Causes of Globalisation

Globalisation

• globalisation is the process by which goods, people, information, culture and finance transfer between countries with few barriers

• similar to international trade which has occured for centuries between wealthy countries (who invested and manufactured) and poorer countries (who provided raw materials and basic labour to produce)

• modern globalisation has shifted greatly from this original model, many poorer countries now responsible for manufacturing and globalisation has a wider scope

• no longer concerns just commodities but also people, culture, information, technology and capital

• enabled by communications and travel growing more efficient and faster, referred to as time-space compression which has led to a shrinking world

History of Globalisation

• steam power = Britain were leaders in industrial revolution, could move armies and goods quickly into colonised countries

• jet aircraft = efficient transport of goods, increasing competition between airlines lead to affordable travel abroad

• containerisation = 200+ million container movements every year, lower costs of good transport beneficial to global economy

• telegraph = instant communication

• telephones= improved global communication

• GPS = satellites allows companies and people to track goods across the world

• broadband and fibre optics = transfer large amounts of data very quickly

• internet = approx 40% of world population has acess, social media increases spread of connections and information

Technology

• social media become increasingly popular allowing spread of info, culture, idealogy and opportunities for migration and tourism

• server farms store large amounts of data

Economic

• online purchasing between countries has become more common

• stocks are traded across countries

• FDI causes countries to invest in one another

• volume and influence of TNCs have increased

Cultural

• exposure to media increase recognition and understanding between countries

• greater anwareness of world events

• westernisation

• international travel allows people to experience different cultures

Political

• political ideas expressed internationally in media

• IGOs work to harmonise economies whilst promoting democratic ideologies

• Western democracies have had influence on political ideas such as development of market economies in communist countries

• trade blocs become more influential and reduced protectionist measures like tariffs (deregulation)

Migration

• international tourism increased more people travel abroad due to lower travel costs

• international migration leads to extensive family networks across the globe

Flows of Commodities

• goods can be easily imported increasing countries interdependece

• volume of manufactured goods increased due to low cost countries like Bangladesh

Dimensions

• global flows = what countries share

• capital = movement of money for investment, trade or business production

• labour = movement of people wanting to work in another country

• products = flows of physical goods

• information = any type of info that can flow from one place to another

• services = industries that can locate anywhere e.g. call centres

Governance

ENVIRONMENTAL

• landlocked countries cannot be independent in trade, must rely on neighbours for ports and transport systems

• some countries more vulnerable to climate change than others so environment can change to unfavourable conditions

• poor fertility, arid land can limit a country’s ability to produce goods for trade

ECONOMIC

• countries with unstable markets or weak currencies will deter investment and business

• LICs can’t afford infrastructure investments to attract TNCs or education to develop a skilled work force

POLITICAL

• political agenda may limit flows of people, culture and information

• terrorism or active conflict limits global connectivity

• corruption in government mean money lost rather than invested

Key Players

• IGOs = International Governmental Organisations

• Trade Blocs = in order to trade more freely governments sign an agreement to reduce restrictions on trade of capital and goods

• TNCs = Trans National Corporations

• National Governments = just as important to the globalisation process is the willingness of individual national governments to create strategies and policies that promote international strategies for growth

Key Player: IGOs

a group of sovereign states, often established through a treaty, with mutual interests which works toward a unified goal

IMF (International Monetary Fund)

• loans money to developing countries

• in exchange country must open up markets and industries from government control to lead to privatisation

• in order to increase size of private sector and generate economic growth

• TNCs enter easier but economic benefits usually generated in host HIC

• also maintains currencies to stabilize countries and maintain economic growth

• e.g. involvement in Greek debt following 2008 financial crash, many cutbacks on government spending met with protests

World Bank

• loans money to developing nations

• focuses on natural disaster aid and humanitarian issues

• criticised for creating debt to limit a government’s sovereignty

WTO = World Trade Organisation

• promotes free trade between all countries by removing barriers and restrictions

• liberalises trade

• some countries suffer

• e.g. Pakistan joined the WTO in 1995 and to comply with WTO regulations opened up its fishing waters to foreign competition, previously there was a 200 mile exclusion zone around the coast so only Pakistanis could fish there, but after waters opened up huge trawlers from places like India took all the fish leaving local Pakistani fishing communities in poverty

Key Player: Trade Blocs

PROS:

• businesses opened up to a larger potential market

• business have a positive feedback loop where if onebusinesses is catering for larger demand this opens up opportunities in production line for raw materials and skilled workforce outsourcing opportunities

• trade is more reliable

CONS:

• countries outside trade bloc suffer and it’s very hard to get in on trade bloc

• foreign competition directly impacted

• doesn’t guarantee fair treatment within bloc

• e.g. USA and Mexico’s relationship wasn’t strengthened by NAFTA agreement

Key Player: National Governments

ATTITUDES

• limiting migration = most countries have border control and migration monitoring, rise of right wing views mean more countries impose stricter rules on migration

• trade protectionism = subsidies, tariffs and quotas help protect domestic industries

• censorship = government restricts flow of information and knowledge through state controlled media outlets which limits population’s knowledge of foreign culture and ideas which could undermine a dictatorship government

ACTIONS

• encouraging start ups = many countries offer incentives (grants, tax breaks) to attract business

• free market liberalisation = belief that government involvement in markets would hinder economic growth and development in teh long term, e.g. banking and finance ceentres in the UK deregulated by Thatcher and now extremely successful

• privatisation = privatising state owned and government controlled industires so private companies can buy and run them, creates loads of income for governemtn bt can compromise quality of services long term, e.g. public transporrt in UK privatised by Thatcher and quality diminished

• FDI = TNCs increase economic or industrial development in a country

  • offshoring = TNCs set up production facilities in countries with cheap labour costs

  • foreign merger = TNCs from different countries join to make one big company

  • foreign acquisitions = a TNC another company from abroad, usually hostile

  • transfer pricing = TNCs channel profits through subsidiaries in tax havens, e.g. Ireland

• EXAMPLES

  • China’s Open Door Policy in 1978, opened the country up to FDI, rapid urbanisation and low-wage factories built which utilised China’s vast workforce and attracted TNCs

Key Player: TNCs

MOTIVE = profit

• increasing revenues by expanding markets and merging or over taking competitors

• developing new markets = depend on either creative product design and desirabilit to create new amrket, or creating frequent updated models for existing customers to buy

• vertical intergration = a company ocntrols every stage of production from exploration to sales

• horizontal integration = company expands on one level of the production process

• controlling and minimising costs

• achieving economies of scale by expanding capacity

• diversifying product range = companies expand range in order to in order to future proof, if one product fails another will replace it

Types of Globalisation

• politcal globalisation = increase in trading blocs, free trade agreements and global organisations

• economic globalisation = increase of TNCs and information and communication technology

• social globalisation = international migration leads to improvements, international migration leads to improvements in services and connectivity