globalisation Flashcards
What is globalisation?
The widening and deepening global connections, interdependence and flows (commodities, capital, information, migrants and tourists
What are the most important global flows?
a
Capital, commodities, information, tourists, migrants
What is the shrinking world effect?
Whilst the physical distances between places remain unchanged, developments in technology and transport makes places feel closer than in the past
What are some of the important innovations in transport contributing to a shrinking world effect?
Steam power (1800s)
Railways (1800s)
Jet aircraft (Boeing 747 in 1960s)
Container shipping (around 200 mil individual container movements take place every year - intermodal containers)
What is the IMF’s role in globalisation?
a
It loans from rich nations to countries that apply for help, but in return the recipients must agree to run free market economies that are open to outside investment
What is the World Bank’s role in globalisation?
a
It lends money on a global scale and gives direct grants to developing countries
What is the WTO’s role in globalisation?
It advocates trade liberalisation, and asks countries to abandon protectionist attitudes in favour of untaxed trade
What are the different types of FDI?
a
Offshoring - TNCs build own production facilities in low wage economies
Foreign mergers - two firms in different countries join forces to create a single entity
Foreign acquisitions - TNC launches takeover of a company in another countries
Transfer pricing - TNCs have channelled profits through a subsidiary company in low tax country
How are national governments key players in globalisation?
They promote free trade blocs and key policies (free market liberalisation, privatisation, encouraging business start ups)
What is free market liberalisation?
Governance model which follows 2 beliefs:
- government intervention in markets impedes economic development
- overall wealth increase, trickle down takes place from richest to poorest in society
What is privatisation?
Allowing foreign investors to gain a stake in privatised national services and infrastructure to help fund it
What are trade blocs?
Voluntary international organisations that exist for trading purposes, bringing greater economic strength and security to the nations who join
Markets for firms grow through the removal of barriers to intra-community trade, enlarged market increases demand (meaning products can be sold more cheaply), smaller national firms within bloc can merge to form TNCs
What is the EU?
EU
Formed in 1993.
27 member single market trade bloc, with a single currency (the Euro) adopted by 19 members.
Guarantees the free movement of goods, capital and people
ASEAN?
Established in 1967, ASEAN has 10 member states.
Uniform low tariff is applied between members for specified goods, and the agreement promotes peace and stability (members have pledged not to have nuclear weapons)
What are SEZs?
Special Economic Zones - an industrial area, often near a coastline, where favourable conditions are created to attract foreign TNCs
How is globalisation in China successful?
Radical ‘Open Door’ allowed China to embrace globalisation whilst remaining under one party authoritarian rule. It gave China the nickname the ‘workshop of the world’ due to the world’s largest TNCs finally being let in to establish factories etc.
FDI from China and its TNCs predicted to total $1.25 trillion between 2015-2025
China is now part of WTO
400 million said to have escaped poverty
Life expectancy reduced by 5 years due to air pollution in cities - worst in the world
Strict controls on foreign TNCs in some sectors
Google and Facebook have little to no access to China’s market
What is outsourcing?
When TNCs contract another company to produce the goods and services they need rather than do it themselves
KOF index, A.T. Kearney Index
24 indicators spread over 3 categories - political, economic and social globalisation. Each indicator converted to index value, then data is analysed before comparing the new scores with previous ones dating back to 1970
Only measures international interactions (not internal) and does not include recent technological developments. Some cultural bias
12 indicators spread across 4 categories - political engagement, technological connectivity, personal contact, economic integration - complex points and weighting system.
Uses more holistic indicators than KOF
Only includes 62 countries, heavy weighting given to ICT allows USA to gain high index score despite low political engagement
How is North Korea a ‘switched-off’ place?
Ruled as an autocracy, chosen deliberately to remain politically isolated from rest of the world.
Ordinary citizens have no internet acess, no undersea data cables connecting North Korea with anywhere else
As a result, North Korea has relatively low GDP and development especially as it only trades with China
What is glocalisation?
Changing the design of products to meet local tastes or laws (common strategy used by TNCs)
driving seat positioned differently in US and UK
reality tv shows are re-filmed using local people in different countries
certain foods made specfically for different countries
How is the Sahel region a ‘switched off’ place?
Economic - low income levels mean it lacks market size to attract FDI, low literacy rates makes it unattractive for offshoring
Physical - all Sahel countries are landlocked resulting in high transport costs which defers FDI
Environmental - semi arid climate becoming drier due to climate change, reducing land area available for agriculture
What is the ‘global shift’?
The global shift is the relocating of the global economic centre of gravity to Asia from Europe and North America, over the last 30 years
Why has there been a global shift?
It has been driven by improvements in transport and communications, plus the lowering of trade barriers and economic liberalisation, opening up to FDI. Labour-intensive manufacturing was attracted to Asia by the large amounts of workers willing to work for low wage rates
Why have US and UK businesses outsourced so much work to India?
Many Indians are fluent English speakers, giving them a comparative advantage for call centre services
Broadband capacity is unusually high in the city of Bangladore, it is a long established technology hub
some business process workers report they are exploited
work can be high repetitive
huge gap between rich and poor (80 million living in extreme poverty)
indian call centre workers earn good middle class wages by Indian standards
Indian outsourcing companies have become extremely profitable
global outsourcing of manufacturing to China?
in early years, many workers exploited in sweatshops
environment continues to suffer greatly, air pollution reduces Chinese life expectancy by 5 years
people enjoying large income gains, can afford smartphones and car ownerships grown to 1 in 5
trasnfer of technology, meaning local compaines have adopted tech and management techniques brought to China by TNCs
What are some examples of environmental challenges for communities in developing countries as a result of global shift?
Ivory Coast - tens of thousands of Ivorians suffered ill health after toxic waste alleged to produce hydrogen sulphide dumped by ship in employ of Dutch TNC Trafigura in 2006
Indonesia - deforestation of 13 million hectares of rainforest due to demand for palm oil plantations, biodiversity suffers as a result