Globalisation enquiry question 1 Flashcards
Define globalisation
The widening and deepening of global connections, interdependence and flows of commodities, capital, people and information.
How have transport innovations impacted globalisation? - 19th and 20th century?
Steam power - 1800s Britain was leading the world in steam power which enabled them to move their goods and armies quickly into areas such as Africa and Asia.
First telegraph cables were laid across the Atlantic in 1860s which innovated how the first multinational businesses could operate.
How have transport innovations impacted globalisation? - 21st century
Jet aircraft - increasing efficiency means more people can be transported quicker and cheaper - e. budget airlines - Ryan Air
Broadband and Fibre optics - Since 1990s cables laid along the ocean floor means much information can be transported rapidly.
Containerisation paired with GPS
Internet - 67.9% of the world’s population has access to the internet. Instant messages and info through the internet the world has become more interconnected allowing businesses to set up and monitor low skilled jobs in cheaper economies.
Many social media users has led to the rapid global spread of news and opinions.
How has the development of containerisation lead to further globalisation?
Container ships allow the fast and efficient transport of commodities around the world.
90% of all international trade takes place for at least one bit on sea routes.
In 1990 the average container ship held 4000 containers now its 18000. With the development of intermodal containers they can now be placed straight onto trucks via automated cranes.
A GPS and barcode integrated system allows TNCs to track their commodities all the way to their final destination.
Negatives of containerisation and the increasing flows of commodities?
Leads to a throw away society.
People are only aware of the low economic value of these cheaper products leading to more being thrown away.
They remain unaware of the environmental and societal value of the products that are made in low quality sweat shops
What is the time space compression theory?
Communication technologies have revolutionised the time it takes to communicate and trade on a global scale.
The flows of information and capital can be done via fibre optic cables in a matter of seconds,
In little over a 100 years the world has move from communication taking months by ships and horses to days by rail and telegraph, to hours via planes and now seconds through the internet.
This has lead to a ‘shrinking world effect’.
What is the aim of some political and economic international organisations in globalisation?
Why did they start up?
After WW2 the US and other weakened European countries felt threatened by the advance of communist states such as the Soviet Union. They believed the best way to prevent this was economic development.
To achieve this 3 intergovernmental organisations were created:
- The International Monetary Fund
- The World Bank
- The World trade organisation.
They aimed to enable switched off countries to become more globalised.
How does the International monetary fund and the World Bank operate?
Negatives?
Based in Washington it loans money to poorer developing nations under the key conidtion that it opens up its markets and industries from government control. This leads to privatisation.
TNCs then have the opportunities to enter those markets which then more easily generates financial activity and tax. - Promotes FDI
However, some believe its a hinderance leading to LICs falling into debt due to their industries being privatised.
Countries which struggle to pay debt often have to cut their funding on key areas such as healthcare and education.
How does the World Trade organisation work?
Criticisms?
Headquarters in Geneva, Switzerland.
Aims to liberalise trade by removing tariffs, subsidies and quotas.
Criticised as the EU and US have subsidised certain groups such as EU farmers to protect them against the influence of the global market. This goes against WTO rules who have failed to uphold equal trading opportunities for all countries.
How did Thatcher’s government embrace globalisation?
- Industries left to close if their profitability depended on government subsidies.
- Industries were not supported if they were facing competition from cheaper overseas producers.
Eg. Mining, ship building - Instead tax breaks to companies starting up and investing in areas such as Canary Warf which has acted as an incented for many large international finance companies to start up in London.
Deregulation of finance and marketing and free market liberalization has lead to London becoming a major financial hub
-Subsidies were provided to encourage new manufacturing plants eg. Toyota factory in Derbyshire. This encouraged FDI and by 2015 UK were the 4th largest FDI recipient in the world.
Negatives of privatisation?
Although it often leads to large financial growth some people argue it leads to a drop in quality.
Eg. 1980 Thatcher privatised and deregulated utilitities and railway services. Today despite raising costs there are many strikes in companies such as Northern Rail which negatively affects consumers.
What are the different types of FDI?
Offshoring - TNCs set up production in developing countries which have cheaper workforces.
Foreign mergers - TNCs from different countries join together to form a larger one
Foreign acquisitions - TNCs acquires another company from abroad, often in a hostile way.
Transfer pricing - TNCs sometimes channel their profits through subsidaries in tax havens eg. Ireland and Jersey
What does it mean if a country is part of a trade blocs?
Examples?
Governments may sign agreements with each other to reduce restrictions on the flows of commodities and capital.
Tariffs are removed between non-member states.
Tariffs are created on imports for non member states to protect their own industries.
EU
ASEAN - Association of South East Asian Nations
Pros and cons of Trade blocs?
Pros:
-Businesses have a larger potential market to sell to - more revenue.
- Businesses cater for more demand by increasing production, this means others can benefit by providing raw materials, skilled workers or outsourcing opportunities. This means its a positive feedback loop.
- Trade within blocs is more reliable so there is less economic risk.
Cons:
- Excludes and limits the development of other countries outside the bloc.
- Doesn’t guarantee strong relationships between countries. eg. US and Mexico in NAFTA
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How have the Chinese government accelerated globalisation in China?
In 1978 China declared an ‘open door policy’ to international business with an aim for Western technology to grow its economy.
Companies from US and Europe quickly saw the opportunity and started to set up offshoring in 1 of China’s 4 special economic zones.
These zones offered tax incentives and large pools of cheap labour.
By 2005 50% of Chinese exports came from these zones.
How is globalisation measured?
The KOF Index
The AT Kearney Index
How does the KOF index work?
Creates a score based on:
- Economic globalisation eg. volume of FDI
- Social globalisation eg. cross-border contacts - phone calls, messages and tourists
- Political globalisation eg. number of foreign embassies in the country or its presence in global organisations such as WTO.
It then weights these different indicators depending on how influential they are in globalisation. eg. Volume of FDI is high.
These scores are then averaged out and the country is ranked.
In 2015 Ireland were top and the Solomon islands were better.
How does the AT Kearney Index work?
Identifies four main indicators to calculate its Index:
- Political engagement - eg. participation in international organisations such as the WTO
- Technological connectivity- eg. number of internet users, hosts and servers
- Personal contact - eg. number of telephone calls and remittance payments.
- Economic integration - eg. volume of FDI
Rankings are worked out by a complex points and weighting system.
Why are TNC’s important to the spread of globalisation?
Because their expansion involves the free flow of capital, labour, goods and services.
How do TNCs continue to generate such large profit?
Achieving economies of scale by expanding their capacity. eg. amazon increases their warehouse size to reduce their costs
Developing new markets - Expanding products to new markets or creating frequently upgraded models that existing customers will want to buy.
Horizontal integration - Company expands at one level in the production process - gain a larger market reach, reduce competition and achieve economies of scale
Vertical integration - When a company expands so it owns every stage of production.
This is good as it means companies can better manage supply chains, have improved efficiency and reduced costs.
What are GPNs?
Global production networks that link sources of raw materials, financing, manufacturing and sales. They are often all controlled from the HQ of a TNC in a HIC.
How do TNCs take advantage of economic liberalisation?
Outsourcing - Companies that provide services often outsource tasks to other companies in order to save money and time.
Off-Shoring - Companies set up branches in lower developed countries often in order to manufacture and maximise the cheap workforce.
What is glocalisation?
The adaptation of goods or services by a TNC in order to meet local tastes and needs.
Eg. McDonalds have created menus with no beef or pork burgers in India to accommodate for the large Muslim and Hindu populations.
Car makers change the orientation of the car depending on which side of the road people drive on.
Negatives of TNCs?
Natural disasters eg. Tohoku 2011 can disrupt supply chains that TNCs heavily rely on. If their production stops even briefly it can have major implications.
Collapse of the Rana Plaza factory in 2013 killed 1134 workers.
Tesco sold horse meet in 2013. The supply chains were not adequately checked.
