What factors have led to the current economic globalisation?
Financial Factors / FDI, Computer/communication Technologies, Transport Technologies, World Trade Organisation, Trade Blocs
Factors that have led to the current economic globalisation-
1) Financial Factors
Trans-National Companies (TNCs) have sought to increase profits by reducing their production and operational costs, by:
a) Seeking locations with cheaper sources of labour
b) Seeking locations with cheaper raw materials
c) Seeking locations with fewer environmental restrictions/costs
d) Circumventing import restrictions such as quotas and import tariffs. For example Japanese car companies have located factories in Europe to avoid EU import quotas and duties.
-TNCs have achieved this through Foreign Direct Investment (FDI) - the investment of capital (money) into operations in countries other than their home nation.
-In 1980 the TNCs of the world invested US$20billion; by 2008 this figure was US$1700billion, and involving over 60 000 TNCs.
-FDI has resulted in the Global Shift of economic activity
Between 2009 and 2013 the two countries with the greatest levels of FDI inflow were the USA and China.
What factors influence FDI in to each country?
· Technology, more wealthy people as target for certain products, easy to import to other countries, cheap imports, NAFTA trade bloc
· Cheap land, labour, raw materials, less safety and environmental restrictions, growing market, middle class increasing
2) Computer and communication technologies
The Internet is the fastest growing tool of communications ever:
· Radio took 38 years to reach its first 50 million users.
· TV took 13 years
· The Internet just 4 years!
The development of the internet and mobile communication technologies have enable economic development for the following reasons:
· R and D facilities located in TNC Head Offices (HQ) in MEDCs can transfer information, such as design plans to their manufacturing plants in LEDCs
· Executives of global TNCs can meet using video conferencing
· Companies can market, sell and export products free from location restrictions
· Mobile technologies have freed up the development of communications from physical cables, and reduced the cost of key infrastructure.
Key growth statistics:
· 1.83 billion users of internet
· 2.10 billion projection for 2012
· 1 trillion pages of content on the internet
· 4 billion searches per day
· 1.5 billion email users in 2010
· 38% online shopping outside normal shops hours
· Tim Barners invented the internet
· Less than 500 million internet users in 2000, doubled in 2005, 2.084 billion in 2010
3) Transport technologies
Two key transport developments in transport during the last 50 years have revolutionised the movement of goods and have facilitated economic globalisation:
· Air Traffic
Containerisation is a system of using steel containers with standardised dimensions. They can be loaded and unloaded, stacked, transported efficiently over long distances, and transferred from one mode of transport to another – from container ships…