GS&GG Flashcards
banana republic
country whose economy is dependent on commodities (often leads to politically unstable state)
comparative advantage
when a country specialised in producing only those goods that can be produced efficiently and at the lowest opportunity cost
de-skilling
when traditional skills and crafts may be lost when production technology replaces manpower
domestic monopoly
when single firm controls large proportion of domestic marker (25% or greater) TMT domestic prices kept high as there is less competition
Dutch disease
negative consequences as result of large increases in countries income
fairtrade
value-based organisation aims to tackle injustices of globalised economy
aims to pay farmers a guaranteed minimum price, offer fair terms of trade and make payment of an additional development premium for reinvestment
foreign direct investment
investment made by a company based in one country into a company based in another country
global commons
parts of planet that fall outside national jurisdictions and to which all nations have access
glocalisation
describes product that is developed and distributed globally but adapted to meet local market tastes
international monetary fund
standardises global financial relations and aims to promote global monetary and exchange stability by monitoring the global economy and encouraging the growth of international trade
non-governmental organisation
non-profit organisation created by private organisations or people with no participation or representation by any government
over-specialisation
when focus of production is on only one or two products
lack of flexibility + ability to diversify if the same goods can be produced more cheaply oversees
trade liberalisation
involves removing barriers (tariffs)
trade protectionism
use of barriers (tariffs) to increase price of imports so protect domestic production
World Bank
promotes investment globally + provides loans for countries
World Trade Organisation
global organization that deals with the rules of trade between nations
globalisation
process of opening up world trade and markets to TNCs and an increasingly interconnected world
dimensions of globalisation
flows of information, technology and capital
flows of products and labour
flows of services and global marketing
patterns of production, distribution and consumption
factors in globalisation
new technologies, communications and information systems
global financial systems
transport systems
security
trade agreements
Uganda and global systems
land-locked country in East Africa that lies within the Nile basin
shouldn’t be poor: green, fertile, plenty resources (copper, cobalt) - civil war, corruption, HIV
one third of pop live below national poverty line - global systems worked against interests of Uganda
poverty greatest rural where pop smallholder subsistence farmers - when part of British Empire strongly influenced countries exports and continue to dominate
fish now traditional food staple and most profitable export - trade unsustainable - overfishing - fish factories close and knock-on effect to local economy
installation of cables is cost prohibitive - but ‘Village Phone’ model offers loans to people wishing to start mobile phone business - rapidly growing market - farmers pay to access internet and gain information about price for seeds or information on new farming techniques
China and the internet
internet allows flows and shares of money, ideas and technology
Chinese central government controls what citizens see using two methods:
1. ‘Great Firewall’ censorship - blocks access to foreign websites, filters key words, bandwidth throttling (Google, Facebook)
2. ‘Golder Shield’ domestic surveillance - traditional methods fines, arrests, lawsuits to enforce censorship
Nigeria: negative impacts of a single-product economy
single-product economy (oil & gas 80% national income)
without global trade in oil countries development limited
global demand for oil fuelled Nigeria’s economy but at cost - focus on oil resulted in dramatic decline in traditional industries (agriculture, manufacturing)
rural-urban migration increased - increased rural poverty and overcrowding in cities
as neither technology or skills to exploit oil, major oil companies encouraged to develop - scant regard to local environment and indigenous local people e.g. oil spills common is Niger Delta and land rights of local people abused
high income generated from oil results in Nigerian currency being overvalued making imported consumer goods cheap - results in domestically manufactured goods being too expensive and unable to be exported (Dutch disease)
deindustrialisation consequence drives more people into oil and gas industries exacerbating problem
greater emphasis on exports of oil and gas makes Nigeria less internationally competitive in manufactured foods and increases reliance on imports
international trade
resources unevenly distributed so trade allows access to products that might not be available domestically or better meet specific needs
international trade highly contentious - foreign products bought cheaply but (most costly) domestic seller loses a sale
trade seen as one of main ‘engines’ of economic growth
advantages of international trade
comparative advantage
economies of scale (producing narrower range of goods and services means that a country can produce in higher volumes and at cheaper cost)
purchasing power (increased trade and competition lowers prices and allows consumers to buy more)
fewer domestic monopolies
transfer of technology (lead to design improvements and cost savings)
increased employment
disadvantages of international trade
over-specialisation
‘product dumping’ - exporting at a price that is lower in the foreign market than the price charged domestically
stunted growth/decline of local and emerging economies (new home-grown industries difficult to grow become established when faced with foreign competition where costs lower)
protectionism and tariffs
de-skilling
exploitive and labour-intensive industries - by squeezing cost work conditions compromised and profits maximised)
International Trade - The Umbrella City
China: exported via Silk Road to Asia and then across Europe, gaining popularity within Roman Empire
umbrellas now recognised worldwide
70% world’s umbrellas still made in China
specialisation (all kinds of umbrellas made)
access to domestic and international markets
cheap production costs (low labour costs)
government support
Songxia Umbrella Industrial Park (strengthen competitiveness of local manufacturers and raise rand awareness)
terms of trade
refers to cost of goods that a country has to import, compared with the price at which they can sell the goods they export
trading relationships
HICs import primary products from LICs and turn into manufactured goods for export to world markets - value of product increases as it passes through the hands of HICs
prices of manufactured goods have continually increases over last few decades, whereas prices of primary products fluctuated TMT LICs need to export increased volumes of primary products to purchase manufactured goods required
trading relationships - impacts of metal extraction
in last 20 years, dramatic increase in demand for metal from emerging economies of east Asia
to meet demand, metal supplies developed
trading relationships: Tata Steel, UK
2016, Tata Steel announced to sell UK businesses risking jobs - call for British Government to renationalise steel industry
instead Government said it would work with Tata to find buyer to protect steel jobs
early trade bloc
birth of EU dates back to 1957 when Treaty of Rome created the Common Market
trad blocs
support free trade between member countries without incurring tariffs - countries outside bloc pay additional tariff
opponents of trade blocs argue that by offering unfair advantages to member countries they restrict development of global economy
advantages of largest trade blocs are increased further as any similar trade agreements between LICs are weaker and achieve limited advantages
trading organisations (help encourage trade of different types from different countries - attempt to govern and set rules of trade:)
World Trade Organisation
Organisation for Economic Cooperation and Development (OECD) - global ‘think tank’ for 30 of world’s wealthiest nations
Organisation of Petroleum Exporting Countries (OPEC) - consists 11 states who supply 40% of world’s oil, regulates global oil market to ensure good fair price
G8 - Canada, France, Germany, Italy, Japan, Russia, UK, USA represents 65% world trade and meet annually to discuss economic development - 2005, G8+5formed China, India, Brazil, Mexico, South Africa
G20 - includes all finance leads of G8+5 plus South Korea, Australia, Turkey, Saudi Arabia, Argentina, Indonesia and EU - discuss global economy and methods to encourage economic growth
World Bank - promotes investment and provides loans
International Monetary Fund
An example of a trade bloc and regional governance - the European Union
origins based on simple premise - countries who trade with each other and less likely to be in conflict
European Council (sets political direction and priorities - heads of state or government)
European Commission (implements laws, monitors treaties, day-to-day running)
European Parliament (represents 500 mil citizens and elected by them - adopts laws proposed - shares power over budget and legislation with Council)
Council of European Unions (represents governments of member and promotes/defends national interests)
Member countries (implement laws)
for Greece to stay in EU
imports 50% of food and 80% energy from abroad and benefits being part of European free market
drastically change Greece’s trade balance and might cause bankruptcies and high inflation with an associated huge knock-on social cost
Greece find it very difficult to borrow further and would have to pass on increased living costs to population
against Greece to stay in EU
independent Greece trade more freely and take advantage of its location and geography
free of EU legislation and control, might be able to newly position itself as regional trading hub and gateway into Middle East, Balkans, Russia
national needs might be met in more sustainable and local way
see return of drachma as currency and with it flexibility of exchange rates
imports may become more expensive but in turn spur job growth and economic growth
TNC example
Coca-Cola, Nike
TNC linkages and production
control and coordinate economic activities in different countries and between units of same corporation in more than 1 country
lessen impacts of trade restrictions (quotas) and negotiate more favourable terms of trade
horizontal integration (improves links between different firms in stages of production)
vertical integration (one company owns or controls multiple stages of production)
TNCs favourable for host country
increase employment (raise living standards)
improve levels of skills and expertise
socio-economic multiplier effect - increased purchasing power that leads to demand for consumer goods and further economic growth
encourage transfer of technology into country, e.g. growth of telecommunications
TNCs unfavourable for host country
many jobs low skill in LICs
managerial positions tend to be brought in rather than developed locally
majority of profits sent back to home country
multiplier effects can be negative e.g. environment
investment may only be short-term and TNC may pull out at short notice
TNCs favourable for country of origin
development of higher-order jobs (research, development, management)
overseas investment adds to income for whole nation via tax and multiplier effect
wider share ownership - individuals and companies more willing to become involved in foreign investments
TNCs unfavourable for country of origin
workforce may need to relocate or make increased visits to operations overseas
as result of loopholes, corporation (business) tax is not paid fully by all TNCs
speculative investments in TNCs for quick returns helped contribute to global 2008 financial downturn
reasons for growth of TNCs
cheap labour
mergers and takeovers (allow big businesses to buy out smaller competitors or increase their market share leading to monopoly)
flexible workforce (willingness to travel to jobs overseas e.g. training of call centres employees in India for UK-based companies)
availability of finance to fund expansion
fewer environmental restrictions
globalised transport network
technological developments
governmental encouragement e.g. financial incentives tax breaks
cheap land
world trade: Coca-Cola: positive social, economic, environmental
social: Coca-Cola Foundation award grants companies throughout world - employment opportunities directly and indirectly
eco: franchise operations means local bottlers profit from sale; supports local eco directly and indirectly - investment in new plants in expanding markets (Asia, North Africa) - investment in new markets drives eco growth
envi: uses marketing network to increase awareness of recycling and distribution network for disaster relief - replenishes water used e.g. funding local projects to protect watersheds
world trade: Coca-Cola: negative social, economic, environmental
social: hard working conditions in some plants, millions spent countering links with obesity
eco: long hours for little pay - majority of profits returned to shareholders in USA
envi: exhaustion of local water supplies (2012 Coca-Cola used more water than around 25% of world’s pop) - water pollution
world trade: banana trade and UK consumption
supermarkets use bananas as loss leaders (selling so cheap no profit made as incentive to lure shoppers)
however fairtrade bananas have increasing representation in supermarket - 2013 one in 3 bananas sold in UK carried Fairtrade certification
fairtrade
pay farmers guaranteed minimum price, offer fair terms of trade
fairtrade cooperatives able to develop local infrastructure, build schools and health clinics , provide training
banana TNCs
unreasonable pressures of UK supermarkets on supplies to keep prices low helped create unethical methods of banana cultivation
bananas sold in UK grown in Latin American plantations owned by fruit-exporting TNCs
landscape stripped of natural vegetation, heavily treated with pesticides farmed by workers who paid little and live and work poor conditions
The El Guabo Association of Small Banana Producers (fairtrade)
eco: stabilised incomes and improvements to standards of living - guaranteed fair wage and long-term supply contract including direct access to new and international markets - producers able to raise additional capital for reinvestment - migrant labourers helped
social: health care benefits to families of cooperatives - provision of educational and medical supplies - improved education provision - marginalised groups helped to find employment
global food systems - palm oil
highly versatile, cheap, highest yield
demand for processed food increased (palm oil)
needs high humidity and temperatures, lots of land - tropical rainforest climate - pressures on tropical rainforest biomes (south-east Asia) - rainforest cleared to allow plantation monoculture
TNCs forced local inhabitants off land
deforestations results in lifestyle change for locals
chemicals used in palm oil production pollute water and soil making other forms of agriculture impossible
