EQ1 What are the causes of globalisation and why has it accelerated in recent decades? Flashcards
What is Globalisation?
A term used to describe the variety of ways in which people and places are more connected with one another than they used to be.
What are examples of Economic Globalisation?
- Growth of TNCs
- Growth of ICT systems
- Online shopping
What are examples of Social Globalisation?
- International Immigration
- Improvements in education + health
- Social connectivity (email, SMS etc.)
What are examples of Cultural Globalisation?
- Western culture traits (Americanisation/McDonaldisation)
- Glocalisation
- Circulation of ideas/information on social media
What are examples of Political Globalisation?
- Growth of Trade Blocs
- Bretton Woods institutes
What is a TNC?
Firms whose operations are spread across the world.
- Many are instantly recogniseable ‘global brands’
What is one concern about the impact of growing TNCs on culture?
They are responsible for a global trend of cultural homogeneity
What 3 changes to connections have occurred in modern globalisation (post 1940s)?
- Lengthening of connections (bottled Fiji water travels 10,000 miles)
- Deepening of Connections (food cuisines from a variety of places)
- Faster connections (airplane travel, zoom call etc.)
What 4 reasons have contributed to accelerated globalisation?
- Developments in Technology
- Better Transport links
- Decline in conflict
- Increased mobility of capital/labour
What are the 5 most significant global network flows?
- Capital (money)
- Commodities
- Information
- Tourists
- Migrants
What is Gross Domestic Product?
A measure of the value of all goods and services produced within an area
- this includes foreign firms located there
-often divided per capita for comparison
What are remittances?
Money that is sent home by Migrants, often to support families.
This can be achieved through both formal and informal methods
What is interdependency?
When 2 or more places become over-reliant on financial/political connections with one another
- e.g a reccession in a country with many migrant workers will see a reduced amount of remittances for the source country
What are 4 important transport innovations that accelerated globalisation in the 19th and 20th century?
- Steam Power
- includes ships/trains, helped move goods and armies - Railways
- Trans Siberian Railway (9000km) linked Moscow with China and Japan
- HS2 today set to halve some travel times - Jet aircraft
- arrival of Boeing 747 in the 1960s
-firms like easyJet bring cheap flights to the masses - Container shipping
- 200M individual container movements per year
- ‘Intermodal’ containers are compatible across rail and cargo ship
What is the name given to the design of shipping containers which makes transport more efficient?
Intermodal containers
These are large capacity units which can be transported over multiple types of transport (ship and rail), without the freight being removed from the container
Explain spatial division of labour
This is when TNCs move low-skilled work abroad (or ‘offshore’) as labour costs are lower
Management roles are retained at the TNCs HQ in it’s country of origin
What is the ‘shrinking world’ effect?
When heightened connectivity changes our perception of time and distance.
- As travel times fall due to new innovation, places begin to feel closer together than in the past
What are 4 important technological innovations that have accelerated globalisation?
- Telegraph + Telephone
-first cables laid across the Atlantic in the 1860s, replacing a 3 week boat journey - Broadband + Fibre Optics
- More than 1,000,000km of flexible undersea cables carry all of the worlds emails, searches and tweets - GIS and GPS
- continuously track location and time data
- first satellite launched in 1970s, currently 24 - Social Networks
- first introduced in US defence system in Cold War
- By 2014, 5B Facebook likes per day
Between 2005 and 2015 , how has the ownership of mobile phones changed in Africa?
6% of Africans in 2005, rising to almost 70% in 2015
- due to falling prices and growth of provider companies such as Safaricom in Kenya
What mobile phone service was launched by Safaricom in 2007 to aid money transfer?
M-Pesa - directly allows credit to be transferred via mobile phone
- equivalent of 1/3 of Kenya’s GDP sent per year on M-Pesa
How can global flows be seen as threats?
- Imports of raw materials/commodities: threatens domestic industry
- Cultural change from migration: not everyone welcomes this
- Information: can provide citizens with knowledge that the gov’t find threatening
What is foreign direct investment?
FDI is a financial injection made by a TNC into a nations economy
- achieved through construction of new facilities or acquisition/merging of existing firms
What 3 international organisations act as ‘brokers’ for globalisation?
The Bretton Woods institutions
- The World Bank
- World Trade Organisation (WTO)
- International Monetary Fund (IMF)
When were the Bretton Woods institutions formed and with what objective?
After WW2
- restabilise the world economy
- avoid a return to conditions of the Great Depression of the 1930s
- reduce protectionism
Have also grown to include persuading developing countries to embrace free market economics/globalisation
What factors have caused nations to be more cautious of Bretton Woods institutes?
- Global financial crash 2008-09, originated in the US and EU markets
- New alternatives - e.g China Dev. Bank or New Dev. Bank (BRICS)
- Hard to reach agreements with all 159 members
- Deals unfair on developing nations - many walked out of WTO talks in 2003 in protest
What is the role of the World Trade Organisation (WTO)?
- Advocates trade liberalisation (no subsidies/tariffs)
- Set and enforce rules for international trade
- Calls for abandoning protectionism
164 member nations in 2021
What is the role of The World Bank?
- Finances economic development
- Uses deposits from wealthier countries to provide loans in developing nations
- such nations have to abide by strict conditions for repayment
e.g help given to DR Congo to kick-start a mega-dam building project
What is the role of the International Monetary Fund (IMF)?
- Maintain international financial stability
- Forces nations into privatising assets to increase size of private sector
- Stablises currencies
What change in the 1980s helped for TNCs to thrive and companies to rapidly globalise?
Financial deregulation for many EU/USA states.
- These rules helped them operate more freely.
- A variety of methods were used to inject capital into foreign economies in the absence of political barriers
What is offshoring?
When TNCs build new production facilities in low-wage economies
e.g US guitar-maker Fender opened it’s Mexican plant in 1987
Describe a foreign merger
When 2 firms in different countries join to create a single entity
e.g Royal Dutch Shell has HQs in Netherlands and the UK
What is a foreign acquisition?
When a TNC launches a takeover of a company in another country.
- The UK has few restrictions on foreign takeovers
- Contrastingly, in the US strict rules are enforced
What is Transfer Pricing?
When TNCs channel profits through a subsidiary company in a low-tax nation.
- e.g Starbucks and Amazon
- The OECD is now trying to limit this practice
Explain free-market liberalisation as a government policy
Also known as neo-liberalism, it follows 2 simple beliefs
- Gov’t intervention in markets impedes economic development
- Trickle down will occur from the rich to the poor
Advocate for the easing of restrictions on the way companies can operate
- removal of ‘red tape’ in 1986 helped transform the City of London into a global financial hub
Explain Privatisation as a gov’t policy
The policy of selling off state-funded services to private/foreign investors
- aimed to reduce government spending
- in recent times has often been passed overseas e.g French firm Keolis with large stake in UK southern railways
Explain encouraging business start-ups as a government policy
Can be achieved through lowering businesses taxes or changes in the law
This allows local and foreign-owned businesses to make more profit
- Aided by Sunday trading introduction in 1994
- Italy has eased restrictions on Chinese investors wanting to start textile businesses in the EU
Explain the concept of ‘trickle-down’
The positive impacts on peripheral regions (poor people) caused by the creation of wealth in core regions (rich people)
What is a Sovereign Wealth Fund (SWF)
Gov’t owned investment funds and banks
e.g China and Qatar have them
What are the 6 stages of Trade Blocs?
- Preferential Trade Area
- Free Trade Areas (e.g NAFTA)
- Customs Union
- Common Market
- Economic Union (e.g EU)
- Full integration (e.g USA)
What are the terms of a Preferential Trade Area (Stage 1)?
Nations in a geographical area reduce/eliminate tariffs on SELECTED goods imported from members
What are the terms of a Free Trade Area (Stage 2)?
Eliminate internal barriers (between members), but maintain independent external barriers (with non-members)
What are the terms of a Customs Union (Stage 3)?
Eliminate internal barriers, members agree on common external barriers
What are the terms of a Common Market (Stage 4)?
Eliminate internal barriers, adopt common external barriers, allow free movement of resources (e.g labour) among member countries
What are the terms of an Economic Union (Stage 5)?
Eliminate internal barriers, adopt common external barriers, free movement of resources AND uniform set of economic policies
What is a trade bloc?
Voluntary international organisations existing for trading purposes, aiming to bring greater economic strength and security to member nations
What are the benefits of trade blocs for businesses?
- By removing barriers to trade, markets for firms grow as they can easily access more consumers
- Firms with a comparative advantage in an industry should prosper (e.g French wine makers have fertile soil/climate)
- Cheaper products due to EoS (as firms grow with higher demand)
- Smaller firms grow quicker (e.g through mergers with other firms)
What are 2 benefits of Trade Blocs for countries?
- Agreements on tariffs and quotas
- the EU block imports if they exceed a certain quota, to protect domestic manufacturers
- Inclusive of nations at varying levels of development
- e.g USA takes advantage of low-wage labour in Mexico (NAFTA), whilst Mexico gets a boost in employment rates
What are 3 disadvantages of Trade Blocs for nations?
- Loss of sovereignty
- particularly in a political union (e.g EU rules on human rights) - Interdependence
- disruptions in one nation affects all other members - Compromises on domestic success
- nations must accept that foreign firms may gain significant market share
What are Special Economic Zones (SEZs)?
An industrial area where favourable conditions are created to attract foreign TNCs
Can include:
-low taxes
-exemption from tariffs/export duties
What are the similarities between ASEAN and the EU?
- founded to promote peace, focusing on regional unity
- Integrate economies of member states into a single market
- Share a commitment to human rights
- Hold regular political/economic dialogues with external aprtners
What are some of the differences between the EU and ASEAN?
- The EU has a common currency (euro), ASEAN does not
- ASEAN is inter-governmental, EU is supranational (sovereignty over members)
- EU has a parliament to legislate (law), ASEAN has an assembly with only moral persuasion
- ASEAN takes decisions through consensus, EU decides through voting
What was China like pre-1978
- Very poor - purposefully ‘switched off’
- under communist rule of Mao Zedong
- pre-industrialisation, agriculture based
- often swept with famine
What was the name of the radical policy introduced in 1978 by new leader Deng Xiaoping?
The ‘Open Door’ Policy 1978
- aimed to embrace globalisation and expose itself to the international economy
In what sector came the first reforms and how many moved to cities?
Agriculture
- communes dismantled
- farmers allowed to keep a small profit for the first time
300M left rural areas for growing cities
- However a strict registration system ‘hukou’, prevented villages from emptying entirely
In what area was city growth concentrated in China?
On the SE/East Coast, around the Pearl River Delta
What evidence backs up expansion of China’s ‘instant’ cities?
- Urban mega region of over 120M has grown
- Cities have grown and conjoined e.g Shenzen, Dongguan and Guangzhou
- soon to be 200 cities with 1M+ inhabitants
What name was given to China as a result of it’s high levels of production in the past 4 decades?
The ‘Workshop of the World’
What proportion of GDP was being generated in China’s SEZs by 1990s?
50%
- due to lower taxes and special export permissions for foreign TNCs
Why are some firms choosing to outsource production elsewhere?
Standards of living and wage rates have increased in China
- Due to workers becoming higher skill (e.g manufacturing high tech)
- Due to encouraged innovation
Therefore costs for TNCs are rising
- Places such as Guatemala and Vietnam offer prices similar to China 30 years ago
How many people have escaped poverty in China since reforms began in 1978?
400M
- supports the idea that ‘free trade’ can sometimes cure poverty
What cultural change did Saudi Arabia introduce to help boost globalisation?
They changed their official weekend from Thursday and Friday to Saturday and Sunday
- This puts them more in line with other nations, making business more accessible
What 3 main dimensions of globalisation does the KOF index cover?
- Economic Globalisation
- Political Globalisation
- Social Globalisation
What are advantages of the KOF Index?
- uses a wide range of globalisation data
- allows for comparison between countries
- reliable measure, used since 1970
What are disadvantages of the KOF index?
- doesn’t account for informal economies
- smaller countries are over-represented at the top (e.g Belgium)
- The internet skews some data
The Kearney Index Measures global integration.
What 4 components are assessed?
- Economic Integration
- Personal Contact
- Technological Connectivity
- Political engagement
Why have some parts of the world benefitted more from FDI by TNCs than others?
- Not all places are suitable sites for production
- due to geography, natural resources, government policy, education etc.
- Not enough places have enough market potential to attract large retailers
- this is likely due to low incomes and a lack of demand
What is a global production network (GPN)
When TNCs establish thousands of outsourcing partnerships whilst building their business
-2500 different suppliers provide parts for construction of MINI Car’s
- some parts are still made in the EU to dodge import tariffs
What potential risks of outsourcing are there for TNCs?
- Natural Hazards
- e.g 2011 Japan Tsunami disrupted supply chains - Political instability
- war in Ukraine has affected interdependence - Reduced Quality
- Horse meat entered UK supermarket supply chains in 2013 - Health and Safety
- Rana Plaza Textile factory in Bangladesh killed 1100 workers in 2013
In what 3 emerging continents of the world have 2bn people escaped 1 dollar a day poverty, since 1990?
The Middle East, Latin America and Asia
What is Glocalisation?
A strategy used by TNCs which involves changing the design of products to meet local demands
- This can be due to preferences, culture or law
Give 3 examples of glocalisation suited to consumers preferences, culture and law
- Cadburys make their chocolate sweeter in China
- MTV avoids showing sexual music videos in the middle east
- The driving seat is positioned differently (by law) for cars in the US and the UK
Why do some companies, such as Lego, not need glocalisation?
The Authenticity and Uniformity of products in a global brand generates sales
- Lego exports identical products internationally, including to China, due to it’s iconic Lego bricks
Give 3 examples of North Korea as a ‘switched off’ nation
- Citizens have no internet/social media access
- No undersea data cables installed
- No sharing/awareness of western culture (e.g music, food etc.)
What factors are limiting market potential in the Sahel Region, Africa?
- Mismanagement of natural resources - dates back to colonialism
- Landlocked (Chad) - harder to attract FDI
- Arid conditions/desertification
- Lack of modern infrastructure (ICT, railways)
