globalisation Flashcards
What is globalisation
process of increasing interconnectivity between countries
-people, culture, finance, goods, information –> transfer between countries
explain economic globalisation
- the growth of TNCs accelerates exchanges of raw materials, goods
-> rapid growth in world trade
->spreading of investement around world
explain the effect of the shrinking world
the physical distance between places remains unchanged but new technologies reduce the time taken to transport goods/people/communicate information
explain the technology that has led to globalisation
- telephone and the telegraph
- broadband and fibre optics
- GIS and GPS
- internet
- electronic banking
What is the world trade organisation (WTO)
- an international organisation that works to reduce trade barriers -> free trade -> ^ movement of goods -> ^ interdependency
explain the EU
- composed of 28 members
- largest free trade bloc in the world today
-issues; euro not being used in all countries, migration and open borders, brexit
-guarantees free movement of goods, capital and people
what are two examples of trade blocs?
the EU
ASEAN
what is a trade bloc?
group of countries that agree to reduce trade barriers between them.
promote free trade between members, increasing economic globalisation
explain the work of ASEAN
-free trade area with 10 members
- association of south East Asian countries
- encourages free trade between countries and encourages FDI
- china is a connected member of this trade bloc -> didn’t want to damage their economic power -> negotiated a deal in order to get preferential conditions
- it has allowed the movement of skilled workers
what are the 4 roles of the national government in globalisation?
1) joining trade blocs
2) free market liberalisation
3) privatisation
4) encouraging business start ups
how do trade blocs lead to globalisation?
specialisation
- countries specialise in goods being produced -> competitive advantage (produce at lowest cost) -> trade these products for other members’ specialisms
- firms producing a country’s specialisation become TNCs -> sell outputs through the bloc
explain free market liberalisation
- involves promoting free markets (tax = minimal) & reduces government intervention in economy
- competition between firms -> innovation & lowest cost production
-means you can choose your supplier for telephones, broadband, gas and electricity, based on quality and price.
-created competition in once restricted markets.
explain privatisation
-where state-owned companies are now privately owned
-e.g. UK governments allowed foreign investors to gain stake in privatised national services (railways)
-this is because running these services were costly
-so it reduces government spending & raises money
explain the encouragement of business start-ups
- encourages people to set up business by offering financial incentives -> grants, loans
-low business taxes also encourage new firm creation
-this creates innovation and competition in new production techniques
what are government subsidies
they are grants given by governments to increase profitability of key industries
explain government subsidies
-why does WTO usually prohibit them
- Govs may provide subsidies (grants) to attract FDI (finance made by TNC into a nations economy)
e.g. could cover relocation costs, payment per worker to attract FDI
- WTO usually prohibits subsidies to domestic firms as acts as a trade barrier- as subsidy allows firm to accept lower market price, undercutting price of imports
- WTO may accept a subsidy for FDI, e.g. in SEZs as this promotes trade
- through gov subsidies they can increase globalisation as through the financial injection, firms can work on a more global scale. it increases consumption so the firm can expand, leading to economic and cultural globalisation
what are the 3 positives of government subsidies?
- ^ in consumption & output, -> ^ business’ profits
-prevents long-term decline of industries (fishing, farming) -> sustains culture these industries bring
-reduces unemployment by investing into the creation of new jobs -> benefitting economy
what are the 3 negatives of government subsidies?
-very expensive
-sometimes when firm receives subsidies -> it reduces incentives to cut costs -> so should only be given subsidies if there is a clear social benefit
- difficult to measure success when they receive subsidies, hard to see whether the subsidies have positively affected area
how can you measure globalisation?
using indicators and indices
KOF index
A.T Kearney index
What is an indicator
measure of an individual aspect of globalisation
e.g. the amount of FDI
what are the disadvantages of the KOF index?
- trade flows will not include informal economy flows, will understate degree of globalisation in developing and emerging countries
- choice and weighting of indicators is value of judgement and may contain cultural bias
- fewer missing or estimated data is increasing accuracy and comparability
explain the A.T index
-ranks NYC, LDN, PARI, TKY, HONKON as top 5 cities for commerce
-rankings established by analysising; business activ, culutral experience, political engagement
what are the disadvantages of the A.T index?
- only includes 62 countries, though these include 84% of the world’s population and 96% of global GDP
- first published in 2008
- heavy weighting given to ICT community, enables the USA to gain a high index score despite low political engagement in terms of treaties signed
how is the growth in size and number of TNCs been encouraged?
by the creation of trade blocs, removing international barriers
explain Starbuck’s position in globalisation
- there has been a change in social structuring, before there were much less coffee shops and more pubs, they drank more alcohol
- Starbucks have shifted social interactions, more of a coffee culture
- linguistic globalisation has come from this, they are interacting with American businesses
- westernisation has led to greater aspirations, they have adopted a better work ethic, increased profitability of businesses
- increased carbon emissions from the flow of goods
explain globalisation in china
china embraces economic globalisation but not social and cultural globalisation as they have a communist approach
what are economic reasons for why countries are switched off
- lack of money to invest in infrastructure, cannot have interdependence, can’t trade (economic), no telephones or airports (cultural), poor infrastructure and low literacy rates makes it unattractive for offshoring FDI
- high level of government debt, can’t embrace foreign companies, e.g. Senegal, cannot afford to purchase imported goods
- dependency on one industry -> can’t be interdependent, this is when they specialise their industry on one of their natural resources , bananas in windward islands, risky
- poorly developed transport and telecommunications infrastructure
what are environmental reasons why countries are switched off
- Arid conditions, Sahel region countries have a semi-arid climate and so agricultural exports are reliant on a good rainy season
- desertification as getting rid of trees reduces transpiration and evapotranspiration, this reduces the amount of clouds and therefore rain
desertification has been due to overpopulation as more grass is eaten, also deforestation, THIS MEANS: there is a reduced amount of available land area for producing agricultural exports - trees give shade (cool area), no infiltration due to baked ground, flooding, no shade for cattle, no building materials
- climate change has led to differing weather patterns, more extreme climate, heatwaves,
- lack of natural resources (e.g. discovery of coltan)
- landlocked countries, difficulty for trade, no airports, travel through other African countries
- isolation from markets
what role do TNC’s play in the globalisation process?
- outsourcing
- global production market
- offshoring
- glocalisation
- investment in new markets
what is glocalisation?
adapting your product to meet the demand of your local market
explain social globalisation
- international immigration has created extensive family networks that cross national borders, world-city societies become multi-ethnic and pluralistic
- global improvements in education and health can be seen over time, with rising life expectancy and literacy levels, although the changes are no means universal
- social interconnectivity has grown over time thanks to the spread of ‘universal’ connections such as mobile phones, the internet and email
explain political globalisation
- the growth of trading blocs (EU, NAFTA) allows TNCs to merge and making acquisitions of firms in neighbouring countries, while reduced trade restrictions and tariffs help markets to grow
- global concerns suc has free trade, credit crunch and the global response to natural disasters
- the world bank, IMF and the WTO work internationally to harmonise national economies
explain cultural globalisation
- ‘successful’ western culture traits com to dominate in some territories, e.g. westernisation, the ‘mcdonaldisation’ of tases and fashion
- glocalisation and hybridisation are a more complex outcome that takes places as old local cultures merge and meld with globalising influences
- the circulation of ideas and information has accelerated thanks to 24 hour reporting, people also keep in touch using virtual spaces such as facebook and twitter
what are the 5 flows that result from globalisation?
commodities
toursim
capital
information
migration
explain the flow of commodities in globalisation
- these are things being sold and bought within different countries
- it is the flow of goods
explain the flow of tourism in globalisation
- improvements in aircraft made trips quicker and cheaper
- low-cost airlines have raised aspirations
- emerging nations are travelling more than ever, westernisation
explain the flow of migration in globalisation
- the most restricted flow unless there is deemed to be a need
- if there is a need for a person with your job they will accept you
- brain drain vs brain gain
- impact of remittances
explain the role of planes in globalisation
- cultural globalisation, the movement of people
- movement of knowledge
- they have accelerated globalisation as it has allowed people to move all over the world, easier and quicker, they have contributed to the ‘shrinking world’
what is intermodal containerisation?
standardised sized containers that can be transported by lorry, train and ships. this is a capital-intensive process and is very efficient as the products are not unloaded.
Name the 4 important innovations in transport
-steam power
-railways
-jet aircraft
-container shipping
explain the development of steam power
in the 1800s, Britain was leading the world in the use of steam technology. this allowed the British to move their goods and armies very quickly into key areas like Africa and asia
explain the development of jet aircraft
- newer and more efficient aircraft have allowed goods to be transported quickly between countries
- increasing competition between affordable airlines has led to more people being able to travel abroad, arrival of the intercontinental jet aircraft in the 1960s
- the Boeing 747 introduced I the 1960s lowed the cost of international air travel, bringing international tourism within the purchasing capabilities of the middle class
explain the development of containerisation
- the ‘backbone’ of the global economy since the 1950s, with around 200 million individual container movements taking place each year, lowering costs of transport is beneficial for businesses and customers
- process is easily mechanised, containers are unload by crane, increasingly automatically. previously it was loaded manually in crates or stacks, much quicker
- dramatically sped up goods trade and reduced costs, making consumer goods cheaper , dramatically lowered the costs of ‘break bulk cargo’ (when products have to be loaded individually) as there is less time spent when products change transport type (e.g. at. dock = more trade = cheaper)
- container ships are so efficient that the transport costs of moving an iPhone or television form china to the uk is less than £1.
- shipping cost reduced as fewer days are wasted queuing at a port waiting to unload, faster transport times increase the distance perishable products can be transported, e.g. cut flowers from Kenya, opening up more distant markets and reducing losses.
explain the technology that has led to globalisation
- telephone and the telegraph
- broadband and fibre optics
- GIS and GPS
- internet
- electronic banking
explain how the telephone and telegraph contribute to globalisation
- core technologies for communicating across distance
- allowed for better global communication
- reduced mobile phone costs expanded usage from an expensive business tool to an essential consumer product
explain how broadband and fibre optics have contributed to globalisation
- since the 1990s, enormous flows of data are converted across the ocean floor through the use of fibre optics
- fibre optic cables has allowed for instant, global communication
explain how GIS and GPS have contributed to globalisation
satellites continuously broadcast position and timer data to users throughout the world, it has become an essential feature fo cars and has led to the success of google maps
explain how the internet has contributed to globalisation
- connects people and places across the globe
- 40% of the world’s population have access to it.
- social media has led to the rapid spread of news, knowledge and opinions
- the development of social media has led to space-time compression were the cost of communicating over distance has fallen rapidly, so people can communicate regardless of distance
- social networks have allowed people to communicate instantly and without charge
explain how electronic banking has contributed to globalisation
the ease of transferring money abroad
- digital economy is worth $1.5 trillion
- investment, links between other countries
- in real areas, fishermen and farmer use mobiles to check market parties before selling produce
- e banking allows migrants to transmit remittance sos money back to their own home countries
explain the work of the world bank
it has the role of lending money and giving grants to the developing world to fund economic development and reduce poverty.
- most of the world bank’s funds come from the world’s financial markets by selling world bank bonds to investors
- it has 189 member countries who share ownership, the US has a controlling voting interest
- they encourage free trade by removing legal restrictions and capital controls along with adopting structural adjustment programmes to reduce government budget deficits.
it involves government spending cuts, privatisation of state-owned firms and opening up to foreign competition
- since 1947, they have funded over 12,000 projects
- the WB provides low-interest loans, interest-free credit and grants. it focuses on improving education, health and infrastructure
- 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.
explain the work of the IMF
- aims to maintain a stable international financial system and this promotes frees trade and globalisation
-their funds come from quota subscriptions paid by member states and loans. quotas are pooled funds of member nations and the size of a member’s quotes depends on its economic and financial importance in the world - it is made up of 189 member countries
- since 1945 the IMF has worked to promote global economic and financial stability and encouraging more open economies, and encourage more open economies through trade liberalisation programmes and opening up to FDI
- as of January 2012, the largest borrowers from the IMF in order were Greece, Portugal, Ireland, Romania and Ukraine)
- the IMF has been criticised for promoting a ‘western’ model of economic development that works in the interests of developed countries and their TNCS
what is a quota?
an amount of stock that is agreed that can be brought into a country in a set time period
what is protectionism?
high level of quotas, import/export tax, tariffs, protect American trade
- is a way for a country to try protect itself from foreign companies investing in their company
what is a trade surplus?
when you make more money on the exports that you spend on your imported good
explain NAFTA
- its aim is to allow free trade between countries
- it is made up of 3 countries: USA, Canada and Mexico
- it has allowed for free flow of goods and encourage migration between countries
- the issues it faces are that USA is the dominant country which can cause conflict and trump wants a wall
wha tare two examples of trade blocs?
the EU
ASEAN
what have international political and economic organisations contributed to?
they have contributed to globalisation through the promotion of free trade policies and FDI. these include: the WB, IMF and WTO
what do trade blocs enable?
- if a foreign firm is located abroad, for exporting you will have to pay tax, as seen by apple when delivering to the UK
- the higher the export tax, the less investors
- trade blocs aims to remove these barriers between countries involved
- the very nature of trade is orchestrated to disadvantage poor countries (frank’s dependency theory)
What is foreign direct investment
when company owns another company in a different company
Name the 4 types of FDI
-offshoring -> hiring external organization -perform some business functions - usually countries with lower labour cost
-foreign mergers -> 2 firms in diff countries join forces -> single entity
-foreign acquisitions- when TNC launches takeover of company in another country
-transfer pricing -> putting profits in terriorties where tax rates - more favourable
What is a tariff
taxes paid when importing/ exporting goods
what are special economic zones?
enclaves where investors recieve special tax, tariff ®ulatory incentives to attract foreign TNCs.
explain special economic zones
- SEZs -> clustering of TNC’s -> agglomeration -> trickle down effect, benefitting the area.
- SEZs are used by some countries to attract FDI, spreading globalisation to new regions
- Successful SEZs need good infrastructure, close proximity to trade routes or emerging markets
- they are tariff and quota free, allowing manufactured goods to be exported at no cost
- Taxes are usually very low, and often there is a tax-free period of up to 10 years, after a business invests.
What is outsourcing
when TNC’s contract another company to produce goods, services rather than doing it themsleves
What are TNC’s
businesses whose operations are spread across the world
Explain cultural globalisation
unifying and diversifying a place
-people using increasingly similar: food, clothes, music, values
- many of which are ‘western’ in origin (maccies) (from North America and Europe)
Explain characteristics of political globalisation
growth of trading blocs (EU, NAFTA) -> allows TNC’s to merge and make firms in neighbouring countries
Have the WTO been successful in trade liberalisation (something that involves countries lowering import taxes)
-wto have failed to stpo worlds richest countries (USA, UK) assisting their own food producers
-harmful to farmers in developing countries who want to trade on a level playing field
Name the 3 government policies that allow TNC’s to grow in size and influence
-free-market liberalisation
-privatisation
-encouraging business-start-ups
How do you calculate a country’s globalisation score using the KOF index
collect data relating to :
economic globalisation (trade & FDI)
political globalisation (no. of foreign embassies, peace-keeping missions)
social, cultural globalisation (imports, exports of books, houses with tvs)
