free trade (x3)

1. can destroy domestic industry due to cheaper imports → increases number of consumer buying from overseas

2. cause job losses in local community

3. adverse working conditions as undeveloped countries attempt to cut costs to gain in a price advantage

comparative advantage

instead of every country trying to make all the things they want, it makes more sense for each country to specialise and make things they’re best suited to make → leads to increased efficiency and better quality products

Tanzania - global organisations not benefitting a country

• decades of neglect and under-investment in the city’s water infrastructure mean that fewer than 100,000 households have running water

• Biwater took over water system (privatised) since the IMF and World Bank offered loans if privatised water supply systems

• led to many people turning to unsafe water supplies due to increased bills

• “pushcart men” - charge 1000 shillings for 20L of water of varying quality

Pakistan - global organisations not benefitting a country

• joined WTO which meant they opened up its fishing areas to foreign competition (previously had a 200 mile exclusion zone around its coast)

• cause job losses in local community

• adverse working conditions as undeveloped countries attempt to cut costs to gain a price advantage

foreign direct investment

when a company owns another company in a different country

types of FDI

1. offshoring - some TNCs build their own production facilities in low-wage economies e.g. Ford Motor Company in India

2. foreign mergers - two firms in different countries join forces to create a single entity e.g. T mobile and Orange to form EE

3. foreign acquisitions - when a TNC launches a takeover of a company in another country e.g. UK Cadbury subjected to a hostile takeover by US Kraft

4. transfer pricing - some TNCs channel profits through a subsidiary company in a low tax country e.g. Amazon - “aggressively avoiding” £75bn of global tax over past decade

government mechanisms to encourage FDI

1. low corporation and individual income tax

2. tax ‘holidays’ or other tax concessions

3. preferential tariffs (sometimes with Special Economic Zones)

4. free or subsidised land

5. visas (encourage companies to come and locate in their country

6. subsidies for infrastructure or research and development spending

how does free trade liberalisation accelerate globalisation

increase flow of commodities, knowledge, money and people which increases globalisation - ‘trickle down’ effect

how does privatisation accelerate globalisation

increase TNCs since private companies, ow own more in other countries e.g. Biwater in Tanzania - reduces government spending and raises money

how does encouraging business start-ups encourage globalisation

increase levels of wealth, and trade as the flows of information and goods increases (decrease in businesses taxes or changes in law) e.g. UK offered tax breaks, subsidies and grants

trade bloc

a voluntary agreement where a group of countries establish rules for trade between them

advantages of trade blocs

brings greater economic strength, and security to nations who join it as well as enabling free movement of people

economic union

like a common market bloc but also has the external tariff to other countries

free trade area

no taxes, or tariffs between specific countries

monetary union

nations sharing a single currency e.g. euro

common market bloc

freely exchange all goods, services and labour

customs union

remove all tariffs between a group of countries, but still charge as a general tariff to any country outside of their group

preferential trade agreement

an agreement within countries to remove all taxes and import and exports on specific products

tariff

a tax on an import or export between countries

EU information

• 27 members including France, Germany, Spain etc.

• the Schengen Agreement - free passage and flows of people + trade of membering countries

• has its own currency (Euro) and has some shared political legislation

• finances employment promotion, regional development, education, research and the environment

• made trade easier and more common

• more than 500 million people live in the EU with 24 different languages

ASEAN info

• 10 members e.g. Indonesia, Malaysia, Cambodia and the Philippines

• 3rd largest labour force in the world and know to be an economic powerhouse

• intra-regional trade could deepen with the implementation of the ASEAN economic community which aims to boost regional trade and production through delivering free movement of goods, services. labour force and capital

How has the Chinese government encouraged globalisation (x4)

1. open door policy - 1978 - needed western technology and investment to develop

2. Zhengzhou aerotropolis - 20,000 workers aiming to build 2 terminals, 5 runways with 70 million passengers early including homes and amenities for 2.6 million people by 2025

3. export processing zones (EPZs) - decreased tax on exports out of certain areas

4. Special economic zones (SEZs) - offer tax incentives and huge pods of cheap labour, means TNCs locate their as they use the advantage of outsourcing

Shenzhen case study

originally a fishing village of 30,000 and now a city of 18 million

• known as an SEZ and this status attracts young working migrants to the area creating a skilled workforce

advantages of SEZs (x6)

1. economic boost to that region

2. employment increases as labour demand increases

3. investment interest goes up due to the tax and other incentives

4. companies want to relocate to get easier terms and better opportunities compared to other regions

5. attracts FDI

6. can become hubs for trade and helps build better international trade relations

disadvantages of SEZs (x5)

1. can create pockets of development as well as boost economy of that region and not everywhere

2. can destroy local markets due tot he introduction of the global market with increased competition

3. excessive focus on a SEZ can lead to a relative neglect of other industrial areas

4. may increase pollution due to the increase of buildings and possible factories

5. immigrant workers may cause resentment from local workers

KOF index

measures the 3 main dimensions of globalisation

1. economic (actual flows of trade, FDI, investment etc.)

2. social (spread of ideas, information + people, cultural proximity etc.)

3. political (international memberships, degree of political cooperation e.g. number of embassies etc.)

Ireland, Netherlands + Belgium = highest

Somalia, Afghanistan + Sudan = lowest

advantages of KOF index

• 24 factors - large range of influences

• wide range of data available

• allows for easy comparisons between countries

• uses a weighing system that takes into account missing data and rebalances discrepancies

• available for 158 countries over a long period (1970 - 2006)

disadvantages of KOF index

• dated measurements e.g. international letters uncommon

• many countries don’t know the size of the informal economy so hard to measure trade

• measuring foreign populations can be hard due to illegal immigrants etc.

• hard to calculate number of internet users

• some countries choose not to join international organisations e.g. Switzerland

AT Kearney index

includes business activity, human capital, information exchange, cultural experience and political engagement

ranks both cities and countries through collecting and analysing data on

1. economic (integration data, FDI etc.)

2. political (international agreements etc.)

3. social (internet user, travel etc.)

4. cultural globalisation

= score of 100

top cities = London, New York, Paris, Tokyo, Beijing

advantages of AT Kearney

• allows for easy comparison between multiple countries as numerical score

• allows for comparison over time

• takes into account how globalised cities are as well as countries

disadvantages of AT Kearney index

• subjective

• difficult to measure cultural trends

• smaller countries tend to take top places in the index due to more importance on FDI

global shift

the eastern movement of the earth’s economic centre due to the deindustrialisation of HICs like the UK and the US and the industrialisation of eastern countries like China and India

environmental disadvantages of the global shift

1. loss of productive farmland - over 3 million hectares arable farmland has been polluted with heavy metals e.g. over 12 million tonnes of grain polluted in 2014 (increased use of fertilisers and pesticides = leaches to rivers)

2. pollution - China’s air pollution kills around 4400 people everyday as 1/3 of China’s population breathes in polluted air - 70% China’s rivers and lakes are now polluted and 100 cities suffer from extreme water shortages with 360 million people not having access to clean water

3. land degradation - over 40% of China’s farmland is now suffering degradation with the south suffering from acidification caused by industrial emissions

4. over-exploitation of resources + resource pressure - abundant oil and coal as well as key metals like iron ore but its resources cannot keep up with the increased demand so find from other countries e.g. Latin America (→ clearance of Amazon rainforest)

5. loss of biodiversity - China’s terrestrial vertebrae declined by 50% since 1970 dye to habitat loss and the degradation of natural environments

economic benefits of the global shift

1. increases in urban incomes - driven by both economic growth and slower population growth meaning employers have to pay higher wages to recruit staff → urban incomes rise by 10% a year since 2005

economic disadvantages of the global shift

1. loss of productive farmland - less crops yielded meaning less money from agricultural sector

social advantages of global shift

1. investment in infrastructure e.g. China developed the worlds longest railway network reaching 100,000km in length (linking all cities + provinces), 82 airports built since 2000 and Shanghai’s Maglev (magnetic levitation train) became the worlds fastest commercial train (268mph)

2. reductions in poverty - over 300 million Chinese people are now considered to be middle class and extreme poverty rate dropped from 84% to 10% in 25 years - worldwide 1 billion people moved out of poverty since 1990 - Indian call centre employees earn 3500 rupees a week

3. better education and training - education is free and compulsory for those between 6-15 with 94% of Chinese over the age of 15 are now literate, compared to just 20% in 2014 - 7.2 million Chinese graduated

social disadvantages of the global shift

1. increase in unplanned settlements - big increase in informal homes as land prices have made decent housing unaffordable, particularly near city centres

2. health problems - air pollution kills 4400 people each day

3. worker exploitation - ADIDAS in Cambodia = long hours without break and pay is so low it is hard to live off of - 2500 metal workers in Yongkung lost a limb or finger

transnational corporations (TNCs)

where major companies which have a presence (e.g. production, HQ, sales) in at least two countries

(often offshore to lower-wage economies due to weaker labour laws, cheap raw materials, less environmental regulations, lower taxes, lower cost of land, cheaper and larger labour forces etc.)

global production network

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

e.g. BMW minis engine is made in Brazil - 2500 parts made in multiple different countries

(natural hazards can disrupt chain of production)

Rana Plaza textile factory in Bangladesh

collapsed in 2013 killing 1100 people - damaged reputation

disadvantage of long global production networks

horse meat found in Tesco, Iceland and Aldi as difficult to control and supervise

Tata Nano

cheapest car on the planet (one wing mirror, small tyres = lowered cost)

glocalisation

a company adapting their products to suit a market (to peoples tastes or culture/religion)

allows a TNC to be profitable in a variety of cultures

e.g. McDonalds in India doesn’t sell beef or pork

economic advantages of glocalisations

• TNCs put capital into the local economy → the multiplier effect, increases disposable income as waged work

• through tax, government gains capital

• helps to provide resources to extract natural resources e.g. Shell extracting oil in Nigeria allowing them to access to the oil as well

economic disadvantages of glocalisation

• local businesses may be forced to shut down due to increased competition

• money often leaked back to the origin country

• may try to avoid tax commitments

• can encourage the ‘race to the bottom’ since TNCs aim to minimise their costs

social advantages of glocalisation

• poverty reduction and waged work e.g. China reducing poverty from 60% to 18% in 15 years

• education + training - 2500 unis in China, India, South Korea etc.

• improved infrastructure - from tax meaning governments have more to spend on infrastructure e.g. Mumbai Dharavi slum

• land price increases

social disadvantages of glocalisation

• worker exploitation e.g. ADIDAS + Puma

• increased urbanisation means increases in squatter settlements e.g. 5000 people arrive in Lagos each day

• difficult hours/conditions e.g. call centre employees in India often work overnight due to time difference

environmental advantages of glocalisation

• may bring technology that reduces harmful pollution

• may help locals extract local and natural resources

environmental disadvantages of glocalisation

• many host countries have less rigorous pollution laws, meaning TNCs under less pressure and scrutiny to reduce their emissions

• urbanisation means an increase in deforestation factory emissions (e.g. China) and transportation of goods

• industrialisation of eastern countries (the global shift)

NORTH KOREA INFO

• run by communism with a highly patriotic population and highly protected border to stop flows of people and information

• no trade blocs and has very strict rules on imports and exports (exports only worth 2.8milllion)

• desire to avoid cultural erosion and retain hertiage

• Kim Jong Un - supreme leader that wants to stop globalisation and maintain maximum control

BHUTAN INFO

• small labour force and land-locked

• the government believes by limiting the influence of outer areas, if can preserve its culture (must wear national dress)

• high-level of government debt - increased by 63 million

• large distance from the market discouraging FDI

• between India and China so must be cautious to prevent conflict

• has a carbon negative status so does not attract industry that may affect it

SUB-SAHARAN AFRICA INFO

• economy is mainly in the agricultural sector

• worlds lowest total GDP and 0.56 HDI showing incredibly low level of development (no money to invest in exports etc.)

• unskilled workforce - 239 million so cannot produce valuable resources (lack of education)

• food produced is used to sustain the population rather than being exported

SINGAPORE INFO

• one of the most competitive countries in the world

• has a diverse population of 5.6 million including Chinese, Somalian and Indian people

• strong emphasis on improving education in order to produce a skilled workforce

• large tourism and manufacturing industry

• major trade hub with a busy port

• free trade with little barriers to try and encourage FDI

• global significance in finance sector

GUANGDONG INFO

• most populous area iwht 126 million, and one of the longest coastlines of any province meaning it is easily accessible for trade

• largest exporter in China

• ASEAN - the provinces biggest training partner with Taiwan, the EU and USA also major

• contains Shenzhen = SEZs attracting young migrants for a skilled workforce + TNCs as reduced tax laws

• annual growth of 6% maintained

deindustrialisation

decrease in primary and secondary industries whilst there being an increase in the tertiary and quaternary sectors

e.g. Salford Quays - docks shut as cargo ships could not fit down the Channel leading to high unemployment