Globalisation Flashcards
globalisation definition
the process of the worlds economies, political systems and cultures becoming more strongly connected to each other
if there was no globalisation there would be no interaction between countries and if there was complete globalisation the world would act like a single country
dimensions of globalisation
flows of information
- information can be spread across the world very quickly
- rapid spread of email, internet and social media mean large amounts of info can be exchanged instantly across the globe, this allows people living in different countries to communicate and work together
- increasing flows of information are making the world more interconnected, e.g. people can learn a lot about different countries and cultures without leaving their own country
dimensions of globalisation
flows of capital
capital: money invested, spent to produce an income or increased profit
- historically capital was mostly invested within a country e.g. companies expanding by building new factories or branches in their country of origin
- over time amount of capital invested in to foreign countries has increased: foreign direct investment
- improvements in ICT have encouraged flows of capital around the world, it can instantly be moved around the world via the internet
- increasing flows of capital are making the world more interconnected e.g. most economies are now dependent on flows of investment to or from other countries
dimensions of globalisation
flows of products
- historically manufacturing industries located in more developed countries and the products were being sold in the countries where they were made
- recently manufacturing decreased in more developed countries
- lower labour costs overseas have caused many companies to relocate the production side of their business abroad, they then import products to the countries where they’re sold e.g. apple produce in china
- as a result international trade in manufactured goods is increasing
- changing flows of products is making the world more interconnected e.g. many of the manufactured products products bought in the uk have been produced in other countries and then imported
dimensions of globalisation
flows of services
services are economic activities that aren’t based around producing any material goods, e.g. banking
- improvements in ict have allowed services to become global industries in recent decades. things like banking and insurance depend on communication and transfer of information. improvements in ict mean thats services can locate anywhere in the world and still be able to serve the needs of customers anywhere else in the world
- during 70s and 80s there was also deregulation and opening up of national financial markets to the rest of the world e.g. in the uk and the usa which means it was made easier for banks and and other financial institutions to do business in other countries
- services can be split in to low level e.g. customer service and high level e.g. banking financial services. high level services tend to be concentrated in cities in more developed countries, companies are increasingly relocating low level services to less developed countries where labour is cheaper
- increasing flows of services are making the world more interconnected e.g. people are connected to other countries just through having a bank account
dimensions of globalisation
flows of labour
flows of labour are movements of people who participate in the workforce from one country to another
-more people are moving overseas because they have to or choose to for work
-some migrants are highly skilled workers moving to developed countries where wages and working conditions are better. others are unskilled workers who move to more developed countries to look for work because of unemployment or poor wages in the own countries
increasing flows of people between different countries are making the world more interconnected e.g. people bring aspects of their culture with them and countries are connected because people have family all over the world
global marketing
marking is the process of promoting and selling products or services
now, many products and services are sold all over the world rather than just where they are produced, this means marketing has had to become global
global marketing involves treating the world as one single market and using on single marketing strategy to advertise a product to customers all over the world
global marketing gives economies of scale: it is cheaper to have one marketing campaign for the whole world rather than having a different campaign for every country
global marketing can create global brand awareness, customers around the world identify a name or logo with a particular product or service so they will purchase that product rather than a lesser known competitor
marketing needs to be adapted to regional markets: different populations have different laws and cultural attitudes e.g. about consuming alcohol
factors in globalisation
technologies, systems and relationships
development of new systems, technology and relationships in a range of sectors including finance, transport and and management have been the driving force behind globalisation
-systems: include ways of working, procedures and methods of organisation that allow a particular function to be carried out e.g. ‘just in time’ manufacturing system is a way of making products in response to the demand for them. since 1940’s many new systems have been introduced to make it easier for flows of info, capital, products, services and labour to cross national boundaries
-technology: used for info, communications, and transport has advanced rapidly e.g. internet allows access to information and aeroplanes allow goods and people to be transported around the world swiftly and efficiently
before the second world war most relationships involved one country losing and one country benefiting but nowadays relationships are based on trade and common rules; these allow everyone to gain
factors in globalisation
financial systems
the global financial system governs the flows of capital between countries
financial systems are based on companies called investment banks, the main role of investment banks is to help companies raise capital by selling shares on behalf of those companies. people or groups who buy shares are called investors and they receive a fraction of the profits that the company makes
in the 1980’s several things happened to make the financial system more global:
-information technology: investors and investment banks could easily find out whether a company was doing well or struggling and make an informed decision about whether to invest
-investment banks created new financial products that made foreign direct investment less risky
-governments around the world undertook financial deregulation where they relaxed rules about what banks allowed to do, included allowing banks to charge people more for their services as well as letting banks invest in a greater number of businesses
-financial deregulation also involved removing barriers to capital coming in and out a country, making it easier for banks to buy and sell shares
-led to a greater range of countries getting involved in finance
today investors and banks and other companies all over the world are part of the global financial system, the decisions of banks or investors in one part of the world can affect a company on the other side of the world
factors in globalisation
trade agreements
trade agreements remove barriers to trade
the global trade system governs the flows of products between countries
-trade is primarily regulated by countries governments who control which products they let into the country and at what price, controls include tariffs (taxes), non tariff barriers (quality controls) and the banning of certain products e.g. drugs
-controls make it more expensive for companies to sell their products abroad as well as for consumers to buy them
-to make it cheaper countries can enter into a trade agreement: one country agrees to remove controls in exchange for another country doing so = bilateral trade agreements
-multilateral trade agreements: trade agreements between several countries, all countries involved agree to remove tariffs and other controls
-world trade system governed by WTO which sets rules on how countries can trade with each other and acts as a forum for negotiation and to settle trade disputes
factors in globalisation
transport and communications systems
- improved transport allowed people and products to get round the world more easily
- uniform metal containers made it easier for goods to be transported more quickly and cheaply
- communication satellites allow cheaper communication which means companies based in rural/remote areas can access internet and communicate
- optic fibre cables allow fast communication
- last 20 years significant growth in software that allows free communication
factors in globalisation
management and information systems
increased companies efficiency:
- supply chains become global which allows companies to minimise cost
- large companies benefit from economies of scale; purchase specialised equipment and use production lines and buy material in bulk which gives big companies an advantage over smaller companies
- outsourcing to save costs
- working practices changed, e.g. casual and temporary contracts save money
factors in globalisation
security
- by forming trade agreements countries become interdependent, if two countries need each other to buy and sell their products it would not be in their interest to be at war with each other which means trade war is less likely
- by working together countries are able to improve security e.g. north atlantic treaty organisation founded in 1949 with the aim of providing security after the cold war, by grouping together they were able to deter common threats
- globalisation can make a conflict more likely: e.g. developed countries have in conflicts in developing countries to secure resources like oil
globalisation causes interdependence
they rely on each other
interdependence creates inequality between countries and people within the same country, tends to bring more benefits to developed countries than less developed
because the flows of people, money, ideas and technology and unequal
interdependence
economic
countries rely on each other for economic growth, consumers rely on producers to sell, producers rely on money for consumers
interdependence
political
countries dependent on each other to solve issues that cannot be addressed by just one country e.g. european migrant crisis
interdependence
social
greater connections between people living in different countries creates social interdependence between countries
interdependence
environmental
every country in the world is dependent on others to look after the environment
benefits and inequalities
unequal flows of people
people move from places with less jobs to more jobs
people leave countries to escape war (refugees) to the nearest safe country
people who move for economic reasons are usually not the poorest and have some level of skill
it is easier for people from developed countries than less developed countries to migrate
flows of people create economic growth because igrants do jobs that the countries citizens cant or dont want to do
migrants send money back to their home countries: remittance which can significantly increase economic growth in less developed countries
unequal flows of people can also create problems:
-inequalities: ‘brain drain’ when skilled people leave less developed countries which increases inequalities
-conflict: migrants happy to work for less money so companies depress wages for local population which can cause conflict between local population and migrants
-injustice: migrant workers made to work in dangerous conditions for little money
benefits and inequalities
unequal flows of money
flows of money can include remittances, foreign aid, fdi and income from trade
more often flows from developed to less developed countries, less developed countries rarely have the money required to invest in other countries
flows of money can bring benefits: fdi allows companie to take advantage of cheap raw materials and low labour costs while the host country benefits from the money and can be used to improve living standards and infrastructure
negative impacts:
-inequalities: foreign aid can create dependency and force out local businesses
-conflict: foreign aid can find its way to armed groups and help fund conflict, also conflict between companies and local people
-injustice: companies pressure govs of less developed to make it cheaper to trade there
benefits and inequalities
ideas
ideas about how the world works are dominated by developed countries
before 1980 most govs took responsibility for providing welfare for their citizens and controlling imports
however in the 80s many developed countries began to think the world would work better without state intervention, max economic growth only occur if trade barriers were removed, state owned companies privatised and gov spending cut: neo liberalism
increased free trade which led to move development and less conflict in some countries
negatives:
-inequalities: tends to concentrate wealth in the hands of a few
-conflict: developed countries may believe intervention is justified to save free trade which may cause conflict
-injustice: govs and tncs argue free trade and privatisation are best way for a country to develop which justifies poor working conditions and environmental degradation
benefits and inequalities
technology
flows from developed to less developed
concentration of technology lead to rapid innovation
negatives
-inequalities: developed countries afford latest technology whereas less developed cant, better technology=make good more cheaply and access info and services which gives developed countries an advantage
-conflict and injustice: repressive govs of less developed countries used weapons technology sold to them by developed countries to stop protests from their own peole
globalisation makes some countries more powerful than others
unequal flows of money, ideas and technology have created unequal power relations between countries with some having much more power than others
developed/emerging have a lot of control over the global economy and political events
less developed lack money and technology and have less power and are only able to respond to events:
-eg. power relations and climate change
biggest contributors=richest and reluctant to agree to limit climate change because they think it may damage economy through loss of jobs and energy prices
most effected = poorest but find it difficult to influence developed to decrease emissions due to lack of power
global institutions can reinforce unequal power relations
the IMF and world bank govern the global financial system
-imf monitors global economy, advises governments and grants loans
-world bank provides loans to less developed countries for development, money comes from loans from subscription countries
some people think they are reinforcing unequal power relations
-both based in usa and led by developed countries, less developed who are more likely to need loans have less influence
-loans are conditional: e.g. cutting trade regulation
-wto works to reduce trade barriers however many developed countries have kept then, boosting their economy at the expense of the less developed country
features and trends in international trade associated with globalisation
- import and export of goods and services
- increased dramatically since 80s
- developed biggest traders, emerging catching up
- less developed becoming bigger traders but growth is slow
- more countries removing barriers due to formation of trade blocs
- fair trade: supports less developed, increasing
features and trends in investment associated with globalisation
- fdi: when money is spend in another country to generate profit
- fdi investors attracted by size of market, stability of market, resources or access to financial services
- vol of fdi risen
- until 80s developed invested in developed, now investing in emerging and developing
- emerging now invest heavily in less developed
- ethical investment: investing in areas considered socially responsible, growing
global trade rules
set by wto
using tariffs/non tariff barriers to shield from foreign competition: protectionism, free trade is the policy of removing these barriers
wto set up to increase trade and resolve disputes
rules:
-cant give another country special access besides members of their trade bloc
-should promote free trade
-act predictably
-fair competition, no unfair advantages over rivals
trading blocs
associations between different governments the promote and manage trade, remove barriers between members
- many are regional: made it easier to trade between neighbours
- based around specific industries: e.g. oil which aim to standardise prices
- special economic zones (diff rules lower taxes) increase volume of trade with emerging and less developed countries
trading relationships between developed, emerging and less developed countries
- developed: most trade in the world takes place between developed countries, machinery and chemicals, require money and expertise to make
- less developed: trade mainly with emerging and developed, export food, tobacco, crude oil
- emerging: increasingly important, highly educated population growing
differential access to markets
developed countries have greater access than others
access to markets: how easy it is to trade
- access affected by wealth, developed put higher tariffs on good from less developed making it harder for them to access the market. developed have more money to invest so can avoid high tariffs by opening factories in less developed. less developed depend on loans which means removing trade barriers
- access increased by trade blocs
SDT agreements give less developed countries greater access to markets
wto forms special and differential treatment agreements that lets the least developed countries bypass developed countries tariffs which gives them greater market access
e. g. everything but arms agreement
- profits made from sdt agreements allows less developed countries to diversify industries they have
- may have a negative impact on developed countries by allowing cheap imports into the country and regional trade blocs may be more effective