EQ1 GLOBALISATION Flashcards
Definition of globalisation
Increasing interconnectedness of social, economic and political entities around the world.
Definition of networks
System of interconnected points in which flows move. Eg. TNCs operations, airports or phone calls.
5 types of flow
- Capital
- Commodities
- Information
- Tourists
- Migrants
Examples of social/economic/political/cultural flows
Social: phone calls, text messages, emails.
Economic: raw materials, online shopping.
Political: government phone calls between them, emails to collaborate (trading).
Cultural: social media, providing information such as data or photos.
Acceleration of globalisation in the 19th century
- Railways: expanded rapidly in the 1800s. Today they remain a priority for governments across the world. Has helped trade to grow in a geographical scale. Eg. by 1904, the 900km Trans-Siberian railway connected Moscow to China and Japan.
- Telegraphs: revolutionised how businesses were conducted. They remain a technology for communication across distance. Eg. 1st telegraph cables were placed across the Atlantic Ocean in 1860s.
- Steamships: moved goods and armies along trade routes to Asia and Africa. Eg. Britain became the leading power in using steam technology in 1800s.
Acceleration of globalisation in the 20th century
-Jet aircrafts: arrival of the intercontinental Boeing 747 in 1960s has made international travel much more commonplace. The recent expansion of the cheap flight sector has bought it into masses in richer nations.
EASYJET: established in 1995, connects most European cities, extends beyond Europe (Israel), allows places to become ‘switched on’ (Tallin, Estonia). Allows rapid and cheap form of travelling. Growth due to internet.
-Containerisation: standardisation of containers that transport goods by sea or truck. Allows quicker and cheaper trade, so more people are trading. Eg. around 200 million container movements take place every year.
Acceleration of globalisation in the 21st century
- Mobile phones: remain core technology for communicating across distance. Allowed world to be more connected for social and economic reasons. Credit can be directly transferred between phone user. Eg. parts of Africa where telephone lines have never been placed, are leap-frogging (adaptation of modern systems without going through intermediary steps) to mobile phone use.
- Internet: allowed massive access to information. People are always connected. Productivity has increased. Eg. began as a scheme funded by US Defence Department during the Cold War.
- Social networking: connectivity between people and places has grown exponentially. A way of linking research computers in different location. Eg. by 2014, 5 billion Facebook likes were being registered globally.
-Electronic banking: large amount of data can be moved quickly though cyberspace. Business stay connected due to electronic transactions. Eg. broad internet allowed this in 1980/90s.
CASESTUDY —> MPESA, KENYA.
Simple mobile phone service that allows credit to be directly transferred between phone users. 1/3 of country’s GDP is now sent from MPESA system. They use it for utility bills, school fees, fishermen and farmers check the market prices before selling, women are able to send micro loans lifting families out from poverty.
-Fibre optics: enormous flows of data are conveyed by fibre optics owned by national govern,ents or TNCS. Eg. Google.
Time and space compression
Shrinking world
-T/S compression: increase in connectivity results in changes to our conception of time, distance and potential barriers to migration of people, goods, money and information. We have the impression that time and space are compressed.
Shrinking world: places feel closer together. Travelling greater distances in shorter periods of time, international holidays (not local), goods transported to international destinations, volume of trade has increased (cheaper + more efficient).i
International organisations (promote free trade policies + FDI) —> WORLD BANK
-189 member countries.
-Lends money and gives grants to developing world to fund economic development and reduce poverty.
-Deals with flows of capitals and provided financial assistance for development projects.
-Requires members to adopt trade liberalisation policies to open up to FDI by removing legal restrictions and capital controls.
-Requires members to adopt structural adjustment programmes to reduce government budget deficits.
BENEFITS: helped developing countries develop deeper ties to global economy and has raised lining standards.
CRITICISM: policies put economic development before social development.
EXAMPLE: in 2014 it gave a US$470 million loan to the Philippines for poverty reduction programme and a US$70 million grant to the Democratic Republic of Congo for the Inga 3 mega-dam HEP project.
International organisations (promote free trade policies + FDI) —> International Monetary Fund (IMF)
-190 members.
-Aims to maintain a stable international financial system and promotes free trade and globalisation. Promotes monetary corporation, high employment, reduced poverty and sustainable economic growth.
-Deals with flow of capital and progres policy advice and technical assistance.
-Members must adopt structural adjustment and trade liberalisation programmes, opening up economy to FDI and free trade.
CRITICISM: promotes a ‘western’ model of economic development that works in the interest of developed countries and their TNCs. Encouraged government spending cuts that can slow down economic growth as developing countries are less able to pay debts as they need to invest in healthcare and education.
EXAMPLE: in 2008 Greece received the first series of IMF loans when its foreign currency earnings were insufficient to pay its existing debt obligations.
International organisations (promote free trade policies + FDI) —> WTO (World Trade Organisation.
- +130 members.
- Works to reduce trade barriers (both tariff and non-tariff) and create free trade.
- Global agreements have gradually reduced trade barriers and increased free trade.
- Deals with flow of goods and services (commodities).
- Mainly benefits developed and emerging countries.
National governments promote free trade blocs and economic liberalisation policies.
-Free market liberalisation: removal or reduction of restrictions or barriers on the exchange of products or goods between nations. Results in integration among countries as it’s made foreign trade and investment easier. Businesses are allowed to make their own decisions on exports and imports.
EXAMPLE: deregulation of London on 1986. London became the world’s leading global hub for financial services and the home of many billionaires.
-Privatisation: transfer of a business, industry or service from public to private ownership and control due to the cost of running these as they increase government spending. Ownership of many assets have passed overseas. There is investment from foreign companies (FDI) as they buy shares in privatised companies.
EXAMPLE: French company Keolis owns a large stake in Southern England’s railway and the EDF energy company is owned by Electricité de France.
-Encouraging business start-ups: lowering business taxes, lengthening hours for trading and changes in law allowing local and foreign owned businesses to make profit. These methods make it more attractive to foreign retailers.
EXAMPLE: Italy has eased restrictions on Chinese investors wanting to start up textile companies in the EU. The city of Prato now has the largest Chinese population in Europe.
-Government subsidies: grants to certain companies or industries to encourage their growth.
EXAMPLE: UK subsidised Nissan 40 million pounds to produce a new car line.
-FDI: an injection of income from a foreign source often TNCs expanding its operations to a new country. One way of attracting FDI is investing in infrastructure to facilitate trade and transport.
EXAMPLE: Crossrail in London.
-SEZs: area in which business and trade laws are different from the rest of the country. They encourage trade, increased employment and attracting increased investment.
EXAMPLE: Shenzhen, China.
National governments join free trade blocs which promote globalisation —> EU & ASEAN
Multinational groups in major regions of the world. Seek to overcome past conflict by promoting integration and freedom of movement. They have gained global reputation.
-EU: single market trade bloc (28 members). Guarantees free movement of goods, capital and people. The Schengen area countries (26) have removed barrier controls. Single currency adopted by 19 countries. Uniform product labour and environment regulations. The founding Treaty of Rome in 1957 committed members to work towards an even closer union.
ASEAN: free trade area with 10 members. A low tariff applied between members for specified goods. Single market not achieved. Nuclear weapon free since 1995. Limited funding. Countries less developed. Aims for conflict resolution.
Advantages of joining trade blocs
- Bigger markets.
- National firms can merge to form TNCs: increased sales means benefits from economies of scale and lower production costs. Eg. Vodafone became world’s largest mobile phone company in 2010 by merging with Germany’s Mannesmann.
- Protection from foreign competitors and political stability: in 2007, EU blocked 50 million dollars of Chinese made clothes from entering the UK as quotas had already been filled.
Disadvantages of joining trade blocs
- Loss of sovereignty: EU deals with human rights, consumer protection and greenhouse gas emissions. These laws supersede those of member governments.
- Interdependence: trade disruption can have consequences for other countries. Eg. Eurozone debt crisis.
- Compromise and concession: countries entering into a trade bloc must give foreign firms access to their markets at the expense of local companies.
