Globalisation Flashcards
what is globalisation ?
it involves widening and deepening global connections, interdependence and flows through commodities, capital, information, migrants and tourism
what is glocalisation?
adapting your product to meet the demand of your local market
what are the 4 stems of globalisation?
economic
social
political
cultural
explain economic globalisation
- the growth of TNCs accelerates cross-border exchanges of raw materials, components and shares
- ICT supports the growth of complex spatial divisions of labour for firms and a more international economy
- online purchasing using amazon on a smartphone
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
explain the interdependence that is brought through globalisation
- this means that the success of one place depends on the success of other places
- economic problems in one country can quickly spread to its trading partner and quickly affect people in distant places, e.g. the German DAX (stock market) lost 1.2% within minutes after the 2011 tsunami
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 flow of information in globalisation
- goes to the cloud
- real time communication
- buying at the click of a button
- information exchange and access 24/7 via the internet
explain the flow of capital in globalisation
- money, global capital flows through global stock markets
- companies buy and sell currency to make a profit
- these companies can be investment banks or TNCs
- moves in a data sense, fibre optics
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.
what does modern globalisation involve?
- a lengthening of connections between people and places
- a deepening of connections with the sense of being connected to other people and places penetrating into almost every aspect of life
- faster connections, talk to people in real time, using new technologies, travelling quicker
what are the developments in transport and trade in the 19th century?
- railways
- telegraph
- steam ships
what are the developments in transport and trade in the 20th century?
- jet aircraft
- containerisation
explain the development of railways
- in the 1800s, railway networks expanded globally, today railway buildings remain a priority for governments across the world
explain the development of telegraph
- first telegraph cables were laid across the Atlantic in 1860s which allowed for almost instantaneous communication and revolutionised how businesses operate
- the transatlantic telegraph cable in the 1960’s replaced a 3 week boat journey with instant morse code nmessages
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 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
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
explain the work of the world trade organisation (WTO)
- an international organisation that works to reduce trade barriers (both tariff and non-tariff) and creating free trade leading to an increased movement of goods and increased interdependency
- their funds come from the WTO’s regular budget, voluntary contributions from WTO members and cost-sharing either by countries involved in an even tor by international organisations
- the WTO has 164 members. in addition to states, the EU and each EU country in its own right, is a member. members that have joined after rate original members were the result of negotiation
- a series of global agreements have gradually reduced trade barriers and increased free trade, latest round of talks in 2001 in Doha are seeking to reduce tariff on agricultural products
- since the creation of the WTO, the world has experienced a significant increase in trade volumes and both the stock and flows of FDI have expanded considerable at the same time
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
what is trade excess?
when you make more money on importing than exporting
explain the EU
- composed of 28 members
- they aim to a political and economic organisation and it operates a distinct political entity with its own parliament and laws
- it is the largest free trade bloc in the world today
- holds 500 million people and 20% of global GDP
- the issues it faces are: the euro not being used in all countries, migration and open borders, brexit
- it guarantees the free movement of goods, capital and people
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
what does economic liberalisation lead to?
it causes a natural movement if people, which will inevitably lead to a further increase in migration leading to cultural diffusion
what is ghettoisation?
when large groups of people from similar backgrounds (e.g. ethnicity, religion, race) locate next to each other
what will happen from an increase in migration?
it will lead to cultural diffusion and cultural enrichment as it means that the local council can cater to the needs of the population
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)
explain the work of ASEAN
- a free trade area with 10 members with a population of 625 million
- association of south East Asian countries
- encourages free trade between countries and encourages FDI
- china is an affiliated member of this trade bloc, they didn’t want to damage their economic power, they negotiated a deal in order to get preferential conditions, benefit rom cheap china exports
- ASEAN pledged to remin nucelar weapons free in 1995
- it has allowed the movement of skilled workers
- one may question the success as 80% of trade happens outside of ASEAN countries
what are the advantages of a trade bloc membership?
1) bigger markets (but no extra cost)- uk companies like Tesco have benefitted by expanding into other EU countries and sourcing their good at the best price from within the 28 member states
2) national firms can merge to form TNCS- TNCs can compete globally but they need large domestic markets to generate economies of scale. increased sales leads to lower relative production costs and so higher profits and consequent investment. Vodafone became the world’s largest mobile telecommunications company in 2000 by merging with Germany’s mannesmann.
3) protection from foreign competitors and political stability- in 2007 the EU blocked £50 million of Chinese-made clothes from entering the UK because the annual quota had already been filled. the idea is to limit the import of cheap goods to protect domestic manufacturers, this brings trade blocs political stability
what are the disadvantages of trade bloc membership?
1) los of sovereignty- a trading bloc is likely to lead to some loss of sovereignty (the ability for Govs to make their own decisions). the EU not only deals with trade but also with human rights, greenhouse gases and consumer protection
2) interdependence- because trading blocs increase trade among participating countries, the countries become increasingly dependant on one another. a disruption of trade within a trading bloc may have severe consequences for thee economies of all participating countries.
3) compromise and concession- countries entering a trade bloc must allow foreign firms to gain domestic market share, sometimes at the expense of the local companies. they do this in the expectation that their co summers will benefit from better products and keener prices, as well as in the hike that their firms will expand abroad.
4) cultural erosion- cheap uniform products across the bloc replace more expensive local variants
explain the liberalisation of the UK’s economy
- British gov have liberalised their economy leading tp a large increase in FDI
- this has led to our dependency on china for a lot of funding that occurs, they have invested a lot in our nation, including in carry wharf
- they are making part-shares into UK companies, we are a poor nation
- it has led to a lot of leakages happening in the UK
- Chinese and Qatar’s SWFs own much of Canary Wharf
- china has made an £800 million investment in the airport city Manchester airport
what is a trade bloc?
it is a group of countries that agree to reduce trade barriers between them. they promote free trade between members, increasing economic globalisation
what are the economic effects of globalisation?
- it allows economic specialisation where the outcry focusses on production of certain goods/services it can produce most efficiently, lowering production costs
- globalisation reduces self-sufficiency and increases interdependence- mutual reliance on inputs from other countries
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 which have a competitive advantage and trade these products for other members’ specialisms
- firms producing a country’s specialisation become TNCs as they sell outputs through the bloc
explain free market liberalisation
- this involves promoting free markets and reduces government intervention in the economy
- competition between firms leads to innovation and lowest cost production
- It means ending the monopoly provision of some services like telephones, broadband, gas and electricity, so you can choose your supplier based on quality and price.
- It has created competition in once restricted markets.
- Foreign competition can be encouraged by removing legal restrictions on foreign ownership and removing capital controls, allowing inflows of FDI (and outflows)
explain privatisation
- this is where state-owned companies are now privately owned, allowing companies to take over important national services such as railways
- Since the 1980s many governments have sold of industries they once owned (so-called ‘nationalised industries)
- In the UK the steel, car, electricity, gas and water industries were all state-owned but are now privately owned
- However, many governments still own big slices of industry, even in big countries like France.
- It may increase efficiency as the profit motive minimises loss (government reluctant to sack workers, leading to higher labour costs)
- Permitting foreign ownership allows an injection of foreign capital through FDI, introduces new technologies and promotes globalisation.
explain the encouragement of business start-ups
- encourages people to set up business by offering financial incentives, especially in areas that are seen to be globally important growth areas such as ICT development, pharmaceuticals or renewable energy.
- gov.uk website provides info and guidance
- regional grants to economically-disadvantaged areas especially with unemployment
- volunteer mentors
- tax reliefs
- it creates innovation and competition in new production techniques, erodes excess profit of monopolies, lowers prices and increases household PP.
what are the advantages of privatisation?
- large amounts of FDI coming in, china have invested lots of money in UK projects and businesses, benefits the economy thus leading to an improvement in services
- it may increase efficiency as the profit motive minimises loss
- through the sales of industries to foreign countries it has led to the flow of people into the UK, increased cultural diffusion, cultural globalisation, westernisation happening in home country
what are the advantages of free market liberalisation?
- lifting restrictions on the way banks and companies operate has led to increased competition in once restricted markets, thus benefitting the economy’s FDI
- it means ending the monopoly provision of services like telephones, gas and electricity, leading to the ability for customers to choose their suppliers based on quality and price, more reasonable prices
- foreign competition can be encourager by removing legal restrictions on foreign ownership and removing capital controls, allowing inflows and outflows of FDI, globalisation
- competition between firms leads to innovation and lower cost production, promotes globalisation
what are the advantages of encouraging business start ups?
- where legal restrictions on foreign ownership and capital controls are also removed, foreign new businesses will be attracted to start-ups, promoting globalisation
- the increased amount of businesses through the gov’s incentives has led to a boost in the economy, attractive areas are created, improved QOL
- it creates innovation and competition in new production technologies, erodes excess profit of monopolies, lowers prices and increases household PP, more spending on local services
- through the help and aid given to business start-ups it will attract many people to become entrepreneurs, escape from poverty and therefore aesthetic appeal of areas improved, improved motivation and less reliant on benefit schemes
what is FDI?
a financial injection made by a business into another country’s economy, either to build new facilities or to acquire or merge with a firm already based there
why would a government want to encourage FDI?
- increased economic and cultural globalisation
- regenerate derelict areas facing counter-urbanisation
- increased flow of ideas, cultural diffusion, glocalisation
- investments in projected allows for areas like the north to become more accessible (HS2)
what are the different types fo FDI?
horizontal FDI- investments in businesses like those the investing company runs. for example, Starbucks opening a new outlet in a foreign country.
vertical FDI- refers to any investments into businesses that fit somewhere in the investing company’s value chain, e.g. BMW investing in a parts manfuacturer in Poland
conglomerate FDI- investments in business unrelating to the investing company’s core business, e.g. a real estate company opening a restaurant chsim
how have attitudes towards FDI changed?
- during the 1950s, 60s and 70s many people were against FDI and saw it as exploitative (paying low prices for resources, low wages to workers, demanding low taxes and polluting the environment.)
- by the 1980s, attitudes towards FDI changed, Instead they viewed FDI as positive, creating new jobs, better paying than the existing alternative (e.g. subsistence farming) with reliable wages and better working conditions, which introduced new technology and were reliable tax contributors.
what are special economic zones?
an industrial area, near a coastline where favourable conditions are created to attract foreign TNCs. they are focused on a particular industry. these conditions include low tax rates and exemption from tariffs and export duties.
explain special economic zones
- SEZs leading to the clustering of TNC’s leading to agglomeration, this then leads to the 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, minimum bureaucracy and rule of law (contract security, minimal corruption, freedom from crime and violence.)
- 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.
explain china’s open door policy
- it was created in 1978 after the death of Chairman Mao
- rural farmers were given land could run it for profit
- there was a huge surge of rural to urban migration (300 million people)
- exports soared from $2 billion in 1980 to $200 billion in 2000
- SEZs were created and by the 90s, 50% of FDP was created in them
- by 2006, China was receiving $60 billion in FDI per year
- cheap rural migrant workers created the ‘workshop of the world’
explain china’s ‘open door’ approach to global flows
- FDI from china and its TNCs is predicted to total US$1.25 trillion between 2015 and 2025 (of this, over $100 billion is for the UK)
- china agreed to export ‘more rare earths’ minerals to other countries in line with a WTO ruling
- foreign TNCs are allowed to invest in some sectors of China’s domestic markets, including its rail freight and chemical industries
explain china’s ‘closed door’ approach to global flows
- google and facebook have little or no access to china’s market (instead, Chinese companies like Youku provide social network services)
- china’s government sets a strict quota of only 34 foreign films to be screened in the cinema each year
- there are strict controls on foreign TNCs in some sectors, China’s government blocked Coca-Cola’s acquisition of Huiyan Juice in 2008
what are government subsidies?
they are grants given by governments to increase the profitability of key industries
explain government subsidies
- Govs may provide subsidies to attract FDI, e.g. a subsidy to cover relocation costs, payment per worker, etc.
- WTO usually prohibits subsidies to domestic firms as this acts as a trade barrier- the government payment allows a firm to accept a lower market price, undercutting the 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?
- it causes an increase in the amount of consumption and increases output, this in turn results in the business’ profits going up through the economic boost
- it prevents the long-term decline of industries such as fishing and farming. this sustains the culture these industries bring to areas, the increased competition implements risks to the smaller industries
- it can be used in order to reduce unemployment in an area by investing into the creation of new jobs. this in turn will benefit the economy through the reduced amount of sink estates
what are the 3 negatives of government subsidies?
- it is very expensive, the government would have to raise a significant amount of tax revenue
- there is an argument that when a firm receives subsidies, it reduces incentives for firms to cut costs. so it is argued that firms should only be given subsidies if there is a clear social benefit, e.g. developing an environmentally friendly technology
- difficult to measure success when they receive subsidies, hard to see whether the subsidies have positively affected to area to make an informed decision about their future implementation
how can you measure globalisation?
the degree of globalisation can be measured using indicators and indices
an indicator is a measure of an individual aspect of globalisation, for example the amount of FDI
an indice may be composite indicators, combining several indicators
- each component indicator is expressed as a percentage
KOF index
A.T Kearney index
explain the KOF index
- produced annually by the Swiss Institute for business cycle research
- its a composite index which combines 24 indicators spread across three categories: 1) economic globalisation (FDI figures)
2) social globalisation (tourist flows)
3) political globalisation (trade and agreements) - you use the 24 variables and give it a score out of 100, comparing the new scores with previous scores dating back to 1970
- it shows the economic globalisation has risen faster than political or social globalisation
- in 2016, the Netherlands and Ireland topped the list
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
- produced annually by the AT Kearney management consulting firm
- it uses 12 indicators across 4 categories:
1) economic integration (trade and FDI flows)
2) technological connectivity (no. of internet users)
3) political engagement (level of aid, international organisations)
4) personal contact (tourism, remittances) - index value calculated for each inductor based on its relative position on the scale with highest value scoring 1.0 and lowest 0
- FDI, internet usage and international traffic telephone weighted double
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
what are TNCs known as?
the architects of globalisation
how is the growth in size and number of TNCs been encouraged?
by the creation of trade blocs, removing international barriers, changing government policies to encourage economic liberalisation, including removing capital control and legal restrictions and creating SEZs
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 (natural resource curse, commodity cycle) and so cannot 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 political reasons why countries are switched off
- Govs have complete control over the country and do not allow movement into or out of the country (N Korea) they do not want to encourage capitalist views
- unstable governments (fight due to different groups) as a consequence of Neo colonialism, e.g. the Sahel region, this is when you give back countries independence partly because we didn’t have the money to subsidise, when the UK colonised indigenous tribes they broke up and separated them, this leads to the lack of TNC investment and reliance on NGO’s for aid
- lack of investment by governments in infrastructure
- corruption (Zimbabwe under Mugabe)/ organised crime (drug groups organised by the gov)/ terroism
- excluded from trade blocs (North Korea due to human rights, African countries’ ‘African Union’ isn’t good) / not allowed to trade fairly/ disadvantaged in trade
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
explain the role of TNC’s in globalisation of: outsourcing
- this is the process where a firm contracts with another company to obtain goods or services from it
- outsourcing is more flexible than offshoring as the TNC can quickly shift supplier if a cheaper source becomes available
- apple outsourcing to Foxconn, very poor conditions
- outsourcing leads to the production of global production networks and reduces costs for the firm, allowed through economic liberalisation
explain the role of TNC’s in globalisation of: offshoring
- this is the process of moving part of a company’s own production process to another country, e.g. building a new factory in china, where wage rates are lower especially to SEZs in asian countries
- made possible fro economic liberalisation, e.g. china
- reduces costs as wage rates as lower, tax rates are lower, less environmental regulation
explain the role of TNC’s in globalisation of: glocalisation
- this is the process of adapting brands and products to suit the local market conditions, such as taste, laws or culture
- some TNCs sell identical ‘authentic’ products in all countries, e.g. Louis Vuitton handbags
explain the role of TNCs in globalisation of: global production markets
- improvements in transport technology
- trade blocs
- economic liberalisation
explain the role of TNCs in globalisation of: investment in new markets
- breaking into the American market, through seeing celebrities used their products, used in series
- free market liberalisation
- opening new outlets in another country increases revenue for TNCs
what are the top 3 TNCs
1) walmart
2) stat grid corporation of china
3) china national petroleum corporation
what are the drawbacks of TNCs
- they have been accused of exploiting workers in developing/emerging world by paying them low wages
- outsourcing jobs can lead to job losses in the home country
- local cultures and traditions can be eroded by TNC brands and western ideas
what is the global shift?
the relocating of the global economic centre of gravity to Asia from europe and North America , over the last 30 years
what encouraged the global shift?
- improvements in transport and communication, plus the lowering of trade barriers and economic liberalisation, opening up to FDI
- labour-intensive manufacturing was attracted to Asia by the large pool of workers willing to work for low wage rates
explain the change in GDP across the world
- the GDP is growing at a faster rate in the east than in the west
- chin has maintained its very high GDP growth rates and Indonesia has seen a very steady growth rate, highlighting the lack of globalisation
- the world’s GDP growth rate saw a large fall in 2009 due to the housing crisis in America, leading to the global financial crisis
explain the global shift
1) service and admin jobs moved mainly to India, such as Bangalore.
- close links to the Uk, speaks English
- 24 hr service, time zones
2) manufacturing jobs went to China
- cheap labour, quicker, transport links, government incentives (SEZ)
- no human rights in china, exploit people
what are the costs and benefits to the global shift in china
benefits
- investment in infrastructure
- reductions in poverty
- increased in urban incomes
- better education and training
costs
- the loss of productive farmland
- an increase in unplanned settlements
- pollution and health issues
- land degradation
explain china’s investments in infrastructure
China has invested heavily in its infrastructure:
• It has the world’s longest highway network
• Its rail systems links ALL provinces and cities
• Its HRS has doubled in length in 10 years linking its major cities
• Shanghai’s Maglev is the fastest commercial train (268mph) taking 8mins from the CBD to the airport
• 82 airports have been built since 2000 (now 250 in total). 8 of the world’s top 12 airports by freight tonnage
explain the reductions in poverty that china has seen
- 300 million Chinese people are now considered to be middle class (pop of the USA!)
- Sales of consumer items have sharply risen – they buy more TVs and Laptops than Americans
- Between 1981 and 2010 the number of people living in poverty reduced by 680 million
- Extreme poverty has reduced from 84% in 1980 to 10% in 2016
- Remittance payments have decreased rural poverty .
explain the better education and training that China has encountered
- Education is free and compulsory in China
- 94% of Chinese over 15 are literate compared to 20% in 1950
- In 2014 7.2 million Chinese graduated from university – 15 times higher than in 2000.
- THIS WAS A PLAN BY THE GOVERNMENT – CREATE AN EDUCATED AND INNOVATIVE WORKFORCE!
- Spending still varies between rural areas (£2200 to £300)
explain the loss of biodiversity in china
- A 2015 survey carried out by the WWF found that China’s vertebrates had declined by 50%.
- The UN has identified the Yellow Sea and South China sea as the most degraded marine areas on earth.
- 36% of forests are facing pressure from urban expansion
explain the increase in urban incomes in china
- Economic growth and slow population growth has led to urban incomes rising as pay has increased.
- Urban incomes have increased by 10% a year since 2005.
- In 2014 the average urban income had risen to $9000 a year.
- The urban workers also receive good terms and conditions – 40hour working week, overtime payments and paid holidays
- There is a big and growing urban / rural divide.
explain the increase in unplanned settlements in china
• Rapid industrialisation and then urbanisation has created a need for more housing resulting in an increase in informal homes.
• An increase in land process has made affordable housing hard to find. As a result two types of illegal housing are now common:
o Expanded housing in villages close to the edge of cities. Villagers add an extra storey to their house and rent it to migrant workers
o Farmland is privately developed for housing without permission
explain land degradation in china
- Over 40% of China’s farmland is now suffering from degradation.
- Industrial emissions are creating acidic soils in the south.
- Land clearance for industry has led to deforestation.
- Over-intensive grazing has created degradation and then desertification
explain the over-exploitation of resources and resource pressure in china
• China has coal, oil and metals such as iron ore but not enough.
• Supply cannot keep up with demand so the Chinese government are having to seek additional resources
o Amazon rainforest cleared for soy production
o Venezuela is being exploited for oil
o Coltan mining in Congo
• This search for additional resources is creating widespread environmental degradation
explain the pollution and health problems encountered in china
- China’s air pollution caused mainly by coal power stations is so bad that many cities have regular pollution alerts
- 70% of China’s rivers and lakes are now polluted. 207 tributaries from the Yangtze are so polluted they cannot be used for irrigation let alone to drink.
- 100 cities suffer from extreme water shortages and 360 million people don’t have access to clean water. Tap water in some areas has 80 out of the 101 forbidden toxins under Chinese law.
- A third of the Chinese population breathes in air that would be considered unhealthy by US or European standards, the outdoor air pollution that china is exposed to has led to just under 300,000 deaths, 20 million cases of respiratory illness and therefore a health cost of around 3% of GDP annually
explain the loss of productive farmland in china
- China’s rapid industrialisation has led to an increasing loss of farmland
- Most farmland is lost due to pollution. 3 million hectares (the size of Belgium) has been polluted by heavy metal.
- Farmland close to rivers has been taken out of action due to the risk of pollution from fertilisers and pesticides
- Rapid urbanisation has created a loss of farm workers which has decreased production
- Overproduction in some areas (Loess plateau) has created desertification and a further loss of productive land.
- Rural farmers are 40% more likely to suffer from liver cancer due to their exposure to heavily polluted land and water.
extra info on china’s infrastructure investments
- China is expected to spend another $19bn USD on the Hong Kong-Zhuhai-Macau brindle which is already 19 miles long, it follows and crosses the Pearl River Estuary, with two artificial islands and submarine tunnels to allow travel underneath the busy shipping route
- China spends more on economic infrastructure annually than North America and Western Europe combined, with an infrastructure spending of $28tn USD predicted for 2040 they show no sign of slowing down
- Studies show that this investment is not wise however and is generating more problems than it is trying to solve, on average there has been a 31% overspend on these infrastructure projects (Saïd Business School)
- Many of the projects have been in vain as there have been major traffic shortfalls after completion, of up to 40%
extra info on the loss of biodiversity in china
- 60% of biodiversity in China has been lost since 1972
- Socioeconomic development in China has led to an uncontrollable urban sprawl which is eating through china’s dive rest forests, especially on the East coast
- In 2011 alone 2140 of species listed in the CITES index were in danger of extinction
- 90% of china’s grasslands and 40% of its wetlands have sustained significant deterioration and the area of undisturbed primary forest has decreased by 50,000km sq. annually
- Estimated economic losses caused by environmental damage range between 4.5-18% of GDP
extra info on pollution and health problems in china
- The pollution occurring in China has had detrimental effects on child development, including reduced foetal and child growth and developmental impairment. A study by the health effects institute found that unhealthy levels of pollution led to roughly 852,000 premature deaths in China in 2017.
- One of the positive action’s china has undertaken in fight against the pollution and health problems is through the banning the selling of leaded gasoline in 2000. Since then, studies are shown that children’s blood levels have decreased significantly, especially in younger children who have had less exposure to atmospheric lead.
- The government only spend 5.5% of their GDP (as of 2014) on health, thus limiting the progression in improving the effectiveness of their aims to improve health
- Much of China’s growth has been powered by coal due to the very low cost however it is highly polluting, with coal still accounting for 59% of china’s energy consumption in 2017
- Beijing’s air pollution is often exacerbated due to weather patterns, topography and the proximity to polluting industries. To the south and east of Beijing is a large concentration of coal-burning industries. Pollutants from factories in these areas are often carried by winds into Beijing and trapped there by mountains in the city’s north and west.
- According to a 2015 report by RAND, health problems and lost labour productivity due to air pollution reached 6.5% of China’s GDP per year between 2000 and 2010.
- A 2018 study from the Chinese university of Hong Kong estimates that the equivalent of $38 billion of revenue is lost yearly due to early deaths and lost food production as a result of air pollution.
