Globalisation EQ 1 Flashcards
What is globalisation
Is the growing economic interdependence of countries worldwide through increasing volume and variety of cross border transactions in goods and services. Flows could be:
- capital
- technology
- information
- tourists
- migrants
What is time space compression
The heightened connectivity changes our conception of time, distance and potential barriers to migration of people, goods money and info.
What is the shrinking world
As travel times fall due to new inventions, different places approach each other in time space and begin to feel closer together. Improvement to containerisation have contributed to a shrinking world.
How have developments in trade and transport contribute to a shrinking world.
- in 1990 ships held on average 4000 containers, now days they hold 19000.
- the uniform of size for containers increase speed
- container size has increased
How have developments in IT and communications give opportunities to businesses
- internet technology is used to exploit new markets
- global communication including social media has enabled the recognition of global brands
- as global communications improves trading communications happen a lot quicker
- transfer money quickly
What are the Breton wood institutions and there aims
World bank
International Monetary Fund
World trade organisation
They aim to stabilise the world economy and promote free trade polices between countries which will increases exports and wealth generation but also FDI.
FDI is investment made by overseas company or organisation into a company which is based in another country.p
What does the World bank do
World bank- provide loans for developments in developing areas if they can repaid and promote development.
What does the IMF do
They lend money for development purposes but also to maintain financial stability. They must agree to run free market economies that are open to outside investment.
What does the world trade organisation don
Advocates trade liberalisation (free trade without subsidies and tariffs) for all goods and asks countries to abandon protectionism in favour of untaxed trade.
How has time space compression been lowered
Rapid developments in icy and mobile communication lowers communication costs and contributes to time space compression heighten the connectivity changing time and distance.
What are trade blocks
Countries grouping together to promote free trade between them. They rompe tariffs between member states and place barriers on none member states. This protects their own economies allowing rapid growth. They hope to invest more into their work force and products. This will increases the tax base creating high skilled levels and high wage employment. Their will be an increases in FDI. However non members are hindered. Examples are the European Union and ASEAN
Advantages of trade blocks
- Bigger markets bot no extra taxes
- National forms merge to form transnational firms
- Protection from foreign competitors
Disadvantages of trade blocks
- Loss of independence as countries rely on each other.
- Must allow foreign firms to gain domestic market share
What is liberalisation of markets
Is removing government control and opening up markets to private companies.
China’s open door policy
In 1978 china opened to globalisation. It’s economy needed western technology and development and opened to FDI. China offered tax incentives and huge pools of cheap labour in special economic zones. As a result 50% of exports in 2005 came from SEZs. China now has the worlds largest economy.
The uk
The uk gave tax breaks to companies investing in the London dockland area. This encouraged large overseas financial institutions to relocate to London. They also grants and subsidies to encourage foreign companies to locate new manufacturing plants.
Three factors that have led to the spread of globalisation by TNCs
Motive
Means
Mobility
What are the Motives for globalisation
Profit. They gain this by minimising their costs and increase their revenues by expanding their market and taking over competitors. They do this by:
- achieve economies of scale by expanding their capacity
- developing new markets
- horizontal integration, Apple required emagic and Logic Pro
- vertical integration, owning all stages of production
- diversifying product range
What are the Means of globalisation
Motives can’t be reality without means. Banking and the free flow of capital around the world. These flows vary:
- year to year
- over medium term e.g. In 2008 there was a financial crisis but largely recovers by 2014
- over long term, the top 10 countries receiving and investing FDI have changed
A reverse Colonialism has happen Hong Kong, china, India and Malaysia are established high or middle income countries and are all net providers of overseas investment.
What Mobility makes globalisation happen
- faster cheaper transport e.g. Larger shipping container ships
- rapid communication systems
- new production technology
- global production networks, which link sources of raw material, finance, manufacturing
How do TNCs contribute to the spread of globalisation
-TNCs outsource this is where make a contract with another company to complete some work.
-offshoring is where TNCs move part of its operation to another country because labour is cheaper, or the economic situation is more beneficial.
-this creates a global production network.
An example is the jaguar Land Rover where they invested manufacturing site in India (offshoring) and partnered with a Chinese company to produce engines (outsourcing).
Why are some areas switched off from globalisation
There are 4 factors:
Physical- e.g. Landlocked, located near a hazard
Environmental- e.g. Landlocked, low agricultural potential
Political- e.g. Corrupt government, dependant on other countries
Economic-e.g. Relies on a particular industry
How is Zambia switched off from globalisation
Physical- a long distance from the market which discourages TNCs from offshoring or FDI
Environmental- it is landlocked making hard to import and export goods, also there is low agricultural potential cannot grow cash crops
Political- a weak committed government to develop the economy, dependant on good relations with its neighbouring countries to access ports.
Economic- is reliant on a particular industry (copper) which is loosing its value due to fibre optics. However there has been investment in railways to transport exports and imports. Debt has been cancelled so they can invest money into copper and other industries.
How is Tanzania switched off from globalisation
Physical- located near a volcano this means there is a high risk of a hazard
Economic- is dependant on a particular industry cotton. Prices frequently fall due to over production and when this happens they are less able to buy imported manufacturing goods, making it hard for them to switch on.
However growing links with India and China due to Tanzam railway.
