14.2 Globalisation Flashcards
1
Q
What is globalisation?
A
- the increasing interconnectedness + interdependence in the world economically, culturally + politically
- as a result goods, capital, labour + ideas flow more freely across borders
2
Q
What are the causes of globalisation?
A
- transnational corporations (FDI, NIDL, outsourcing)
- emergence of NICs
- advances in trade liberalisation under the WTO
- role of governments
- collapse of communism
- transport + communications revolution
3
Q
What are the two main driving forces behind globalisation?
A
- nation states/ governments who make the rules to govern world trade
- TNCs provide FDI to NICs/LICs = allows them to become part of the supply chain
4
Q
Why are TNCs responsible for globalisation?
A
- TNCs are the main source of FDI = invest to make profit + therefore are a driving force behind globalisation
- many TNCs are an example of international divisions of labour = TNCs outsource stages of manufacturing to LICs/NICs + then export them elsewhere to be assembled e.g. cars
- TNCs want to produce outside their home country because of cheaper labour costs + circumventing trade barriers (e.g. tariffs)
5
Q
What are the types of FDI?
A
- horizontal FDI
- vertical FDI
- backward vertical
- forward vertical
- conglomerate
- greenfield entry
- takeover
6
Q
What is horizontal + vertical FDI?
A
- horizontal = company carriers out the same activities abroad as it does at home
- vertical = different stages of activities are added abroad (NIDL) e.g. Apple
7
Q
What is backward + forward vertical FDI?
A
- backward vertical = international integration moves towards raw materials
- forward vertical = FDI takes the firm nearer to markets e.g. Toyota
8
Q
What is conglomerate FDI?
A
- the TNC acquires an unrelated company abroad
- e.g. Toyota acquiring a soft drink company
9
Q
What is greenfield entry FDI?
A
- starting an operation from scratch e.g. Toyota in derby
10
Q
What is takeover FDI?
A
- the acquisition of an existing foreign firm company (merger or acquisition)
11
Q
Benefits of FDI for host
A
- stimulates cumulative causation + the positive multiple effect
- source of external capital which enables to exploitation of resources + raw materials, the development of industry + market in the host country
- leads to the expansion of other TNCs + companies in the host country
- involves not just financial transfer but the transfer of technology, skills + management = further industrialisation + economic development
- source of investment in other areas e.g, infrastructure, education, skills
- local workers contribute tax revenue to govt = stimulates growth of local services
12
Q
Negatives of FDI for host
A
- negative impact on local producers by increasing competition e.g. Walmart effect
- put a strain on resources (environmental consequences)
- remittances of wages from immigrant workers of the source country of the FDI = local economy not benefitting from rise in per capita incomes
13
Q
Who were the first generation of NICs?
A
- Taiwan
- Hong Kong
- South Korea
- Singapore
14
Q
Who were the second generation of NICs?
A
- Brazil
- Russia
- India
- china
15
Q
Why did the second generation of NICs develop?
A
- china + India opened their economies to FDI in 1990 after previously blocking it
- wages + standards of living were increasing in tiger economies —> Japan moves manufacturing to BRIC + companies that developed in the tiger economies also looked elsewhere
16
Q
What were the main causes of deindustrialisation?
A
- technological change enabling manufacturing to become more capital intensive + mobile
- the filter down of manufacturing from HICs to lower income economies, such as those in south east Asia
- UK companies looking for cheaper locations to move manufacturing = increased demand for high wages due to unions means they can no longer compete with Japanese companies
- increased importance of service sector in HICs —> deregulation of banking sector under Thatcher’s govt allowed foreign banks to set up in the UK (e.g. HSBC) = encouraging growth of tertiary/quaternary sector
17
Q
Concerns about deindustrialisation
A
- severe impact on unemployment + caused social deprivation in some regions
- thatchers govt associated with high levels of unemployment related to the closure of mines + other primary/secondary companies
- negative multiplier effect = lower wages, lower tax revenue, low govt spending
- some economists believe that over-reliance on a service makes an economy vulnerable to shocks
18
Q
Positive impacts of deindustrialisation for HICS
A
- cheaper imports of all relatively labour intensive products can keep cost of living down
- greater efficiency in surviving industries = releases labour for high productivity sectors
- encouraging growth of NICs + LICs may lead to an increased demand for exports from HICs
- greater industrial efficiency should lead to development of new tech + promote enterprise + FDI
- improved environmental quality from loss of industry
19
Q
Negative impacts of deindustrialisation for HICs
A
- job losses = often of unskilled workers —> big gaps develop between skilled + unskilled workers as it is unlikely these workers will have the skills to work in the growing service sector e.g. finance
- structural unemployment as job losses are concentrated in certain industries
20
Q
Positive impacts of deindustrialisation for NICs + LICs
A
- higher export generated income promotes export led growth = encouraged FDI + therefore stimulates multiplier effect
- benefits can trickle down to local areas - new higher paid jobs
- reduce negative trade balance
- exposure to new tech, improvement of skills + labour productivity
21
Q
Negative impacts of deindustrialisation for NICs + LICs
A
- unlikely to decrease inequality - jobs tend to be concentrated in core region of urban areas
- disruptive social impacts e.g. TNCs May be exploitative through sweat shops etc.
- can lead to over dependence on a narrow economic base
- environmental issues associated with rapid industrialisation + LICs/NICs tend to have relaxed environmental laws
22
Q
The filter down process of industrial location
A
- companies alter their geographic location of production to minimise costs
- the economic core has monopolised invention + innovation in the early stages of the cycle + in the early stages of a products life cycle high level skills are required as well as external economies = therefore located where the firms main plants + HQ are
- in the growth phases mass production is introduced + number of firms involved in production expands = management skills are critical + the availability of unskilled + semi-skilled labour become a locating factor
- the high wages of the innovating area become excessive + skill requirements decline = shift to less developed areas where there is cheaper labour
23
Q
What are the two types of deindustrialisation
A
- positive deindustrialisation = manufacturing falls but the displaced labour is absorbed into the service sector = economy has near of full employment + GDP per person is rising
- negative deindustrialisation = decline in manufacturing due to slow growth or decline in demand + where displaced labour results in high unemployment
24
Q
What are the 3rd/4th gen NICs
A
- Cambodia
- Vietnam
25
Q
Spatial organisation of Apple
A
- R+D located in Cupertino, California = America’s ‘silicon valley’ = global hub for technology + innovation as it contains highly regarded research institutions + colleges such as Stanford —> valuable connections + access to highly skilled workers
- EU HQ in Cork, Ireland = strategic location as Ireland is part of the EU + it being an HIC with excellent infrastructure + well-connected transport system with ports + airports = helps business operations + trade
- manufacturing outsourced to China = Taiwanese electronics manufacturer Foxconn in shenzhen = cheap skilled labour + relaxed environmental + labour laws = minimises costs
26
Q
Positive economic impacts of Apple (TNC)
A
- apple has invested in many different countries (FDI) + their high profile status means such investment often attracts other TNCs bringing more economic investment
- created jobs directly + indirectly = Apple employs 22,000 people in Europe + supports 170,000 jobs indirectly through their supply chain
- 350,000 are employed at Foxconn manufacturing plant = wages are paid above the minimum wage + higher than in other parts of China
- through investment + creation of jobs Apple is creating a positive multiplier effect in countries where it operates
27
Q
Negative economic impacts of Apple (TNC)
A
- profits made by Apple’s operations overseas are sent back to their home country (USA) = economic leakages
- rates of pay in China approx £2.20 per hour compared to £27 per hour in the US —> the fair labour association stated in 2012 that 64.3% of workers surveyed felt that their wage was insufficient to cover basic needs
- concerns over job security = decision making for business operations takes place in US + if global sales fall, or a decision to subcontract manufacturing to a different company or automation will impact thousands
- apple has been accused of corporate tax avoidance = 2016 Apple was ordered to pay 13 billion euros back taxes to Ireland, but this was subsequently rejected by the EU in 2020
28
Q
Negative social impacts
A
- many people have moved from rural areas to urban areas to seek employment with Foxconn = creating greater levels of inequality between urban + rural areas due to an distinct lack of investment in rural areas
- accusations of poor working conditions, excessive working hours + forced overtime = in 2018 the guardian reported many workers wet working in excess of 70 hours of overtime per month (breach of Chinese law)
29
Q
Positive social impacts of Apple (TNC)
A
- in countries where Apple directly employs people e.g. USA + UK, workers are generally paid + treated well
- ensures a good standard of living
30
Q
Positive environmental impacts of apple (TNC)
A
- apple is working hard go reduce its environmental impacts + be sustainable
- 2017 greenpeace report graded Apple B + ranked it second out of 17 worlds leading consumer electronics companies for addressing environmental impacts
- all of apples offices, stores etc are powered by renewable energy
- claim by 2030 all apple products will be made using 100% renewable energy
31
Q
Negative environmental impacts of Apple (TNC)
A
- 2018 it was reported that in China contaminated waste water from apple manufacturing plants were being discharged into public drains
- global nature of apples activities means there is a reliance on fossil fuels for transport = contributing to increased carbon emissions
32
Q
How are Apple’s markets changing?
A
- HICs usually have the largest consumer markets, with countries such as the the US having a massive population with relatively high incomes
- 2011 44% of apples sales were in the US
- HOWEVER, developing countries such as China are experiencing a rise in incomes, meaning more of the population are now buying phones rather than just making them —> represented 25% of sales in 2015
- the US still remains Apple’s biggest market at 42% now but there is an evident growth of markets elsewhere with China being their second largest market with 17% of sales
33
Q
Spatial organisation of Toyota
A
- HQ located in Japan = largest market in Japan + access to suppliers, good transport network + highly skilled workforce
- UK was chosen as a manufacturing hotspot in 1992 = Toyota has a more market orientated motive for location + this facilitated the expansion of its European market
- UK had the largest domestic market for Toyota cars, 230 British + European based supply partners = allows Toyota to be in close proximity to resources + provided a foothold in the European market
- Toyota also took advantages of transition economies following the collapse of communism in Eastern Europe meaning countries are now open to TNCs
34
Q
Toyota’s manufacturing in transition economies
A
- manufacturing plant placed in Kolin, Czech Repiblic, in 2005 to produce the Aygo model
- St Petersburg in Russia in 2007 to produce the Camry model
- around 2/3 of Toyota’s sold in Europe are manufactured there = emphasises Toyota to prioritise market factors in choosing manufacturing locations rather than just cheap labour
35
Q
Negative impact of TNCs
A
- Walmart effect = establishment of a large company like Walmart leads to smaller firms being forced out of the market + reducing wages for competitor’s employees
- it can also affect suppliers, who need to drive down their production costs in order to be able to afford to sell to the large firm like Walmart
- large companies are able to take advantages of economies of scale by bulk buying which lowers their unit costs + means they can charge lower prices = creates more price competition
36
Q
Impact of the development of China
A
- as China becomes increasingly affluent + its economically active pop is starting to decline, wages are rising = manufacturing in China is becoming more uncompetitive
- therefore manufacturing is being increasingly outsourced to cheaper labour locations e.g. Bangladesh, Cambodia + Vietnam
37
Q
containerisation statistics
A
- 1965 = 1.7 tonnes could be moved per hour onto a cargo ship
- 1970 = 30 tonnes per hour could be loaded onto a ship = allowed bigger ships to be used + ships could leave port the same day = increased efficiency by reducing journey time
- estimated 26% of all container traffic originates in China + 97% of all containers are made in China
38
Q
Impact of containerisation
A
- globalisation + containerisation have a reciprocal relationship
- the expansion of international trade + global shift of manufacturing would have been impossible without the efficiencies + economies of scale that containerisation has brought
39
Q
Future of container ships
A
- container ships will only be constrained by the Mallacamax dimensions = the maximum size of ships that can safely pass through the Straits of Mallaca (between the Indian + Pacific Ocean past the port of Singapore)
40
Q
What influences the location of large container ports?
A
- Felixstowe handles nearly 2 million containers a year
- has good transport links = 90 miles north east of London + good road links with midlands through A12 + A14
- deep water port as it has been dredged (Felixstowe has a draft of 50 ft) = accommodates larger container ships
41
Q
How has developments in communications impacted globalisation?
A
- communications technology has facilitated a shrinking world, and mobile phones brought communication to the mass market
- the interest + high bandwidth sub-sea fibre optic capable network between continent is the most importantly technology in the ‘shrinking’ world
- this has allowed TNCs to transfer large volumes of banking, business + financial data around the world + makes physical location unimportant
42
Q
Why does the world keep shrinking?
A
- TNCs took advantage of technology to extent their reach as well as creating it —> technology + communication have facilitated the NIDL
- large technology TNCs keep creating more innovative technology, which causes a constant feedback loop driven by markets as each new innovation helps deliver an even more intense ‘shrinking world’
43
Q
Why is China still classed as an economy in transition?
A
- GDP per capita is only roughly $14,000 which is well below the average of HICs
- however China is an emerging power as they are transitioning from a secondary sector to a more mature tertiary sector
- China is increasing its value added trade + exerting more economic influence from TNCs
44
Q
Key features of SEZs in China
A
- reduced income tax = 15% in SEZs compared to 33% mainland = encourages foreign investors to set up business in China, leading to the transfer of expertise in industry + tertiary sector
- elimination of corporation tax under losses = risk free business environment for investors
- exemption from local taxes in certain industries
- duty free exports = benefits the interests of TNCs searching for a location to manufacture cheaply + then export elsewhere to a more consumption orientated economy
- tax free imports = benefits TNCs who import raw materials or intermediaries to china for final assembly e.g. individual components of an iPhone are imported into china for final assembly
45
Q
How have SEZs aided China?
A
- triggered sectoral shift by attracting international capital, technology + technical/managerial expertise = stimulated development + integrated china into the global economy
- SEZs have contributed 22% of china’s gdp, 45% of total FDI + 60% of exports
- created over 30 million jobs = accelerated industrialisation, agricultural modernisation + urbanisation
46
Q
Why + how have the SEZs adapted to changing conditions?
A
- standards of living + production costs have increased in south eastern parts of china = therefore global corporations have looked at moving their operations to cheaper areas within the region e.g. Vietnam
- Chinese govt have been encouraging companies to outsource to inland china where costs are lower + labour is cheaper
- the first free trade zone (FTZ) was established in Shanghai in 2013 + seven more were set up in 2017
47
Q
Benefits of FTZs in china
A
- goods can be imported, handled, manufactured + exported without direct intervention from customs = significantly lowers costs
- FTZs contributed 17.3% of china’s total foreign trade + 18.5% of FDI inflows
- FTZs in tier 2 + 3 cities are highly attractive to foreign investors due to large pools of young, skilled labour + low costs + access to large regional markets
- logistics companies established within FTZs are allowed to invest up to 51% in international or domestic shipping agencies
48
Q
What is the purpose of China’s belt + road initiative?
A
- BRI was initially designed to connect chinas modern coastal cities to its underdeveloped interior + to southeast, central and+ south Asian neighbours = cements china as the centre power of the region
- has now expanded globally e.g. digital Silk Road with a focus on high-tech industries
49
Q
Growth of Huawei
A
- founded in shenzhen + has grown from being a contract manufacturer to a world leading provider of ICT solutions
- huawei spends more than 10% of its sale revenue on R+D every year + in 2020 80,000 people were engaged in R+D (45% of total workforce)
- the export of huawei telecom equipment along the digital Silk Road has enabled the company’s share of global telecom to increase by 40%
- 2016 huawei received $190 million in govt grants + state owned banks have lent $9.8 billion for 32 huawei projects between 2012 + 2018
