EQ1 Flashcards
why are large parts of Africa bypassed by globilisation?
corruption little govt support debt politically unstable negative image Unskilled labour Weak market Unstable currencies Poor infrastructure
whats a SEZ?
a special economic zone :
refers to designated areas in countries with special economic regulations that differ to other areas in the same country.
What policies were used by the U.K. to globalise?
1) free market liberalisation
2) privatisation
3) encouraging business startups
what’s free market liberalisation ?
and 1 example
(neoliberalism)
Based on two simple beliefs: 1- govt intervention in marked impedes growth
2- trickle down.
e.g: deregulation of City Of London in 1986 made London global hub for financial services.
what does the world bank do ? (+examples)
lends money on a global scale:
1950s- was used to finance development of ex colonies
1970s+1980s- invested in projects that weren’t sustainable environmentally
2014- 470$ million to Philippines for poverty reduction.
What are the two goals set by the world bank to achieve by 2030?
1) end extreme poverty by decreasing percentage of people living on less than $1.90 a day to to no more than 3 percent.
2) Promote shared prosperity by fostering the income growth of the bottom 40% for every country.
what are 3 examples of innovations in transport and trade in the 1800s?
1) steam ships
2) railways- by 1904 the trans siberian railway connected mosco with china and japan
3) telegraph- 1st telegraph cables across atlantic in 1860s replaced 3 week boat journey with instant connection.
how does free trade increase globilisation?
govts remove trade barriers→costs are reduced→TNCs will see a profit and want to invest in countries→TNCs bring new ideas products cultures and generate wealth in country→QOL + development increases→demand for new products increases→economy has more TNCs and countries become more interconnected.
what are the impacts of NAFTA on Canada?
- visible trade with usa increased by 80 percent during 1st 5 years.
- visible trade with mexico doubled to reach $9 billion in 1998.
- more than 1 million jobs created since 1994
- Canadian manufacturing jobs lost to Mexicans leading to higher unemployment
what are the impacts of NAFTA on mexico?
- mexican companies are forced to adopt higher foreign standards + business practices.
- keeps mexico politically modern as it’s influenced by USA+ Canadian govts.
- mexico has 0 or reduced tariffs with 60% of the world
- mexico is dependent on the usa for 88% of its exports
- many jobs created by TNCs are poorly paid
- many jobs created by TNCs require employees to live in squallor because of the lax govt rules and regulations.
- same jobs- no health and safety
name two examples of developments in transport and trade in the 21st century.
jet aircraft
containerisation
what is globilisation?
the widening and deepening of global connections. interdependence, and flows.
which terms describe the heightened connectivity that changes our conception of time and distance?
time-space compression
shrinking world effect
how could global flows be viewed as threats?
1) information can provide citizens with knowledge that their government finds threatening.
2) imports of raw materials +commodities can threaten a nation’s own industries.
3) migrants can bring cultural diversity; not everyone welcomes this- racial tension
4) mass pollution to the environment.
what is a maquiladora?
manufacturing or export assembly plants in northern mexico, producing parts and products for the USA.
how do maquiladoras benefit corporations?
mexican labour is cheap and courtesy of the nafta trading bloc. they are duty fee and tariff free; taxes and custom fees are almost nonexistent.
how many maquiladoras are there in northern mexico?
over 1 million Mexicans work in over 3000 maquiladoras.
what are the impacts of NAFTA on the USA?
- free trade with mexico will mean US firms can set up factories there and benefit from lower labour costs, meaning more profit.
- environmental laws aren’t as strict there meaning companies don’t have to spend as much money on clean up.
- profits are made in mexico which return to US shareholders.
- US manufacturing jobs lost to mexicans leading to higher unemployment.
- mexican trucks allowed full access to US roads but are not limited by driving hours, leading to more accidents,
- costs are lower. leading to higher profits.
what is offshoring? and one example
when TNCs build their own new production facilities in “offshore” low wage economies. eg Fender (guitars) opened mexican plant in Ensenada in 1987.
what is foreign merging? and one example
when two firms in different countries join forces to create a single entity. eg Royal Dutch Shell has HQs in both the UK and the Netherlands.
what are examples of transfer pricing taking place?
companies like Starbucks and Amazon
low tax countries like Ireland
what is transfer pricing?
when some TNCs channel profits through a subsidiary company in a low tax country.
what is a subsidiary company?
A subsidiary company is a company owned and controlled by another company.
what is now attempting to limit transfer pricing?
The Organisation for Economic Cooperation and Development (OECD)
what is an example of foreign acquisitions?
In 2010 Cadbury (UK) was subjected to a hostile takeover by US food giant Kraft.
what is foreign acquisitions?
when a TNC launches a takeover of a company in another country.
what are thee different types of FDI?
1) offshoring
2) foreign mergers
3) foreign acquisitions
4) transfer pricing
what is privatisation?
foreign investors gain stake in privatised national services and infrastructure. state owned services eg railways, NHS, sold to private investors to reduce gov’t spending.
how is globilisation controlled in china?
- google and facebook have little/no access to china’s market.
- only 34 foreign films in cinemas a year.
- strict controls of foreign TNCs in come sectors, eg chinese government rejected Coke ‘s planned $2.4 billion acquisition of the Chinese company Huiyuan Juice in 2008.
what are SAPs?
strict conditions imposed on countries receiving loans from the IMF and World Bank. Receiving govts may be required to make cuts to healthcare, education, sanitation and housing.
what are the purposes of SAPs?
to reduce the role of government in a country and to open it up to private investment, and to cut govt spending.
what are the impacts of SAPs?
- developing country receives loan
- developing country receives debt relief
- developing country must stop protectionism and adopt the free market.
- developing country must privatise water services; a TNC takes over and raises prices.
- developing country must cut back on education spending.
- developing country must privatise its oil drilling facilities.
name 3 IGOs.
1) WTO- World Trade Organisation
2) IMF- International Monetary Fund
3) World Bank
what does NAFTA stand for?
North American Free Trade Agreement
what are the benefits of being in a trade bloc?
removal of internal tarriffs allows:
•markets to grow
•firms that have a comparative advantage should prosper.
•enlarged market = increased demand= increased volume of production= lower manufacturing costs. economies of scale means products can be sold more cheaply and sales rise further.
•smaller national firms inside a trade bloc can merge to form TNCs- operations more cost effective.
what is an economy of scale?
a proportionate saving in costs gained by an increased level of production.
What is happening to connections through globalisation ?
Lengthening (greater distances)
Faster (higher speed of communication)
Deepening
How did the U.K. Encourage business startups ?
- gov’t’s financial schemes that offer tax benefits to founders, investors+ employees of companies. If you sell your company, you can claim up to £10 million of Entrepreneurs Relief- 18% off tax currently
- 1994 Sunday trading - UK more attractive market for foreign retailers.
What factors led to China’s very rapid economic growth?
1) Labour supply
2) low wages
3) Female participation in workforce
4) Political systems
5) 1978 open door policy
6) SEZs and FDI
7) Economic diversification
8) Investment in infrastructure and education
9) Raw materials and energy supply
What was the 1978 open door policy ?
The economic policy initiated by Deng Xiaoping in 1978 to open up China to foreign businesses that wanted to invest in the country. This policy set into motion the economic transformation of modern China.
How did China get a large labour force ?
mechanisation of agriculture leading to unemployment and under-employment in rural areas and concurrent growth in industrial work in urban areas
How does China maintain its low wages and why do these increase globalisation?
So many workers- if workers demand higher wages many more will replace them- other East Asian countries earn 10x more.
This increased profit margins and attracted inward FDI (Foreign Direct Investment) as American, European and Japanese companies open factories under licence in China
How did Chinese policy increase female participation on the workforce ?
1 child policy - women involved in childcare for much shorter period + gender roles less relevant - much larger workforce.
How does China’s governance increase its globilisation and economic growth?
The non-democratic and authoritarian political regime in China has meant that it has been possible to embrace western-style free market economics while maintaining control over the political system.
Since 1953-5 year plans
When were the first SEZs introduced in China?
1980-1984: 6 SEZs, including the entire island province of Hainan
1984: 14 more, all coastal cities
How did SEZs increase globilisation in China ?
The relaxation of regulation and government control created a more attractive business environment.
How has the Chinese government invested improved infrastructure ?
built many new roads, improved the rail system and made China’s major rivers navigable all year round. China has five of the ten largest container ports in the world (including Shanghai )
What are the literacy rates in China ?
Rapidly increased in past 20 years to 95%
What does the IMF do ?
Channels loans from rich nations to ones that apply for help- in return, countries must agree to run free market economies open to outside investment so TNCs can enter country more easily.
What does the WTO do ?
Draws up rules for international trade- intends to supervise+liberalise international trade.
Asks countries to remove tariffs on foreign imports so trade is free and without borders, so a free global economy is possible.
But international trade exposes homegrown producers to foreign competition, which reduces local employment ( happened in Ghana with Italian tomatoes)
What are IGOs?
Intergovernmental organisations: World Bank, WTO, IMF
What’s different about Saudi Arabia ?
Became so wealthy in petrodollars- biggest oil exporter- so residents don’t have to pay income tax, just capital gains tax and social security payments.
Why do some places remain switched off from globalisation? (Physical)
- highly vulnerable to climate change e.g. Sahel
- poor resources for agriculture e.g. Eritrea
- physical isolation and lack of coastline deters inward investors seeking an import/export base e.g. Niger
Why do some places remain switched off from globalisation? (Physical+human)
- resources controlled by foreign TNCs due to old trade agreements that need renegotiating e.g. Sierra Leone
- resources controlled by a small elite e.g. Zimbabwe
- infighting over resources e.g. Sudan
Why do some places remain switched off from globalisation? (Human)
- lack of skills+literacy deters inwards investors e.g. Somalia
- low prices for food exports due to overproduction+trade rules e.g. Ethiopia
- ethnic clashes + civil war eg DRC
- politically isolated e.g. North Korea
How can levels of globilisation be measured using different indicators and indices ?
KOF index: personal contacts, information flows, cultural proximity Kearney index: global integration No of internet users Migration and capital flows No of airports, train stations, etc Trade bloc involvement, IGOs
What are 3 composite indices measuring development ?
HDI
GII
Happy planet index
What are the 4 categories of the AT Kearney index?
- economic integration
- personal contact
- technological activity
- political engagement
What does the KOF index consist of ?
3 indices: economic, political, and social dimensions of globilsation
What is outsourcing ?
The delegation of 1 or more business processes to an external provider, who then manages+administers the selected processes to an agreed standard.
How do TNCs increase the spread of globilisation ?
Global production networks
Glocalisation
Development of new markets
How do TNCs contribute to globilisation by taking advantage of economic liberalisation?
Outsourcing
Offshoring
What are 3 examples of globalisation ?
1) BMW makes right hand cars for U.K. market + left hand card for German market
2) Disney in USA don’t sell alcohol, but Disneyland Paris sells wine
3) McDonalds in India sell McVeggie burgers in India bc vast population in Hindu +vegetarian.
What is an example of a global production network ?
BMW mini:
- Bonnet made in Netherlands
- Bumpers made in U.K.
- Engine made in Brazil
- HQ in USA
What are some examples of what’s in a global flow ?
- goods: the products and commodities we buy in shops
- capital
- information-data transferred between businesses+people
- people-migrants and tourists
Name 5 types of globalisation.
Economic Cultural Environmental Political Demographic
What is demographic globalisation?
As migration and tourism increase, populations become more fluid and mixed.
What is political globalisation?
The dominance of western democracies in global decision making, spending the view that democratic consumerist societies are the most successful.
Say some stuff about containerisation
development of transport in the 1960s:
- before containers, cargo was loaded in crates or stacks manually into ships-now they can be done automatically by crane.
- inter-modal: can be transported by ship,lorry, or train.
How many container ships are there in the world?
9500
Name 5 innovations in transport from the 1830s to present in order.
Railways Telegraph Steam ships Jet passenger aircraft Containerisation
Why is the communication revolution important for businesses ?
they can now:
- keep in touch w all parts of their production, supply, and sales network locally and globally
- transfer money and investments instantly
- instantly analyse data on sales,employees, and orders from anywhere within their business
What are some protectionist policies ?
- tariffs on imported goods
- using quotas to limit imports
- banning foreign firms from operating in services like retail
- restricting or banning foreign companies from investing
What is the effect of protectionism ?
Reduces total trade volume
Why are SEZs attractive to FDI?
- tariff and quota free-> manufactured goods can be exported at no cost
- unions banned-> workers can’t strike
- limited environment restrictions
- often tax free period of up to 10 years after a business invests
- infrastructure provided by govt.
what was the main thing of globilisation in the 21st century?
rapid developmentin ICT and mobile communication (mobile phones, internet,
social networking, electronic banking, fibre optics), lowering communication costs n
what was the effect of the developments n the 21st century?
time space compression
what was the effect of the development s in the 20th century?
shrinking world effect
what are the 2 measurements of globalisation?
at kearney index
kof index
how do tncs contribute to the spread of globalisation?
global production networks,
glocalisation and the development of new markets
how do tncs take advantage of economic liberalisation?
outsourcing and
offshoring
