Globalisation Flashcards
What is globalisation?
the increasing interdependence between countries represented by an increase in cross border flows
Name the flows
- people (migrants and tourists
- goods (commodities or products)
- services (face-to-face or online)
- capital (FDI, money between people and banks)
- information (data transferred between businesses and people, often using the internet)
What are the different types of globalisation?
- political; spreading ideologies, global organisations (e.g. UN), the dominance of western democracies in decision making; spread of neo-liberal capitalism and western values
- cultural; unifying and diversifying; people using increasingly similar: food, clothes, music, values - cultural diffusion/westernisation
- economic; the growth of TNCs, global brand image and presence through FDI; rapid growth in world trade
- environmental; agreements (Paris), pollution affecting other countries, species being spread to other countries; global warming
- demographic; increasing migration and tourism makes populations more fluid and mixed
Describe how globalisation can be reversed
- During WW1 and WW2
- Many countries responded to the Great Depression by increasing protectionism
- During decolonisation in the 1950s, 1960s and 1970s many newly independent countries reacted against the perceived exploitative nature of the international trade system by seeking self sufficiency through import substitution.
What is the shrinking world?
The physical distance between places remains unchanged, but new technologies reduce the time taken to transport goods/people/ communicate information.
Describe some changes in transport that have led to the shrinking world
- In the 1700s it took two years to circumnavigate the globe.
- Now it only takes jet aircraft (Concorde) 31 hours as they can travel up to 700mph
What is containerisation?
Using standard sized containers to transport goods around the earth on ships. The standard size of a container is 20 feet. It is intermodal
What are the advantages of containerisation?
- Large volumes of goods in one journey on ships-In 2017 $4 trillion worth of goods transported this way
- It reduces costs (cost of moving an iPhone from China to the UK is £1) cuts costs by 75%
- Speeds up goods trade as they transfer quickly from a boat to a lorry or railway (due to intermodal nature of containers)
- Faster transport times increase the distance perishable products can be transported, e.g. cut flowers from Kenya, opening up more distant markets and reducing losses.
- makes consumer goods cheaper, increasing demand
- facilitated outsourcing
What are the disadvantages of containerisation?
- environmental impacts (accounts for 1 quarter of nitrogen oxide pollution)
- reduces air quality, health issues
How can development of Mobile phones and Internet lead to globalisation?
- increases flow of services, capital and information
- Mobile phones extend communication and information flow beyond landline networks since their invention in 1990s. Information can be shared across the globe without the need to travel
- Reduced costs of mobile phones expanded usage from an expensive business tool to an ubiquitous consumer product. Increases depth of globalisation as more people can communicate
- used in countries with lack of communication infrastructure
e.g. By 2015, 70% of people in Africa owned a mobile phone - Flows of goods and services increase as they are able to buy online and provide services over the internet through Teams ect. no need to travel
- close to 50% of the population uses the internet
- In India 35% of adults don’t have a phone and more than 50% don’t have access to the internet. Decreases length and depth of globalisation
How can development of social media lead to globalisation?
- Social media leads to increase in all flows; people (keep in contact with family= migration), information (news), goods (FB market place), capital (purchasing goods, subscriptions), services (educational videos)
- Social media and Skype allow people to communicate instantly and without charge
e.g. In 2014, 5 billion Facebook ‘likes’ were registered each day. - The development of social media (Facebook 2006, Instagram 2010, WhatsApp 2010) enabled much cheaper communication between friends and family than landline telephone.
- This has led to space-time compression, where the cost (time or money) of communicating over distance has fallen rapidly, so people can communicate regardless of distance.
- # Refugees welcome= designed to put political pressure on EU govs to grant refugee status to migrants crossing from MENA regions to Europe
- migrants feel more confident. In 2015, 1 million migrants made this crossing (mostly to Greece and Italy), increasing flow of people
How can Electronic banking lead to globalisation?
- encourages flow of people and capital/ goods
- The rise of mobile phones means they can be used for economic banking, revolutionising life for individuals and businesses.
- e.g. In Kenya;
The equivalent of one third of the country’s GDP is sent through the M-Pesa system annually. This is a mobile phone service that allows credit to be directly transferred between phone users.
E-banking allows migrants to transmit remittances of money back to their home countries. Encourages flow of people as sending money to family is less risky
has lead to increased consumption (goods/ capital) - Accused of high transaction fees as they are a monopoly
How can Fibre- optic cables lead to globalisation?
- invention of fibre- optic cables= data can travel at the speed of light
- 99% of data is transferred across 1 million km network of sea floor cables
- leads to rapid growth in cross border communication programmes e.g. facetime and teams
- Land-based and sub-sea fibre optic cables increased the speed and volume of data transmission through cyberspace, and allow instant, global communications (space-time compression)
How have international organisation like the World bank and IMF contributed to globalisation?
through the promotion of free trade policies and foreign direct investment.
What is protectionism?
Many countries protect their domestic industries and businesses by:
- tariffs on imported goods, so making them more expensive than home-produced goods.
- Using quotas to limit the volume of imports, protecting home producers from foreign competition.
- Restricting FDI
Bretton woods institutions
At the Bretton woods conference in the USA in 1944, Allied powers agreed to set up 3 IPEOs (WB, IMF, WTO) to rebuild the world economy after WW1
What is the World bank and what does it do?
- UN
- loans to developing world to fund economic development and reduce poverty.
e.g. 2014- $470 million loan to the Philippines for a poverty reduction programme - money used to develop rural infrastructure- farm to market roads improved
- project benefitted 2 million farmers and fishermen, led to a 5% increase in annual incomes
- increases flow of capital and goods
- SAPs used- austerity means social factors suffer
- e.g. Tanzania- had to privatize inefficient state run utilities like water infrastructure. It was acquired by UK based conglomerate ‘CityWater’ here consumers were cut off if bills not paid
- increased likelihood of children not attending school due to having to source water from elsewhere, less productive country so decreased global flows
What is the World trade organisation and what does it do?
- UN
- advocates trade liberalization and removal of protectionist measures
- decrease cost of imports and exports of goods so flow increases
- There has been lack of success in getting 164 members to agree e.g. subsidies in agriculture
- Doha 2011 round of negations, aim= reduce subsidies to 2.5% of the value of production for developed countries and 6.7% for developing
- US and EU disagreed and lobbied to protect domestic food industries as low cost foreign food imports challenge domestic agriculture (flow of goods decreased)
What is foreign direct investment?
the financial capital flow from one country to another for the purpose of constructing physical capital, i.e. building a factory in another country.
How can national governments promote globalisation?
- By joining/ promoting free trade blocs
- Free market liberalization
- IGOs
- Invest in other countries, FDI
- Open door migration policies
- Privitisation
How can national governments promote globalisation by joining free trade blocs?
- removal of tariffs for certain countries to enlarge the market & increase customer potential increases flow of goods due to greater demand from lower prices
- trade blocs can become a social union e.g. free movement of labour throughout Schengen area (neoliberal economic theory)
- improved economies of scale from lowered cost per unit
The European Union;
- A single market trade bloc composed of 28 members and a population of 512 million.
- It guarantees the free movement of goods, capital and people
- Integrated economic policy areas, e.g. Common Agricultural Policy, Structural Funds to assist regions within member countries with a GDP per capita of less than 75% the EU average
- Political globalisation with Europe
How can national governments promote globalisation through privatisation?
- Since the 1980s many governments have sold state-owned industries
- In the UK the steel, car, electricity, gas and water industries were all state-owned but are now privately owned
- However, many governments still own big slices of industry, even in big countries like France e.g. EDF
- It may increase efficiency as the profit motive minimises loss- no longer subsided by government
- Permitting foreign ownership allows an injection of foreign capital through FDI, introduces new technologies and promotes globalisation e.g. Privatisation of Tanzania’s water by City water
How can national governments promote globalisation through free market liberalisation?
- This involves promoting free markets and reduces government intervention in the economy
- Competition between firms leads to innovation and lowest cost production- increasing demand
- Outcome is higher output, lower prices and greater choice - higher SOL
- e.g. promoted in the 1980’s Margaret Thatcher in UK and US President Ronald Reagan
- ending the monopoly provision of some services like telephones, broadband, gas and electricity, so you can choose your supplier based on quality and price
- It has created competition in once restricted markets, increases efficiency and promotes globalisation.
- Foreign competition can be encouraged by open door policy to FDI
How can national governments promote globalisation through encouraging business start-ups?
- Grants and loans are made to new businesses especially in globally important areas such as IT, pharmaceuticals or renewable energy
- low business taxes, well-enforced contract laws, minimum regulation and efficiency bankruptcy procedures, which encourage new firm creation.
- It creates innovation and competition in new production techniques, erodes excess profit of monopolies, lowers prices and increases household purchasing power
- Foreign new businesses will be attracted to start up, promoting globalisation.
- e.g. The UK Government’s support for ICT start-ups in Tech City (Silicon Roundabout) in the Old Street area of London
What are 2 ways globalisation can be measured?
- KOF index
- AT Kearney Index
What is the KOF index?
- It measures a countries level of globalisation for economic, plitical and social/ cultural factors
- It’s measured on a scale from 1 to 100, where 100 is the most globalized nation with 24 variables used
- Highest country; Switzerland= 90
- China= 65
- developed countries have higher scores because they attract foreign labour to fill gaps so are more culturally mixed- this can be promoted through trade blocs (EU)
What is the At Kearney index?
- AT Kearney Index is a measure of globalized cities, across 156 countries
- Analysis based on business activity, cultural experience and political engagement
- Top 5 ‘World cities’= New York, London, Paris, Tokyo, Beijing
- Small European countries dominate top 20
What is largest cargo vessel called and its capacity?
- Ever Alot vessel
- 400m long
- 24,000 TEU capacity
How does containerisation increase flow of goods?
- 90% of goods traded this way
- Ever Alot vessel= 24,000 TEU capacity
- increases efficiency through intermodal containers which reduces cost (iPads transported for $1 from China to UK)
- reduces cost for consumer= demand rises
- facilitated outsourcing which further accelerates globalisation
Evaluation of containerization accelerating flows
can only increase them so much
1. Physical land masses and associated infrastructure determines shipping routes
Trading choke points exist such as Strait of Malacca connecting the Indian ocean and China sea
Suez Canal got blocked in March 2021 for 6 days- caused a delay of flow of goods
- There are 42 landlocked countries
No capacity for a port so wont benefit from container ship trade
Acceleration will be much slower in these countries e.g. Chad
How does the time- space compression lead to increased flow of people?
- takes less time to travel between places so world feels smaller
- reduces friction of distance
- led to development of budget airlines such as Easyjet, which sold 65 million tickets in 2014
- means its more accessible to lower incomes
Describe how there’s a reducing influence of air travel and its contribution to acceleration
- Global Pandemics
e.g. Covid-19
Travel restrictions led to a decrease in the flow of people
Confidence in travelling reduced - Global climate agreements
e.g. Paris agreement
Countries pledge to reduce carbon emissions
12% of CO2 emissions from transport is from aviation - Technology
Instant communication
Decreases need for travel (for business trips especially)
What is the IMF and how does it encourage globalistion?
- part of the UN
- leads money to countries in times of economic crisis
- e.g. In 2015, Ghana received a $918 million loan due to falling price of commodities and gov were over spending on civil service
- they have to reduce spending on public services and open up borders to FDI
- Ghanas agreement lead to cross border flows of capital from TNCs. In 2016, 28 out of 676 FDI projects in Africa took place in Ghana
How does the IMF actually slow acceleration?
- less spending on education and healthcare due to SAP
- less trained nurses and teachers
- quality of services declines
- economic growth and development
- decreased disposal incomes
- decreased demand for goods and lower FDI
- decreased flows
- In Jamaica, an IMF loan led to 60% fall in registered nurses and infant mortality rose
Give some disadvantages of trade blocs
- decrease flow of goods with other countries
- increased migration leads to nationalist movements e.g. UKIP
- more flow of goods from developing countries with less environmental laws and burning of fossil fuels
- increased travel- increases GHG emissions, global warming
What is a special economic zone (SEZ)?
an area in which the business and trade laws are different from the rest of the country
Their aims include;
- increased trade balance
- employment
- increased investment
- job creation
- effective organisation
How do SEZs attract FDI in order to achieve their aims?
- tariff and quota free, goods can be exported at no additional cost
- unions are banned so workers can’t strike
- infrastructure e.g. ports, roads provided by the gov through subsidies, lowering costs for companies
- all profits sent to HQ overseas
- limited environmental regulations
What are some positives and negatives of SEZs?
Positives;
- economic growth for= business owners and country
- multiplier effect e.g. population of 12 million in Shenzen
- high quality infrastructure from gov
- encourages competition between businesses= stops monopolies and lowers price for consumers
- TNCs attracted to set up leading to job creation= in-migration of highly paid workers and QOL increases
Negatives;
- no unions= exploitation not challenged, poor working conditions
- profits sent to HQ= no/little corporation tax (transfer pricing)
- limited environmental regulations= water pollution e.g. water quality is below national standard in Shenzen, climate change, air pollution
- dense/ large pollutions lead to competition for jobs & low wages e.g. 12million people in Shenzen
- at weekends 4 million migrants go home in Shenzen
How did China become a SEZ economy?
- In 1978, China introduced an open door policy for FDI, slowly leading to economic liberalisation
- SEZs were created on the coast e.g. Shenzen on the Pearl River Delts
- Chinas exports in 1980= $2bn
in 2000= $200bn - China joined the WTO in 2001, which guaranteed other countries would lower tariffs in Chinas exports
- China experienced rapid economic growth and 400 million people were lifted out of poverty
How is globalisation limited in China?
- Information flows are still limited as certain apps are banned e.g. Twitter and Instagram
- Cultural erosion is limited as there’s a quota of 34 foreign films a year in Chinese cinemas
- In SEZs wages are high by global standards and countries like Vietnam offer competitive prices
Example of a SEZ (Shenzen)
- Pearl river delta
- one of Chinas richest cities
-GDP in 1980= $28.35mn
2020= $385.9bn - rapid migration has lead to a diverse and multicultural population- 80% of the population are non-native to the city
- TNCs e.g. Huawei have set up operations
- some workers have reported poor working conditions
- water quality is below national standards due to pollution from industry
- gov and corporations have invested in high-quality infrastructure
- culture of learning amongst young people
- criticism that its not a ‘desirable place to settle down and rise a family’
What is outsourcing and offshoring?
Outsourcing= company not owned by TNC that produces goods/services on behalf of TNC
Offshoring= branch plant production bases owned by TNC
What are risks that impact profit in a GPN?
- mega disasters that affect supply e.g. Turkey 2023
- Political unrest- war/ conflict, relationships, infrastructure damage (trade routes etc.)
- changes to trade agreements e.g. Brexit
- Pandemic e.g. Covid-19, lockdowns reduce productivity & travel bans
Give an example of outsourcing
BMW, 2500 different suppliers provide parts for the mini
What evidence tells us a country is ‘switched on’ to globalisation?
- evidence of trade e.g. ports & airports
- social media usage
- TNCs
- trade balance (imports= exports)
- open border policies e.g. migration & trade
- culture- food, music, clothing
- member of political organisations e.g. WTO, UN
- population, ethnicities and languages spoken
How does glocalisation take place?
- TNCs advertise using identifiable branding, consumers are more likely to choose this product over lesser known competitor
- TNCs glocalise their products reducing cultural erosion
- change designs to meet local tastes and laws to conquer new markets
- McDonalds have 37,800 restaurants in over 100 countries (as of 2018)
- In India, Hindus and Sikhs are vegetation and Muslim pop don’t eat pork
- mainly vegetation menu e.g. McSpicy Paneer
Give an example of a ‘switched off’ place and what this includes
- North Korea
- ‘politically isolated’- own political agenda, not in organisations
- e.g. citizens have no internet/social media access, no seafloor cable
- KOF score is 18 (global av 65)
- Sahel nations like Chad and Mali are landlocked and struggle to attract FDI
- extreme environmental conditions e.g. desertification makes building infrastructure more expensive
- some farmers grow cash crops for TNCs in small amounts
- rapid economic growth in neighbouring countries may open these countries up to globalisation in the future
- characteristics are; low levels of development and in-migration, traditional culture and poverty
What is the global shift?
relocation of global economic centre of gravity to Asia from Europe and North America
Manufacturing= China
Service and administration= India
Describe the benefits of the global shift
Waged work
- factory work provides a reliable, regular wage, since subsistence farming is vulnerable to weather & disease
- low wages of $2-3 per day are still double or triple rural income
- long 12 hr days, 6 days a week may be ‘sweatshop’ conditions
- education levels rise and country develops, wages rise & switch to capital intensive production of higher technology products e.g. cars and computers with wage
rates of $10 per day
Poverty reduction
- extreme poverty= less than $1.25 per day (WB)
- since 1990, 1 billion people have been lifted out of extreme poverty due to GS
- wages rise due to waged work or increase in incomes for commodity producers supplying Asian factories
- 600 million people lifted out of poverty in China due to GS
Education and training
- TNCs invest in training to improve productivity and some skills are transferable
- profits are used to finance investment into education
- households use higher income to pay for more of child’s schooling. Increased income and corporation tax is used by govs to fund state education
- Literacy rates have increased from 20% in 1950s to 84% in 2015
- China awarded 30,000 phDs in 2012
Investment in infrastructure
- attracting manufacturing FDI requires initial investment in basic infrastructure
- investment into a few SEZs but later expands o connect SEZs to cities inland
- China built 11,000km of new motorways in 2015
