Globalisation

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What is globalisation

The processes by which people, culture, money, goods and information can be transferred between countries with increasing ease.

Connections are lengthening

new links between places that are greater distances apart

Connections are deepening

More people’s lives connect with far away places – e.g. purchasing commodities / cheaper travel Not just rich people who ‘live globally’

Connections are quickening

Faster speed of connections with people able to talk to one another in real time or travelling quickly between continents using jet aircraft Globalisation can be economic, social, political or cultural. Time-space compression: Heightened connectivity changes our conception of time, distance and potential barriers to the migration of people, goods, money and information. This makes people feel closer together than in the past (shrinking world effect)

 

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Causes of Globalisation

Improvements in transport (e.g. the growth of containerisation)

Developments in ICT and mobile communication

Increase in Foreign Direct Investment (FDI)

The growth of TNCs

Economic and political organisations (e.g. The World Trade Organisation (WTO), International Monetary Fund (IMF) or the World Bank

Governments joining free trade blocs

More freedom of movement for people (tourism and migration)

The media

Global rise in living standards

 

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Political and Economic Decisions that Accelerate G

WTO – World Trade Organisation

Institutions in the United Nations system and were both created in 1944 – they regularly work together to assist member countries in funding and as a world bank. Founded in 1995 and took over from the General Agreement on Tariffs and Trade (GATT) This organisations primary purpose is to ensure the stability of the international monetary system, increase living standards and alleviate poverty

 

 

 

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Political and Economic Decisions that Accelerate G

IMF – International Monetary Fund

Has headquarters in Geneva, where it settles trade disputes between member states. Also known as the “Fund,” was conceived at a United Nations conference convened in Bretton Woods, New Hampshire, United States, in July 1944. Now has 187 member countries. Monitors the financial stability and payments of its 189 members aiming to fund their financial difficulties.

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Political and Economic Decisions that Accelerate G

WB - World Bank

An international organisation with 162 members that promotes international commerce (deals in trade). All European Union countries are members, and it has applications from Iran, Iraq and Syria. (However, Algeria joined GATT in 1987 – and still has not agreed terms) Provides low interest loans to developing countries and advice to member states, acting as a bank.

 

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Free Trade

Governments take away barriers that make trade more difficult and costly.

As costs are reduced, TNCs will see a profit and want to invest in nations.

TNCs will bring new ideas, products, cultures etc. to a nation.

Also the TNC will generate wealth.

This wealth and develop will increase standard of life and demand for foreign products. 

As an economy has more TNCs, so they become interconnected and interdependent on each other.

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FDI and Trade Blocs

EU

The European Union is a unique economic and political union between 28 European countries that together cover much of the continent. The EU was created in the aftermath of the Second World War. The EU was created in 1958 between six countries: Belgium, Germany, France, Italy, Luxembourg and the Netherlands. Since then, a huge single market has been created with 28 member countries. The EU provides funding for a broad range of projects and programmes covering areas such as:

•regional & urban development

•employment & social inclusion

•agriculture & rural development

•maritime & fisheries policies

•research & innovation

•humanitarian aid.

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FDI and Trade Blocs

The Association of Southeast Asian Nations, was established on 8 August 1967 in Bangkok, Thailand, and initially included Indonesia, Malaysia, Philippines, Singapore and Thailand. There are currently 10 member states. The aims and purposes of ASEAN are:

1.To accelerate the economic growth, social progress and cultural development in the region 

2.To promote regional peace and stability among countries of the region

3.To promote active collaboration and mutual assistance on matters of common interest 

4.To provide assistance to each other in the form of training and research facilities 

5.To collaborate more effectively for the greater utilisation of their agriculture and industries 

6.To promote Southeast Asian studies

7.To maintain cooperation with existing international and regional organisations 

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China's 1978 Open Door Policy

China built ‘instant cities’ attracting millions of migrants from rural areas.

Rapid urbanisation fuelled the growth of low-wage factories, gave China the nickname ‘workshop of the world’. 

Worlds largest TNCS quickly set up branch plants or established relationships with Chinese- owned factories. 

By 1990 50% of Chinas GDP was being generated in Special economic zones.

Low wages have helped to reduce and keep the cost of products low.

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KOF Index

The KOF Globalization Index measures the three main dimensions of globalization:

  • economic
  • social
  • political

These categories have a range of data collected within them such as:

  • actual economic flows
  • economic restrictions
  • data on information flows
  • data on personal contact
  • data on cultural proximity.
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Kearney Index

Economic

  • Trade and FDI

Personal

  • Telephone traffic
  • Travel
  • Remittance payments

Technological

  • Internet users
  • Internet hosts and servers

Political

  • Participation in international organisations and treaties
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Role of TNCs

TNCs are companies that operate in several different countries. The expansion of TNCs causes the movement of capital, labour, goods and services. There are 3 factors contributing to this:

  • MOTIVE - motivated by profit. They increase profit through economies of scale, developing new markets, horizontal integration, vertical integration, glocalisation and diversifying product range
  • MEANS - the free flow of capital. Economic liberalisation has allowed this flow
  • MOBILITY - transport has become faster and cheaper, communication systems have become faster, and the development of just-in-time production technologies has helped mobility
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Switched On and Switched Off Places

The places most connected to the world economy though consumption and production of goods are called “switched-on places”. More poorly connected places would be described as “switched-off”.

Causes for being switched off:

Highly vulnerable to climate change and natural hazards (e.g. Mozambique)

Low prices for cash crop exports due to overproduction and trade rules (e.g. Ethiopia)

Ethnic clashes and civil war between tribes (e.g. D.R.Congo)

Politically isolated (e.g. North Korea, Myanmar)

Poor resources for agriculture (e.g. Eritrea)

Resources controlled by small elite (e.g. Zimbabwe)

Infighting over resources – ‘resource curse’ (e.g Sudan)

Lack of skills and literacy deters inward investors (e.g. Somalia)

Resources are controlled by foreign TNCs due to old trade agreements that need renegotiating (e.g. Sierra Leone)

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Switched On and Switched Off Places

Causes continued:

Physical isolation and lack of coastline deters inward investors seeking an import/export base (e.g. Niger)

Lack of (or high cost of) infrastructure  such as high speed internet, telephone connections (e.g. Zambia)

Colonial history and subsequent independence left a lack of experience amongst political leaders (e.g. Zambia)

Literal barriers to connections such as mountain ranges, deserts, rainforest, lakes (e.g. Mali)

Historic debt preventing investment in necessary improvements (e.g. Tanzania)

Over-reliance on one export makes you vulnerable to price fluctuations (e.g. Tanzania)

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