6.1. Geopolitical and economic risks

Question 1

this unit is all about risk, what are the 5 forms of risk that come in the study of global interactions?

Answer 1

physical hazard- geophysical and atmospheric hazards.

economy hazards- asset bubbles and ‘boom and bust’ recession.

geopolitical hazard- conflict and regime changes

biological hazard- pandemics

moral hazards- unethical actions of outsourcing suppliers.

Question 2

what are black swan events?

Answer 2

some human and physical hazards and risks may be avoided through migration and measures; others may be unpreventable and unavoidable. Worst of all are ‘black swan’ events: these are ‘unthinkable’, high impact, had to predict and rare occurrence.

In an interconnected world, black swan events – such as the COVID-19 pandemic and the GFC – bring disproportionate impacts. They can make us question the wisdom of globalisation on account of the sheer number of negative knock-on effects for different places and societies.

Question 3

talk about the overarching idea of new threats created by technological and globalizing processes.

Answer 3

multiple hazard risks accompany the new economic opportunities and social freedoms brought by the internet and social networking growth. Individuals who make regular use of these technologies are also exposing themselves to numerous threats, for instance, text messages, emails and online comments are sometimes used wrongly to harass people. School children may fall victim to cyberbullying. Many celebrities, politicians, journalists and campaigners have suffered from so-called ‘trolling’, which involves hateful comments being posted online.

It is not just individuals who have sometimes suffered harm on account of ICT use. The roll-out of new digital technology has undermined entire industries: think of how the music and film industries have suffered great profit losses on account of free file sharing in a post-DVD world.

Question 4

what are the umbrella ideas you need to discuss under new threats created by technological and globalising processes?

Answer 4

hacking, identity theft and personal freedoms.

personal freedom in a surveillance socity.

global supply chain risk.

Question 5

talk about hacking, identity theft and personal freedoms as one of your umbrella ideas under threats created by technological and globalising processes.

Answer 5

dealing with cybercrime is an increasing priority for business and law enforcement agencies globally. The speed with which new technology develops means that the boundaries keep changing, however.

An example of hacking, identity theft and security breaches was when Ride-sharing service Uber was one of 2022’s high-profile cyber attack victims in September, when it suffered a supposed social engineering attack on an employee by an apparent teenage hacktivist who wanted the company to pay its drivers more money.

Question 6

talk about personal freedom in a surveillance socity as an umbrella idea under threats created by technological and globalizing processes?

Answer 6

A parallel to the risk of hacking and identity threats, ICT also threatens personal freedoms in what is sometimes called ‘the rise of the surveillance socity’.

Sophicsticated softwear and comunications can be used by the state to moitor the activity and behavriors of citizens. One view is that countries aee a a risk of increasingly of becoming what Georage Orwell called ‘big brother’ socities. The view that civil liberties supporters is that just beacuse we can use technology increasingly to monitor daily life it does not mean we should.

Question 7

what are some rational reasons for introducing CCTV as opposition to the introduction point you made of personal freedom in a surveillance socity?

Answer 7

There is often a perfectly sound rationale for introducing CCTV in read space and motoring what happens in virtual space more closely:

Speed cameras make sure motorists do not pass safty limits; in the near future,c ars may be controlled and moved remotly by centralized computers in some cities.

There may be popular supoort for goverments being allowed to ‘snoop’ online. A worldwide moral pandamic has arisen over concerj that deviant social groups – from paedophiles to terrorist– are planning or participating in criminal acity online, far from the prying eyes of law enforcers.

Question 8

talk about global supply chain risks as one of your umbrella ideas under threats created by technological and globalising processes.

Answer 8

TNCsa operating in every sector of industry can find that the benefits gained from expanding globally are countered by the costs of interrupted trade: the more extensive a company’s network becomes, the greater the number of possible local threats it becomes exposed to.

Question 9

when talking about global supply chain risks as one of your umbrella ideas under threats created by technological and globalising processes, if you are giving recent examples what are the three categories they fall under?

Answer 9

geopolitical and conflict risk

moral and ethical hazard rik

physical risk

Question 10

talk about global supply chain risks as one of your umbrella ideas under threats created by technological and globalising processes, in the context of recent examples of global risk export for TNCs under the sub-topic of geopolitical and conflict risk.

Answer 10

political events and changes in foreign government policies can create supply chain shocks for TCNs.

• The ‘Arab Spring’ wave of uprising in North Africa in 2011 meant that French companies such as France Télécom experienced service and supply chain disruption across French-speaking North America.

Question 11

talk about global supply chain risks as one of your umbrella ideas under threats created by technological and globalising processes, in the context of recent examples of global risk export for TNCs under the sub-topic of moral and ethical hazard risk?

Answer 11

Unethical treatment of supply chain workers and the environment by outsourcing companies jeopardises the reputation of the TNCs who do business with them:

In highly published 2010 court cases, European companies BP and Trafigua both tried to lay the blame for the catastrophic environmental damage (in the Gulf of Mexico and Ivory Coast) at the doors of the subcontractors. Ignorance of harm done by a subcontractor to people or the environment rapidly translated into a ‘moral’ and reputational hazard for the hub companies.

Question 12

introduce the idea of new threats ti state sovereigntry?

Answer 12

The rationale for retreating from globalisation is rooted, for some people, in the valid concern that actual political sovereignty and/ or economic sovereignty is being surrendered.

It is certainly true that multi-governmental organisations (MGOs) like the EU, NAFTA and Mercosur have gained power over certain aspects of national life, including trade and migration rules.

Question 13

how does the idea of nationalism link in with new threats to state sovereignty?

Answer 13

The renewal of nationalism is also linked with a much broader interpretation of ‘loss of sovereignty’, which is synonymous with ‘loss of control’. The shrinking world, the argument goes, has brought chaos to national life and culture due to a new and sometimes unchecked flow of people, information and ideas.

Question 14

what is a specific threat to a country’s economic sovereignty?

Answer 14

The acquisition of a country’s business and infrastructure by foreign buyers could be viewed as a threat to its economic sovereignty. Some state governments buy foreign assets using their sovereign wealth funds (SWFs). There are global-scale ‘piggy banks’ used by these countries to help build global influence and diversify their income sources.

However, only a minority of countries operate SWFs. They are mostly countries with oil and gas revenues ( such as Norway and Qatar) or mineral resorces (Chile’s copper wealth e.g)

Question 15

introduce the idea of profit repatriation and tax avoidance by wealthy TNCs and people?

Answer 15

A complex relationship exists between each world state and the TNCs that are domiciled there. Governments and businesses sometimes work together in order to further one another interests. This is another example of interdependency.

Question 16

outline the interdependency. between governments and TNCs?

Answer 16

The taxes that TNCs pay in the states where they are domiciled play a vital role in providing governments with much-needed money for health, education, welfare and defence spending. Apple, which is headquartered in California paid US$6 billion to the US government in 2012; the top tax ayer was ExxonMobil, which handed over US$31 billion. These sums include profit repatriation from other states.

In return, TNCs sometimes look to the national government where they are headquartered for support during a finaical crisis, or when their overeseas assets become threatened by conflict or nationalisation.

Question 17

what are the two strategies used by some TNCs to limit the amount of corporate tax they pay in the country where they are headquartered?

Answer 17

corporate relocation and profit repatriation

tax avoidance and tax havens

Question 18

expand on corporate relocation and profit repatriation as a strategy used by some TNCs to limit the amount of corporate tax they pay in the country where they are headquartered?

Answer 18

A TNC may consider leaving its traditional home if the tax regime in another state looks more attractive; this process is called corporate migration. In recent years, some European-based TNCs have relocated their headquarters to Ireland, Switzerland and Luxembourg where corporate taxes are low. In 2010, petrochemical firm Ineos moved its headquarters from the UK to Switzerland. This corporate migration yielded an estimated saving of almost half a bilion pounds over the five years, Ineos’s worldwide profits are now repatriated to Switzerland instead of the UK.

The ease of doing business almost anywhere using shrinking world technology means that the world’s governments are exposed to a greater risk of this form of ‘capital fight’ than in the past.

However, there are practical reasons why many TNCs choose not to relocate. These relate to brand authenticity, corporate responsibility and public perception.

Question 19

expand on tax avoidance and tax havens as a strategy used by some TNCs to limit the amount of corporate tax they pay in the country where they are headquartered?

Answer 19

Many TNCs use the strategy of transfer pricing to reduce their tax burden. This involves routing profits through subsidiary (secondary) companies owned by the parent company.

The parent company is the original business that a global TNC has developed around and whose directors still make decisions that affect the organisation as a whole. Both Starbucks and Google are parent companies to global networks of subsidiary businesses, including Ritea Ltd (Starbucks Coffe Company, Ireland) and Google Ireland Ldt.

These subsidiaries will be based in a low-tax state like Ireland or possibly an offshore tax haven. Around 40 so-called tax havens offer nil or nominal taxes. Some are sovereign states, such as Monaco. Another, the Cayman Islands, is an overseas territory of the UK that has its own tax-setting powers.

The states where the TNCs remain headquartered as well as those places where they do most business are at risk of receiving virtually no tax.

Question 20

who else might limit the amount of tax they have to pay?

Answer 20

It is not just companies wh route money in this way. Some wealthy individuals attempt to limit their personal tax liabilites by migrating to a tax haven where they may either apply for citizenship or become an expatriate.

Question 21

Your next key idea is disruptive technologies, can you introduce it?

Answer 21

New technologies sometimes have unexpected and disruptive effects on societies. Drones and 3D printing are already transforming many aspects of life at both the local and international scales. In the near future, we can expect to see AI becoming a thrid major disruptive technology with far-reaching geographic effects.

Question 22

what is disruptive technology?

Answer 22

A technology which brings major changes to the way people live and work instead of merely supporting and enhacing the current way things are done.

Question 23

what are the umbrella ideas under disruptive technologies you are going to want to talk about?

Answer 23

The impact of drones on state sovereignty

New geographies of 3d printing

AI

Question 24

talk about the impact of drones on state sovereignty as one of the umbrella ideas for disruptive technologies?

Answer 24

Drones are already transforming geographic relations between people and places in a range of different contexts and sales; on the individual scale people can mount cameras on their own personal drones and make aerial films which threaten other people’s privacy while on the military scale conflict can be waged remotely using armed drones, however, experts continue to question the legality of drone warfare under international law.

Question 25

for the impact of drones on state sovereignty as one of the umbrella ideas for disruptive technologies, can you give some detailed examples ?

Answer 25

Drone technology has become controversial because of the way it is now used in conflict situations, especially by the US military (sometimes assisted by the UK and France). The USA’s drone missile attacks in Pakistan, Yemen and Somalia – part of its global ‘war on terror – are highly debated. ~This raises a challenge for international law makers by arguably breaking Article 51 of the UN Charter whichr relates to self defence.

Question 26

for the impact of drones on state sovereignty as one of the umbrella ideas for disruptive technologies, can you evaluate your detailed example ?

Answer 26

The rules that govern this kind of conflict are disputed. According to one view, the USA is executing people for crimes they may or may not have committed without a trial and is in breach of the Universal Declaration of Human Rights.

However, the US claims its drone actions are legitimised by war law – despite the fact that the US is not at war with any of the countries where drone attacks currently take place.

Many people are uncomfortable with the way the latest shrinking world technology is being used and the way in which it quite arguably violates the sovereignty of states and the human rights of people.

Question 27

talk about New geographies of 3D printing as one of the umbrella ideas for disruptive technologies?

Answer 27

3D printing is revolutionizing many areas of life. This technology paints upon layers of a resin or polymer until fully three-dimensional objects are created.

Although 3D technology has existed since the 1980s, a recent step-change in affordability has taken place. Since 2010, the price of a basic printer – an oven-shaped device capable of creating objects such as cups of simple statues– has plummeted from around US$ 10,000 to less than US$1000.

Question 28

what are some cool examples of what 3d printing can be used for?

Answer 28

Bone replacment0 A CAT scanner can perfectly record the dimensions of a person’s skeleton. New ‘bones’ can then be printed using titanium powder with a ceramic coating.

Question 29

why does 3D printing have important implications for state sovereignty and governments?

Answer 29

3D printing has important implications for state sovereignty and the ability of governments to control what can and cannot pass across state borders. For instance, it may be easier for a state to intercept an illegal shipment of guns than it is to intercept a blue print for making a gun that has been emailed to a 3D printer.

Question 30

what is a hypothetical worry to have about 3D printing?

Answer 30

An incredible technology disruption is taking place: physical commodity movements are being replaced by information exchanges, which are often harder to control. Remember too that states raise money through export sales and through taxes levied on imports. If physical trade ceases – to be replaced by information flows directed toward 3d printers – what will happen to those revenue streams?

Governments could lose vital revenue from import tarrifs.

Question 31

can you give an example of where the hypothetical worry of 3D printing was manifested in real life?

Answer 31

The German electrical company Siemens already envisages delivering spare parts by email to overseas customers, including many living in the US. It is unclear whether the US government would be able to levy an import tax on ‘virtual’ spare parts in the way it currently does on real space parts.

Question 32

talk about the idea of globalisation and trivialisation?

Answer 32

Unit 5.1 explored the resurgence of populist and national movements in different places. Other commentators have established a common link between a wide range of localised movements, including 1) conflict in the Middle East and North Africa, and 2) support for anti-immigration parties and policies in the USA, UK and France among other developed countries.

In all of these contexts, there is rising scepticism that globalisation is a force that remakes places and societies for the better; instead, some groups of people view it as a process which has bettered the lives of others but made their own worse.

Question 33

what is the result of the first part you talked about under the idea of globalisation and finalisation?

Answer 33

The result has been what sociologists and psychologists all the tribalisation of politics. Resistance movements have grown within countries that oppose ‘business as usual’ policies and support for globalisation. Instead, a growing number of citizens appear to be adopting a new defensive form of identity politics.

Question 34

what is next for globalisation?

Answer 34

It is important to remember that even those groups who claim to be opposed to globalisation or Westernisation do not necessarily want to turn back time to an age before the internet. Campaigning anti-globalisation movements such as Occupy want to curtail the influence of global corporations like the World Bank. Yet they retain a strong belief in global citizenship and use global media networks to spread their anti-capitalist message worldwide.

It may also be true that the case against globalisation has been exaggerated. Some academics have suggested that th Milanchovick curve has underestimated the financial success of poorer groups of developed countries ad that the reason for the rise of populism is Western democracies have far more complex causes than the opposite of free trade and immigration alone.

Nonetheless, the 2016 summit meetings for the powerful G7, G20 and OECD groups all agreed on one thing: in order to counter tribalisation and the rise of disruptive and sometimes dangerous populist movements, there needs to be a greater effort to reduce inequality and ensure that globalisation ha benefits for more people and places in the future.

Question 35

what are the evaluation, synthesis and skills for this sub unit?

Answer 35

How risk exposure increases as societies and business become more globalised.

How perspectives vary on whether the advantages of globalisation compensate for the risks.