Impacts of globalisation

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  • Created on: 03-06-16 19:10

Bolivia Case Study

Bolivia has recently introduced a resource nationalisation policy. Along with Cuba and Venzueala it forms the so-called 'radical block' of antions in Latin America which are concerned about US economic power in the region and the exploitative action of TNCs in general.

  • Bolivia is South America's poorest country 
  • In the 1980s and 1990s the Bolivian government introduced free market reforms.
  • Such reforms were required by the World Bank if Bolivia was to continue to be granted aid.
  • Privatisation was at the heart of this agenda
  • Investors, usually foreign, were allowed to acquire 50% ownership and management control of public sectors such as electricity, telecommunications and the state oil corporation
  • This was in return for an agreed level of capital investment

However, the Bolivian government also wanted to link growth with equity so that poorer people would gain more benefit from the participation in the global economy.

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Achieving growth with equity

The measures used to achieve this included:

  • A type of decentralisation called Popular Participation
  • Education reform to improve access to opportunities for the poor

These two strategies were mainly targeted at improving the lives of the indigenous and mestizo (mixed race) population 

December 2005, Evo Morales became the country's first indigenous president - he was elected on a pledge to challenge free market reforms - widespread concern that these policies benefitted TNCs and the Bolivian rich to the detriment of the poor and the environment

In May 2006, President Morales nationalised the country's gas and oil industry

Foreign energy companies were given 6 months to sign new operating contracts or leave the country

Bolivia has taken control of 82% of the oil and gas in the country - rest for foreign companies

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Regional commerce and cooperation

Bolivia has adopted a socialist model of regional commerce and cooperation rather than what it sees as 'US backed free trade'.

It is concerned that the USA has too much economic and political influence in Latin America.

  • The Bolivian government withdrew its watercontract with Bechtel and its operating partner Abengoa
  • The companies sued the Bolivian government $50million

The US drug war in South America has caused problem for Bolivia - the USA wants to end the production of coca and so reduce cocaine production to zero

Bolivia wants to preserve the legal market for coca and promote export of LEGAL coca products - the reduction in coca crop has hit the incomes of many poorer people

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The Bolivian governement is concerned by the number of people moving abroad to find work - limited employment in Bolivia is a major problem.

In 2007, the government announced it was to create 360,000 jobs by 2010 by attracting more FDI and increasing public sector employment.

The USA's actions in 'pressurising' Columbia and Peru into free trade agreements damaged Bolivian exports to these countries - Bolivia's main export is soya beans and 60% goes to Columbia 

In April 2006, Bolivia signed the people's trade agreement with Venezuela and Cuba - Venezuela will also supply oil to Bolivia to meet domestic shortages in production

Like many countries which rely heavily on the export of raw materials to earn foreign currency, Bolivia has a sizeable foreign debt - end of 2006, Bolivia owed $3.2billion to foreign creditors

By 2004, Bolivia ranked 64 in the world in terms of overall globalisation

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Regional inequalities in Italy

The Mezzogiorno is a classic regional problem area, this is due to its physical geography, demographic structure and economic and social structure.

Italy is divided into:

  • The 'industrial triangle' of the North including the cities of Milan, Turin and Genoa - oneof the most affluent regions in the EU
  • The South or Mezzogiorno which remains the least prosperous region of Italy despite massive influxes of regional aid
  • The rapidly industrialising 'Third Italy' of the centre and North-East, including the regions of Tuscany, Veneto and Emilia-Romagna
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The North-South divide in Italy

  • First-time job seekers comprise of 30% of the unemployed nationally but 50% in the South 
  • The South's rate of unemployment is nearly four times greater than that of the rest of the country 
  • The average income in the South in 1995 was only 56% of that in the North
  • Since 1992 the economy in the South has only grown by an average of 6%

The South is falling behind because of a complex set of interacting circumstances:

  • The State's authority is weak, undermined by corruption and organised crime
  • Administration is poor
  • Infrastructure is inadequate
  • Credit is costly and the banks are badly run
  • The economy is insufficiently geared to exports to offset lower domestic demand
  • State transfers, the traditional motor of growth, are being reduced
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Reasons for different rates of development

Suggestions to explain different rates of development in the North and the South include:

  • The 'Southernist View' = the South was neglected by northern politicians who concentrated expenditure on public works and technical education in the North
  • The 'Two Nations' = fundamental cultural differences - inefficiency vs. efficiency - rural vs. urban
  • The Peripherality of the South's distance from the core markets of the EU 
  • The economic structure = rural decline is one of the reasons for poverty in the South. The harsh Mediterranean climate with long periods of intense heat and little rain made non-irrigated farming difficult
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The Cassa per il Mezzogriono

In 1950 the Cassa per il Mezzogriono (the fund for the South) was set up to raise southern living standards to those of the north. The Cassa aimed to do this in two ways:

  • LAND REFORM = broke up the large semi-fuedal estates of the south, creating about 120,000 new, small farms
  • GROWTH POLE STRATEGY = 60% of all state investment went to the south with investments in large steel and chemical plants 

This failed because:

  • They were capital-intensie ventures, built with reference to the needs of the local economy
  • The OPEC price hike which quadrupled the price of oil in 1973, rising the price of raw materials
  • A process of deindustrialisation is underway in the south with the steel plants located at Naples and Taranto in a process of rationalisation because of overcapacity in the EU.
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The results of the Cassa

The south has become increasingly subsidised, dependent and incapable of self-generating growth.

However, the regions of Abruzzi, Molise and Apulia along the Adriatic Coast are doing well, and towns like Pescara, Taranto and Siracusa have grown rapidly in terms of population and prosperity.

Investment was encouraged by grants, laons and tax incentives, increasing the financial burden on the state. 

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Impact on employment structures globally

The key impacts of globalisation on employment structures are:

  • The growth of secondary employment - mostly NICs
  • The decline of secondary employment - in core countries (e.g. UK)
  • The changing pattern of primary employment - peripheral countries (and the increasing importance of commerical agriculture for the production of export crops)
  • The growth of quaternary employment - in key regions of core countries
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The emergence of a new international division of l

The new international division of labour is a result of:

  • Quaternary services, especially Research and Development , are found in the core world regions of Japan, Europe and the USA
  • Manufacturing activity in increasingly found in NICs, where labour costs are frequently much cheaper
  • Primary production is still dominated by the peripheral countries, BUT the USA is the world's major exporter of wheat
  • The new information-led economy works on a global scale, but markets are far from fully integrated - rading blocks still play crucial role
  • Regional differences within the three areas of influence: North USA, the EU and the Asian Pacific region (dominated by Japan)
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