Globalisation EQ1 - Causes and acceleration of globalisation

Question 1

What is globalisation?

Answer 1

The widening and deepening global connections, interdependence and flows (commodities, capital, information, migrants and tourists)

Question 2

Why does modern globalisation differ from the global economy which preceded it?

Answer 2

Due to the longer (products sourced further away), deeper (being connected to other places and people) and faster connections (people able to talk to each other in real time)

Question 3

What is GDP?

Answer 3

Gross domestic product - a measure of the financial value of goods and services produced within a territory

Question 4

What are the most important global flows?

Answer 4

Capital, commodities, information, tourists, migrants

Question 5

What is interdependency?

Answer 5

Two places becoming over reliant on financial and or political connections with one another

Question 6

What is the shrinking world effect?

Answer 6

Whilst the physical distances between places remain unchanged, developments in technology and transport makes places feel closer than in the past

Question 7

What are some of the important innovations in transport contributing to a shrinking world effect?

Answer 7

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)

Question 8

What is spatial division of labour?

Answer 8

The common practice among TNCs of moving low-skilled work abroad or ‘offshore’ to places where labour costs are low

Question 9

What are intermodal containers?

Answer 9

Large capacity storage units which can be transported long distances using multiple types of transport, without the freight being taken out of the container

Question 10

What are some of the important elements of the growth of ICT over time that contribute to time space compression?

Answer 10

Telephone and telegraph (first telegraph cables across Atlantic in 1860s)
Broadband and fibre optics (more than 1.2 million km of flexible undersea cables today)
GIS and GPS (1970s)
Internet and social networks (58% of world’s population using internet)

Question 11

How can global flows be viewed as threats?

Answer 11

• Imports of raw materials and commodities can threaten nation’s own industries
• Migrants can bring cultural change and religious diversity, not always welcomed
• Information can provide citizens with knowledge own government finds threatening

Question 12

What is FDI?

Answer 12

Foreign direct investment - a financial injection made by a TNC into a nation’s economy, either to build new facilities, or to acquire or merge with an existing firm already based there

Question 13

What are the 3 ‘Bretton Woods institutions’?

Answer 13

International Money Fund, World Bank and World Trade Organisation

Question 14

What is the IMF’s role in globalisation?

Answer 14

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

Question 15

What is the World Bank’s role in globalisation?

Answer 15

It lends money on a global scale and gives direct grants to developing countries

Question 16

What is the WTO’s role in globalisation?

Answer 16

It advocates trade liberalisation, and asks countries to abandon protectionist attitudes in favour of untaxed trade

Question 17

How do the Bretton Woods institutions promote free trade and TNCs?

Answer 17

They have created a global legal and economic framework that is suited to free trade and foreign direct investment, allowing TNCs to thrive

Question 18

What are the different types of FDI?

Answer 18

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

Question 19

How are national governments key players in globalisation?

Answer 19

They promote free trade blocs and key policies (free market liberalisation, privatisation, encouraging business start ups)

Question 20

What is free market liberalisation?

Answer 20

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

Question 21

What is privatisation?

Answer 21

Allowing foreign investors to gain a stake in privatised national services and infrastructure to help fund it

Question 22

What does encouraging business start ups involve?

Answer 22

Methods range from low business taxes to changes in law allowing both foreign and local businesses to make more profit

Question 23

What are trade blocs?

Answer 23

Voluntary international organisations that exist for trading purposes, bringing greater economic strength and security to the nations who join

Question 24

What are the benefits of trade blocs?

Answer 24

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

Question 25

What is the EU?

Answer 25

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

Question 26

What is ASEAN?

Answer 26

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)

Question 27

What are SEZs?

Answer 27

Special Economic Zones - an industrial area, often near a coastline, where favourable conditions are created to attract foreign TNCs

Question 28

How did China’s Open Door Policy of 1978 contribute to globalisation?

Answer 28

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.

Question 29

How is globalisation in China successful?

Answer 29

FDI from China and its TNCs predicted to total $1.25 trillion between 2015-2025
China is now part of WTO
800 million said to have escaped poverty

Question 30

What are the drawbacks of globalisation in China?

Answer 30

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

Question 31

What is offshoring?

Answer 31

When TNCs move parts of their own production process to other countries to reduce labour or other costs

Question 32

What is outsourcing?

Answer 32

When TNCs contract another company to produce the goods and services they need rather than do it themselves

Question 33

How does the KOF index measure globalisation?

Answer 33

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

Question 34

What are the cons of the KOF index?

Answer 34

Only measures international interactions (not internal) and does not include recent technological developments. Some cultural bias

Question 35

How does the A.T. Kearney Index measure globalisation?

Answer 35

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

Question 36

What are the cons of the AT Kearney index?

Answer 36

Only includes 62 countries, heavy weighting given to ICT allows USA to gain high index score despite low political engagement

Question 37

What is a global production network?

Answer 37

A chain of connected suppliers of parts and materials that contribute to the manufacturing or assembly of the consumer goods - serves needs of TNC

Question 38

What is glocalisation?

Answer 38

Changing the design of products to meet local tastes or laws (common strategy used by TNCs)

Question 39

What are some examples of glocalisation?

Answer 39

• 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

Question 40

What is a switched off place?

Answer 40

A region or country that still lack any strong flows of trade or investment with other places and economies

Question 41

How is North Korea a ‘switched-off’ place?

Answer 41

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

Question 42

How is the Sahel region a ‘switched off’ place?

Answer 42

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