The Global Shift
The global shift is the movement of economic activity from MEDCs initially to NICs and more recently to LEDCs (especially in Asia and Latin America). Originally this was the movement of manufacturing activity, but more recently service activity has been involved.
- The key players in the global shift are TNCs. These large companies wield enormous economic power. They source materials, make products and supply markets worldwide in integrated globalised operations.
- It is suggested that over 30% of all international trade is within TNCs, and yet another 30% is between TNCs.
- TNCs invest directly into foreign countries through FDI.
Advantages of TNCs locating production overseas
- Avoiding trade barriers such as tariffs and quotas
- Ability to lower production costs by gaining access to lower cost labour and materials
- Operating in an environment with fewer and less stringent pollution controls
- Moving production to areas with msot favourable factors for production - favourable political climate/industrial climate with a highly educated workforce
Factors influencing Global Shift
- Transport Revolution - heavy materials can be shipped around the world using VLCCs or bulk carrier ships
- Information and Communication Revolution - enabled globalised production systems to be set up (broadband, mobiles, undersea cables etc)
- Free Trade - freer movement of imports and exports especially within trade blocks
- Fiscal Policies - which permitted the freer movement of capital between countries
- Role of the State - increased sophistiation of government policies to attract investment from foreign companies.
- Development of Technologies - devalue the role of the skilled labourer and makeoperations possible with limited training using standardised systems
Call Centre Case Study
The Global Shift of administrative and customer service work began in the 1990s, with pioneers such as General Electric moving throusands of jobs to India.
UK & INDIA
- Av. wage: UK = £14,000, INDIA = £3,000
- Working week: UK = 36 hrs, INDIA = 40+ hrs
- GDP per head: UK = £14,145, INDIA = £1,600
In areas such as Dundee and Newcastle (deindustrialised areas of traditional employment) call centres represented great hopes for future employment.
Using a Far Eastern workforce can provide a 24hr service - time is money advantage
A quarter of a million jobs have been outsourced from the UK alone - India is top choice due to use of English Language
If one third of large call centres are shut down, there would be a loss of over 10,000 jobs
Positives of Global Shift in MEDCs
- Cheaper imports keep living costs down and create buoyant retailing sector
- Greater efficieny in surviving outlets - can release labour for higher productivity sectors
- Growth in LEDCs could create a demand for exports from MEDCs
- Greater industrial efficiency should lead to development of new technologies, promote entrepreneurship and attract FDI
- Loss of industries can lead to improved environmental quality
Positives of Global Shift in LEDCs
- Higher export - generated income promotes export led growth - potential multiplier effect
- Can trickle down to local areas with many new highly paid jobs
- Can reduce negtive trade balances
- Can lead to exposure of new technology, improvement of skills and labour productivity
- Employment growth in relatively labour intensive manufactouring spreads welath and adresses development gap
Negatives of Global Shift in MEDCs
- Rising job exports lead to inevitable job losses. Competition changes in technology add to this.
- Job losses are often of unskilled workers
- Big gap develop between skilled and unskilled workers
- Employment gains from new efficiencies will only occur if industrialised countries can keep their wage demands down
- Job losses are focused in certain areas and certain industries. This can lead to deindustrialisation and structural unemployment in certain regions.
Negatives of Global Shift in LEDCs
- Unlikely to decrease inequality - new jobs are concentrated in core region of urban areas. May promote in-migration.
- Disruptive social impacts - eg may lead to sweat shops - instability with branch plants moving to LEDCs (Phillipines)
- Can lead to over dependence on a narrow economic base
- Can destabilise food supplies - people give up agriculture
- Environmental issues associated with over-rapid industrialisation
- Health and Safety issues because of tax legislation, treatment of workers etc.