EQ1: What are the causes of globalisation and why has it accelerated in recent decades?

Question 1

What is globalisation?

Answer 1

Globalisation is defined by the Financial Times as ‘a process by which national and regional economies, societies and cultures have become integrated through the global network of trade, communication, immigration and transportation.

Question 2

What are the four ‘flows’ of globalisation?

Answer 2

• Goods: the products and commodities we all buy in shops, many of which were grown or made in distant places.
• Capital: flows of money between people, banks, businesses and governments.
• Information: such as data transferred between businesses and people, often using the internet.
• People: flows of migrants and tourists from one part of the world to another.

Question 3

What are the different forms of globalisation?

Answer 3

Economic globalisation
Cultural globalisation
Political globalisation
Demographic globalisation
Environmental globalisation

Question 4

Why has globalisation become a wider process?

Answer 4

Globalisation has become wider because even recently isolated places such as Sub-Saharan Africa are increasingly connected to the rest of the world through trade and tourism. It has become deeper because in the developed world our food, goods, media, music, friends and places we visit are increasingly global.

Question 5

Why have developments in transport technology been a key factor driving globalisation?

Answer 5

Transporting goods and people around the world has become cheaper over time.

The speed and ease of moving around the world have reduced the friction of distance between places as well as dramatically lowering the cost of trade.

Question 6

What types of transport can containers be used on?

Answer 6

Inter-modal

Question 7

How many shipping containers can the world’s fleet of 9500 container ships carry?

Answer 7

The world’s fleet of 9500 container ships can carry up to 18,000 twenty-foot shipping containers each.

Question 8

What have the late twentieth and early twenty-first centuries been dominated by?

Answer 8

The late twentieth and early twenty-first centuries have been dominated by developments of ICT and mobile technology.

Question 9

When was the first text message sent?

Answer 9

The first text message was sent in 1992.

Question 10

What percentage of the world’s population uses the internet?

Answer 10

Now close to 50% of the world’s population uses the internet.

Question 11

What technology carries internet data across oceans?

Answer 11

Land-based and subsea fibre optic cables

Question 12

Why is the internet and mobile communications revolution important to businesses?

Answer 12

Businesses can:

• keep in touch with 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.

Question 13

How have many countries been able to protect their own industries and businesses?

Answer 13

• Demanding payment of taxes and tariffs on imported goods, so making them more expensive than home-produced goods
• Using quotas to limit the volume of imports, protecting home producers from foreign competition
• Banning foreign firms from operating in services like banking, retail and insurance
• Restricting, or banning, foreign companies from investing in their country.

Question 14

What is the difference between free trade and protectionism?

Answer 14

Protectionism reduces total trade volume, whereas free trade (no taxes, tariffs or quotas) increases it.

Question 15

What is the role of the World Trade Organisation (WTO) in free trade and FDI?

Answer 15

The international organisation that works to reduce trade barriers and create free trade. WTO was known as GATT (General Agreement on Tariffs and Trade) until 1995, A series of global agreements have gradually reduced trade barriers and increased free trade, although the latest round of talks began in Doha in 2001 and have not been agreed yet.

Question 16

What is the role of the International Monetary Fund (IMF) in free trade and FDI?

Answer 16

Since 1945 the IMF has worked to promote global economic and financial stability and encourage more open economies. Part of this involves encouraging developing countries to accept FDI and open up their economies to free trade.

Question 17

What has the IMF been criticised for?

Answer 17

The IMF has been criticised for promoting a ‘western’ model of economic development that works in the interests of developed countries and their TNCs.

Question 18

What is the role of the World Bank (WB) in free trade and FDI?

Answer 18

The World Bank’s role since 1944 has been to lend money to the developing world to fund economic development and reduce poverty.

Question 19

What has the World Bank (WB) been criticised for?

Answer 19

It has helped developing countries develop deeper ties to the global economy but has been criticised for having policies that put economic development before social development.

Question 20

Which global organisation has been mainly responsible for removing trade barriers between countries?

Answer 20

World Trade Organisation (WTO)

Question 21

Why do most governments actively seek global connections?

Answer 21

Most governments actively seek global connections in the belief that trade promotes economic development and wealth.

Question 22

How can governments promote globalisation?

Answer 22

• Joining free trade blocs such as the European Union and Association of South East Asian Nations (ASEAN).
• Opening up markets to competition.
• Privatisation.
• Grants and loans are often made to new businesses (called business start-ups) especially in areas that are seen to be globally important growth areas such as ICT development, pharmaceuticals or renewable energy.

Question 23

When did China first open the country up to foreign direct investment?

Answer 23

China led the way in this area when in 1978 it decided on an Open Door Policy towards FDI and in 1980 it created the Shenzhen Special Economic Zone.

Question 24

How many people, in how many countries, work in special economic zones?

Answer 24

About 50 million people in more than 100 countries work in such locations.

Question 25

Why are SEZs and similar models attractive for FDI?

Answer 25

• They are tariff and quota-free, allowing manufactured goods to be exported at no cost.
• Unions are usually banned, so workers cannot strike or complain.
• Infrastructure such as port facilities, roads, power and water connections are provided by the government, providing a subsidy for investors and lowering their costs.
• All profits made can be sent to the company HQ overseas.
• Taxes are usually very low, and often there is a tax-free period of up to 10 years after a business invests.
• Environmental regulations are usually limited.

Question 26

What does the KOF Index measure?

Answer 26

The KOF Index measures the degree of globalisation of countries on an annual basis. It measures three aspects of globalisation:

• Economic globalisation
• Social globalisation
• Political globalisation

Question 27

How can economic globalisation be measured?

Answer 27

Economic globalisation measured by cross-border trade, investment and money flows.

Question 28

How can social globalisation be measured?

Answer 28

Social globalisation measured by international telephone calls, tourist flows, resident foreign population and access to foreign internet, TV, media and brands.

Question 29

How can political globalisation be measured?

Answer 29

Political globalisation measured by foreign embassies in a country, the number of international organisations the country is a member of and trade and other agreements with foreign countries.

Question 30

What type of population do many of the most globalised countries have?

Answer 30

Many of the most globalised countries have culturally mixed populations and have many of their residents living abroad, as well as foreigners living in their country.

Question 31

Why is the USA less globalised (ranked 34 in 2016)?

Answer 31

The USA is less globalised (ranked 34 in 2016) than might be expected but this reflects the large parts of the interior of the USA that are not well connected to the rest of the world.

Question 32

What does the AT Kearney Global Cities Index measure?

Answer 32

The AT Kearney Global Cities Index measures how economically successful cities are.

Question 33

What has much of China’s rapid economic growth been fuelled by?

Answer 33

Much of China’s rapid economic growth has been fuelled by western TNCs locating manufacturing plants in its SEZs, creating jobs and boosting exports, taking advantage of China’s economic liberalisation since 1978.

Question 34

How have TNCs contributed to globalisation?

Answer 34

• Outsourcing
• Offshoring
• Developing new markets
• Glocalisation

Question 35

What have TNCs been accused of?

Answer 35

TNCs have been accused of exploiting workers in the developing and emerging worlds by paying very low wages.

Question 36

What can outsourcing jobs to the developing world lead to?

Answer 36

Outsourcing jobs to the developing world can lead to job losses in developed countries.

Question 37

Why do some places remain ‘switched-off’ and have only weak connections to other places?

Answer 37

• Political isolation
• Physical isolation
• Economic isolation
• Environmental isolation