Global flows and networks
Connections shown between places represent different kinds of network flow. These flows are movements of:
Capital - at a global scale, major capital flows are routed daily through the world's stock markets. In 2013, the volume of foreign exchange transactions reached US$5 trillion per day!
Commodities - these products have always been traded between nations. But in recent years flows of manufactured goods have multiplied in size, fuelled by low production costs in China and even lower-waged economies, such as Bangladesh and Vietnam.
Information - the internet has brought about real-time communications between distant places, allowing goods and services to be bought at the click of a button. Social networks have ballooned in size and influence - Facebook has gained 1.5 billion users from the launch date to 2015. Information is stored in enormous "server farms", such as Facebook's data centre in Lulea, Sweden (where cold temperatures reduce the cost of cooling the hard drives).
Tourists - many of the world's air passengers are holiday makers. Budget airlines have brought a "pleasure periphery" of distant places within easy reach for the moneyed tourists of high-income nations. China is currently the world's biggest spender on international travel, with 120 million outbound trips made in 2014.
Transport and trade
Important innovations in transport have included:
Steam power: Britain became the leading world power in the 1800s using steam technology. Steam ships and trains moved goods and armies quickly along trade routes in Asia and Africa.
Railways: During the 1800s railway networks expanded globally. As of 1904, the 9000km Trans-Siberian Railway connected Moscow with China and Japan.
Jet aircraft: Arrival of the intercontinental Boeing 747 in the 1960s made international travel more common. The recent expansion of the cheap flights sector, e.g. easyJet, has brought it to the masses in richer nations.
Container-shipping: Around 200 million individual container movements take place each year. Some commentators describe containers shipping as the "back bone" of the global economy since the 1950s.
Time-Space compression (Shrinking world): As travel times fall due to new inventions, different places approach each other in "space-time": they begin to feel closer to each other than in the past.
Economic globalisation: ICT allows managers of distant offices and plants to keep in touch more easily through technology such as video conferencing. This has helped TNCs to expand into new territories, either to make or sell their products. For example, each time a barcode of Marks and Spencer food is purchased and scanned in a UK store an automatic adjustment is made to the size of the new order placed with suppliers in distant countries such as Kenya.
Social globalisation: Maintaining of long-distance social relationships through ICT - since 2003 Skype has provided a cheap and powerful way for migrants to maintain a strong link with family they have left behind.
Cultural globalisation: Cultural traits are adopted, imitated and hybridised faster than ever before. During 2012 South Korean singer Psy clocked up over 1.8 billion views of "Gangnam Style" - the most watched music video of all time.
Political globalisation: Social networks are used to raise awareness about political issues and to fight change on a global scale. Environmental charities like "Greenpeace" spread their message online, while the militant group Daesh (Isis) has used social media to spread its message of terror globally and to gain new recruits.
- Also known as neoliberalism.
- Governance model associated with the policies of US President Ronald Reagan and Magaret Thatcher's UK government during the 1980s. They followed two simple beliefs:
- Firstly government intervention in markets impedes economic development.
- Secondly, as overall wealth increases trickle-down will take place from the richest members of society to the poorest.
- This means that restrictions are being lifted on the way companies and banks are operated.
The deregulation of the City of London in 1986 removed large amounts of "red tape" and paved the way for London to become the world's leading global hub for financial services and the home of many super-wealthy "non-dom" billionaires.
- Successive UK governments have led the way in allowing foreign investors to gain a stake in privatised national services and infrastructure.
- Until the 1980s important assets, such as the railways and energy supplies, were owned by the state.
- Running these services became costly.
- Therefore they were sold to private investors in order to reduce government spending and to raise money.
- Over time ownership of many assets has passed overseas. For example: the French company "Keolis" owns a large stake in southern England's railway network and the EDF energy company is owned by "Electricite de France".
- Since the global financial crisis, the UK government has approached Chinese and Middle Eastern sovereign wealth funds (SWFs) to help fund new infrastructure projects.
Encouraging business start-ups
- Methods range from low business taxes to changes in the law allowing both local and foreign-owned businesses to make more profit.
- When Sunday trading was introduced in 1994 the UK became a more attractive market for foreign retailers, from Burger King to Disney Store.
- Italy has eased restrictions on Chinese investors wanting to start-up textile companies inside the EU - as a result, the city of Prato now has the largest Chinese population in Europe.
Growth of free trade blocs
National governments have also promoted the growth of trade blocs. To trade freely with neighbours or more distant allies, agreements have to be drawn up allowing state boundaries to be crossed freely by flows of goods and money. Within a trade bloc, free trade is encouraged by the removal of tariffs. This benefits businesses in many ways:
- By removing barriers to intra-community trade, markets for firms grow. For instance, when ten new nations joined the EU in 2004 UK firm Tesco gained access to 75 million extra customers.
- Firms that have a comparative advantage in the production of a particular product or service should prosper. Thus French wine-makers, thanks to their advantageous climate and soil, produce a superior product that is widely consumed throughout a tariff-free Europe.
- An enlarged market increases demand, raising the volume of production and thereby lowering manufacturing costs per unit. An improved economy of scale results, meaning products can be sold cheaper and sales rise even further for the most successful firms.
The Swiss Institute for Business Cycle Research (KOF) produces an annual Index of globalisation.
- In 2014 Ireland and Belgium were the world's most globalised countries according to the KOF Index.
- A complex methodology informs each report, using diverse data such as participation in UN peace-keeping missions and TV ownership.
- While there is merit in KOF's multi-strand approach to measuring globalisation, the validity of these criteria might be debated.
The A.T.Kearney World Cities Index ranks New York, London, Paris, Tokyo and Hong Kong as the top five "Alpha" world cities for commerce.
- The ranking is established by analysing each city's "business activity", "cultural experience" and "political engagement".
- The data supporting this include a count of the number of TNC headquaters, museums and foreign embassies, respectively.
TNCs are important agents of global change because they can be described as "architects" of globalisation - similar to trade blocs - which help "build bridges" between nations.
Making connections, TNCs bolt together different economies and societies through their supply chains and marketing strategies; however, some parts of the world have benefited far more than others from FDI from TNCs because:
- Not all places are suitable sites of production for goods, for a range of physical and human reasons (including accessibility, natural resources, government policies and levels of education).
- Not all places have enough market potential to attract large retailers (due to low incomes, or culture).
Offshoring and outsourcing
Different strategies come into play when the TNCs are attempting to build their global businesses. Rather than investing directly in the offshoring of branch plants, or acquiring foreign firms, TNCs can instead forge business partnerships with existing companies in other countries.
Many of the world's biggest brands do not make their own products; alternatively, they use outsourcing as their strategy.
Large corporations ranging from Dell to Tesco have established tens of thousands of outsourcing partnerships while building their global businesses. The resulting series of arrangements is called a Global Production Network (GPN).
Offshoring: TNCs move parts of their own production process (factories/offices) to other countries to reduce labour or other costs.
Outsourcing: TNCs contract another company to produce the goods and services they need, rather than doing it themselves. This can result in the growth of complex supply chains.
GPN: A chain of connected suppliers of parts and materials that contribute to the manufacturing or assembly of the consumer goods. The network serves the need of a TNC, e.g. Tesco or Apple.
BMW's Mini example - GPN
"The changing of the design of products to meet local tastes or laws."
An increasingly common strategy used by TNCs in an attempt to conquer new markets. Glocalisation is successful because of geographical variations in:
- People's tastes (Cadbury makes its Chinese chocolate sweeter, as it is prefered that way).
- Religion and culture (Domino's Pizza only offers vegetarian food in India's Hindu neighbourhoods; whilst MTV avoids showing overly sexual music videos on its Middle Eastern channel).
- Laws (the driving seat should be positioned differently for cars sold in the US and UK markets).
- Local interest (reality TV shows, such as Big Brother and Jersey Shore, gain larger audiences if they are re-filmed using local people in different countries).
- Lack of availability of raw materials ( SABMiller, a major TNC, uses cassava to brew beer in Africa - this cuts the cost of importing barley but changes the taste too).
Examples of Glocalisation
The Walt Disney Company
- In 2009, Disney released its first Russian film, Book of Masters, based on a Russian fairy tale and produced using local talent.
- Disney acquired Marvel in 2009, gaining the rights to superhero characters that have sometimes been glocalised.
- "Superman India" is an example.
- In a story made for Indian children, Mumbai teenager Pavitr Prabhakar is given superpowers by a mystic being; the story is different from the version UK and US children are familiar with.
- By 2012, McDonald's had established 35,000 restaurants in 119 countries.
- In India, the challenge for McDonald's has been to cater for Hindus and Sikhs, who are traditionally vegetarian, and also Muslims who do not eat pork.
- Chicken burgers are served alongside the McVeggie and McSpicy Paneer (an Indian cheese patty).
- In 2012, McDonald's opened a vegetarian restaurant for Sikh pilgrims visiting Amritsar, home to the Golden Temple.
Examples of Glocalisation
- Unlike Disney and McDonald's Lego has not glocalised its products.
- Since 1949, the Danish plastic brick-maker has been producing gradually more complex designs in four locations: Denmark, Hungary, Czech Republic and Mexico.
- However, Lego exports identical products to all global markets, including China.
- Like Apple and Samsung, Lego makes products with a genuine global appeal.
- The company does not take local tastes into account.
Impacts of globalisation
Poverty, reduction and waged work
- Worldwide there are 1 billion people that have escaped US$1.25-a-day poverty since 1990. The majority are Asian: over 500 million have escaped poverty in China alone.
- The term "new global middle class" is used to describe the growing mass of urban, working people who have escaped rural poverty.
- Many of these people earn between US$10 and US$100 per day and by 2030 it is predicted that Asia will be home to 3 billion middle-class people.
Education and training
- High school achievement in Singapore and Hong Kong is envied by governments globally, including the UK. Throughout Asia, education has improved in recent decades.
- Around 2500 universities in China, India and South Korea award millions of graduate degrees each year.
- Illiteracy remains a problem for rural India and Bangladesh.
- China alone awarded 30,000 PhDs in 2012, and Asian countries now play a leading role in quaternary sector research in biotechnology and medical science.
Impacts of globalisation
Environment and resource pressure
- On the flip-side of global economic growth can occur which is the acceleration of economic decline. Forested land has been sacrificed to urbanisation, logging and cash cropping.
- Since 1990 Togo has lost 60% of its forested area whereas Nigeria's forest has halved in size.
- Elsewhere, productive crop land has been ruined by over-exploitation, soil erosion and mining. From 1990 to 2008, globalisation helped drive a "commodities supercycle".
- Demand for raw materials - from soy beans to iron ore - rose steeply each year. However, global resource pressure has recently slackened, due to a reduced demand in China (where economic growth has halved since 2008).
Infrastructure, the built environment and unplanned settlements
- Infrastructure development has taken place resulting in modern motorways, high-speed railways and airports to major cities, including Jakarta. There is a growing trend for extreme high-rise development in city centre "hotspots" in many Asian cities, e.g. Hong Kong.
- Mumbai's Dharavi slum is a cramped and chaotic place that is home to families who live on little more than £200 a month. It is also a location of a thriving recycling industry worth £700 million a year and employing 250,000 people a year! However, city authorities are determined to replace the Dharavi slum with modern flats.
Environmental challenges in developing nations
- In Dongguan, workers for Wintek - the firm that makes touchscreens for iPhones - were poisoned by chemicals used to treat the glass.
- In Human province, many people were poisoning lead-emitting manganese smelter (manganese is used to strengthen steel, one of China's major exports).
- Tens of thousands of Ivorians suffered ill health after toxic waste was dumped by a ship in the employ of Trafigura, a European TNC - a £28 million cash settlement followed.
- Land degradation and biodiversity loss are widespread in Indonesia, where an area of rainforest as big as 100,000 football pitches is lost each year. Room is being created for oil-palm plantations and mining operations.
- The scale of forest burning has created transboundary smoke pollution affecting neighbouring states.
- More mammal species are threatened in Indonesia than in any other country - government is too corrupt to notice.
Problems for deindustrialised regions
During the 1970s many European and American factory workers lost their jobs - western factories were closed in large numbers once Asia became the focus of global manufacturing.
High unemployment - Detriot has yet to replace large numbers of jobs lost when global shift led to the disappearance of many of the city's automobile industries.
Crime - Rising gun crime reminds us that "losers" of globalisation can be found in all nations, not just the poorer ones. In some low-income US urban districts, life expectancy is 30 years lower than in affluent districts.
Depopulation - Middle class Americans have migrated out of failing neighbourhoods in large numbers. Detroit has lost 1 million residents since 1950. One result of depopulation has been a catastrophic collapse in housing prices; in Baltimore, which has lost one-third of its population, there are 20,000 abandoned properties. Homes in some districts have been sold for just one dollar.
Dereliction - The combination of manufacturing industry closures, falling house prices and rising crime results in widespread environmental dereliction. This creates a "broken windows" scenario (small acts of vandalism are tolerated so eventually more serious problems like arson become commonplace).
Megacity growth and rural-urban migration
Megacity: Homes 10 million people or more. In 1970 there were just 3, by 2020 there will be 30. They grow through a combination of rural-urban migration and natural increase.
Push factors - Poverty, conflict, natural disasters, crop failure and land sub-division.
Pull factors - Jobs, healthcare, education, housing, safety and bright lights.
Megacities in low-income (developing) and middle-income (emerging) countries have grown rapidly. Sao Paulo gains half a million new residents annually from migration. New growth takes place at the fringes of the city where informal (shanty) housing is built by the incomers.
New growth takes place at the fringes of the city where informal (shanty) housing is built by the incomers. Centripetal migration brings people to municipal dumps (Lagos), floodplains (Sao Paulo), cemeteries (Cairo) and steep, dangerous hill slopes (Rio de Janeiro).
Over time, informal housing areas may consolidate as expensive and desirable districts. Rio's now-electrified shanty town Rochina boasts a McDonald's, hair salons and health clinics.
Challenges of megacity growth
- Water pollution from untreated sewage and air pollution from industry and exhausts create challenges for city planners.
- The severity of these problems depends on their economic and physical context:
- Mediterranean cities such as Athens and Rome still suffer from smog, due to anticyclonic weather conditions.
- In contrast, cities in India and Pakistan's monsoon belt experience high-intensity rainfall and flooding due to sewer failures.
- Provision of adequate urban housing, health care and education is a major challenge for planners in developing countries.
- Mass migration into Lagos (Nigeria) and Kinshasa (Democratic Republic of the Congo) means these cities have doubled in size since 2000.
- In many European and North American capital cities, the challenge is to regulate the housing market to make affordable housing available to low-income groups.
- Social sustainability is hard to achieve anywhere unless urban employment needs are met.
International migration into global hubs
Global hub: A highly globally-connected city. or the home region of a large, globally-connected community. Found in various states of development and known as "World Cities" - e.g. Mumbai, New York, London, Beijing, Tokyo and Sao Paulo.
Elite international migrants
- Highly skilled workers and socially influential individuals. Their health derives from their profession or inherited assets.
- Some elite migrants live as "global citizens" and have multiple homes in different countries; they encounter few obstacles when moving between countries.
- Most governments welcome highly skilled and extremely wealthy migrants.
Low-waged international migrants
- Drawn towards global hubs in large numbers.
- London, Los Angeles, Dubai and Riyadh are home to large numbers of both legal and illegal immigrants working for low pay in kitchens, construction sites or as domestic cleaners.
Internal (rural-urban) migration
- The main driver of city growth in global hubs in developing and emerging economies but this plays less of a role in Europe and North America.
Over time, international migration makes countries interdependent; each country depends on the economic health of the other for its continued well-being.
- Economic interdependency may develop - some sectors of the Uk are highly dependent on Eastern European labour; Eastern Europe, in turn, relies on migrant remittances from the UK. In 2009, during the global financial crisis, many UK building projects were cancelled. The knock-on effect was that many migrants stopped sending money home; some even returned to their countries - Estonia's economy shrank by 13%!
- Social and political ties between two countries can be strengthened through migration. The arrival of large Indian diaspora population in the UK has deepened the country's enduring friendship with India.
Thomas Friedman (1990s) argued that economic and politic interdependency are linked. In the "golden arches theory of conflict prevention", he asserted that two countries with McDonald's restaurants would maintain good relations because their economies had become interlinked.
While the recent conflict between Russia and Ukraine has weakened Friedman's arguments (both countries have McDonald's restaurants), it remains an idea worth exploring.
Cultural diffusion is the spread of cultural beliefs and social activities from one group to another. The mixing of world cultures through different ethnicities, religions and nationalities has increased with advanced communication, transportation and technology.
- Traditions: Everyday behaviour and "manners" are transmitted from generation to generation, from parents to their children, such as saying "thank you" or shaking hands.
- Religion: There are several main world religions, each with its own local variants; religion is an important cultural trait that also informs food and clothing, and may be highly resistant to change.
- Clothing: National and local traditions may reflect traditional adaptations to the climate (such as wearing fur in polar climates) or religious teachings.
- Food: National dishes and diet traditionally reflect the crops, herbs and animal species that are available locally.
- Language: Some countries have a single national language with local dialects (e.g. England), or several languages belonging to different indigenous groups.
Development generally means the way in which a country seeks to progress economically and to improve the quality of life for its inhabitants. A country's level of development is shown firstly by economic indicators of average national wealth and/or income but encompasses social and political criteria.
In an economically developed society:
- Citizens enjoy health, long life and an education that meets their capacity for learning.
- Citizenship and human rights are more likely to be established and protected.
Income per capita and GDP
- Income per capita is the mean average of income of a group of people - calculated by taking an aggregate source of income for a country and dividing it by the population.
- GDP is a widely used aggregate measure which is the final value of the output of goods and services inside a nation's borders; each country's annual calculation includes the value added by any foreign-owned businesses that have located operations there.
- The World Bank recently estimated global nominal GDP in 2014 at about US$78 trillion.
- The estimation of GDP is not easy because the earnings of every citizen and business need to be accounted for, including illegal or unregistered work in the informal sector.
- In order to make comparisons easier every country's GDP is converted into US dollars - this can subsequently become unreliable due to changes in currency rates.
- Each country's GDP data is additionally manipulated to factor in the real cost of living, known as purchasing power parity, or PPP - in low-cost economies, where goods and services are relatively affordable, the size of its GDP should be increased and vice versa.
Informal sector: Unofficial forms of employment that are not easily made subject to government regulation or taxation.
Economic sector balance
- A country or region's economy can be crudely divided into four economic sectors whose relative importance changes as a country develops (or industrialises): Primary (agricultural), secondary (industry), tertiary (services) and quaternary.
- A country's economic sector balance can be used as a part of the annual GDP calculation.
- Every few years each country devises a new formula that estimates contribution that different economic sectors, such as agriculture and manufacturing, make total national income.
- For example, Nigeria "re-based" its economic sector calculation in 2013 by reducing the share of agriculture from 35% to 22% of its GDP. At the same time, ICT services were increased from 1% to 9% of GDP, while Nollywood film earnings were included in the calculation for the first time. As a result of these changes, Nigeria's nominal GDP value doubled overnight!
Human Development Index (HDI)
- Composite measure that ranks countries according to economic criteria (GDP per capita, adjusted for PPP) and social criteria (life expectancy and literacy).
- Devised by the United Nations Development Programme (UNDP) and has been used in its current form since 2010 and produces a number between 0 and 1.
- In 2014, Norway was ranked in first place (0.944) and Niger was ranked last place (0.337).
Gender Inequality Index (GII)
Another composite index devised by the UNDP measuring gender inequalities related to three aspects of social and economic development. These are:
- Reproductive health (measured by maternal mortality ratio and adolescent birth rates).
- Empowerment (measured by parliamentary seats occupied by females and the proportion of adult females and males aged 25 years and older with some secondary education).
- Labour force participation rates of the female and male population aged 15 years and older.
- Air pollution data shows that environmental quality is often poor in developing and emerging economies.
- It usually improves as economic and social development occurs and places make the transition from industrial to post-industrial forms of economic activity.
- In 2014 the global Environmental Performance Index (EPI) used by Yale University ranked Ireland highly, with an air-quality index score of 98.3; Bangladesh was ranked as last place with a score of 9.
- The measurement takes into account the amount of pollution found outdoors and also the quality of air inside people's homes.
Tensions in London
- The leaders of some of the UK's biggest TNCs have argued that migration restrictions threaten their own competitiveness and, more broadly, the UK's role as a global hub.
- Deregulation of the City of London in 1986 removed large amounts of "red tape" for businesses.
- London's financial and legal firms began to regularly rotate staff between their different international offices in Asia, Europe and the Americas.
- Other companies have recruited large numbers of skilled people from overseas, such as Indian computer programmers.
- It is not just UK-headquartered TNCs that are alarmed by restrictions on migration. Indian, Chinese and Brazilian TNCs wanting a European base may be less likely to choose London if it becomes harder to transfer staff to the UK.
- Some Londoners believe that too much in-migration has been allowed to take place so these people voted for UKIP in the 2015 general election. This political party wants to see even stricter controls on migration, including an end to the UK's full participation in the EU and the freedom of movement this has allowed.
- Approximately 30% of London's 8 million residents were born in another country.
- Some Londoners believe that the scale and rate of cultural change have been too much.
Internet censorship in China and North Korea
- For nearly 70 years the People's Republic of China has been ruled by the Communist Party. China's rulers are intolerant of any criticism mounted against them by their own citizens.
- In 1988 Chinese students demonstrated against communist in Tiananmen Square: hundreds of people are thought to have died in the army crackdown that followed. Many Chinese people still do not know what happened that day. due to strict censorship of the press and internet.
- Google withdrew its services from China in 2010 when the Chinese government insisted that search engine results should be censored hide information about Tiananmen Square.
- Although Facebook, Twitter and YouTube remain unavailable there due to the "great firewall of China", more than 400 million Chinese citizens interact with one another using local social media sites, such as Youku Tudoi.
- In contrast, North Koreans have no access to the internet as a result of state controls.
- Restrictions on use can be national (China) or personal (North Korea).