Globalisation

• What is Globalisation?


  The process by which people, cultures, money, goods and information can be transferred between countries with few or no barriers.
• Communications Technology that accelerates globalisation


  Telegraph (1866)

  'Leap-frogging' technologies

  M-PESA (Kenyan mobile banking app - used for remittances)

  More than 1 million kilometers of undersea cables

  More than 24 GPS satellites 10,000km above earth

  The Internet
• How many Africans had a phone in 2005, compared to 2015?


  6% in 2005, 70% in 2015
• By 2014 how many likes were registered on facebook every day?


  5 Billion
• Transport innovations that accelerate globalisation

  Intermodal containers

  Cosco ship is 366m long, 46m wide and carries over 13,000 containers

  Jet planes (e.g. Boeing 747 in 1960s)

  Easy, cheap travel (e.g. EasyJet)

  Railways (e.g. HS2 - originally planned to halve travel time between London and the North)
• How do SEZs, like Shenzhen, accelerate globalisation?


  SEZs are regions where governments implement policies to attract FDI, encourage industrialisation, and promote trade. SEZs have accelerated globalisation by integrating local economies into global production and trade networks. They attract FDI by creating policies to attract TNCs (e.g. reduced tarrifs, tax breaks, etc...)
• How do TNCs accelerate globalisation?


  TNCs create global supply chains (by outsourcing production and using materials from multiple countries)

  They also generate FDI by investing in developing countries (because of a lack of labour laws and environmental laws)

  Cause a transfer of knowledge and technology

  Encourage trade liberalisation

  Contribute to cultural homogenisation
• How many countries does Coca-Cola have bottling plants in and how many people do they employ?


  Over 200 bottling plants, employing more than 700,000 people.
• What are the actions and attitudes taken by governments that can accelerate globalisation?

  Neoliberalism

  Privatisation

  Encouraging business start-ups

  Growth of trade blocs
• What is neoliberalism


  Neoliberalism is the belief that government intervention in markets inhibits economic growth and that as overall wealth increases, trickle down will occur.
• How can neoliberalist attitudes by governments accelerate globalisation?


  Encourages the removal of trade barriers (e.g. tariffs and quotas), making international trade easier.

  Advocates for markets to operate freely, attracting foreign investors and encouraging the establishment of businesses by reducing bureaucratic hurdles.
• Give an example of neoliberalism that led to accelerated globalisation?


  Deregulation of London in 1986 by Margaret Thatcher's conservative government, which led to London becoming the world's financial hub
• What is privatisation?


  The transfer of a business, industry, or service from public to private ownership and control.
• How can privatisation accelerate globalisation?


  Encourages FDI by opening previously state-controlled sectors, such as utilities and transport, to global investors.

  Private companies compete internationally, adopting global standards and advanced technologies, enabling privatised firms to grow into global brands

  Trade liberalisation often accompanies privatisation, as governments remove monopolies and encourage privatised firms to engage in global trade
• Give an example of privatisation accelerating globalisation?


  EDF energy is owned by Electricite de France and is leading the Hinkley Point C nuclear power project, a critical part of the UK's future energy strategy.
• How does encouraging business start-ups accelerate globalisation?


  Through the creation of favourable conditions (e.g. tax breaks, reduction of quotas, etc...) FDI is generated as investors put money into supporting business start-ups.

  Trade liberalisation is promoted in the conditions made, allowing start-ups to scale globally
• Give an example of encouraging business start-ups that accelerated globalisation


  Sunday trading introduced to the UK in 1994, which made the UK more attractive to foreign retailers, such as Disney, which began to open more stores in the UK and even began showing the Disney TV channel one year later in 1995.
• How does the growth of trade blocs accelerate globalisation?


  Trade blocs lower tariffs, quotas, and other trade barriers between member countries, making it easier and cheaper to trade goods and services. This increases trade flows both within the bloc and to other countries.

  Larger, unified markets within trade blocs attract FDI, as companies outside the bloc invest to benefit from reduced trade barriers and access to a broader market.
• What international political & economic organisations accelerate globalisation?


  World Trade Organisation

  International Monetary Fund

  World Bank
• How does the World Trade Organisation accelerate globalisation?


  The WTO accelerates globalisation by reducing trade barriers, setting global trade rules, and resolving disputes between countries. It promotes free trade by encouraging market access and ensuring that international trade flows smoothly and fairly.
• How does the International Monetary Fund accelerate Globalisation?


  The IMF stabilizes exchange rates by providing financial assistance to countries facing currency crises, helping them maintain stable exchange rates and avoid economic collapse. It also offers bailouts to countries in need of financial support, but these come with strict conditions, such as implementing policies that encourage free trade and increase economic interdependence.
• How does the World Bank accelerate globalisation?


  The World Bank accelerates globalisation by funding projects that improve developing countries, helping them connect to global markets. It also promotes economic reforms, such as market liberalisation and free trade, which integrates countries into the global economy. This makes countries more attractive to FDI, strengthening global economic ties.
• What is FDI composed of?


  Offshoring

  Foreign Mergers

  Foreign Acquisitions

  Transfer Pricing
• What is Offshoring?


  Offshoring is the practice of relocating business operations or services to a foreign country, usually to reduce costs. It allows companies to access cheaper labor, resources, and production capabilities, which enhances global trade and economic integration.
• Give an example of offshoring


  Fender opened a plant in Mexico in 1978
• What is Foreign mergers?


  A foreign merger occurs when a company from one country merges with a company from another country. This creates a larger, more competitive business that can access new markets, resources, and expertise, helping to integrate global economies.
• Give an example of Foreign Mergers


  In 1907, the Dutch company Royal Dutch Petroleum merged with the British Shell Transport and Trading Company to form Royal Dutch Shell
• What is Foreign Acquisitions?


  A foreign acquisition occurs when a company from one country buys a company in another country. This allows the acquiring company to expand its market reach, access new resources, and enhance its global competitiveness.
• Give an example of a foreign acquisition


  Kraft's acquisition of Cadbury in 2010
• What is transfer pricing?


  When a multinational company has subsidiaries (smaller companies it owns or controls in different countries), it decides on the prices for the goods or services sold between these subsidiaries. By setting these prices, the company can decide how much profit or cost is reported in each country, potentially lowering its overall tax bill by shifting profits to countries with lower tax rates.
• Give an example of Transfer Pricing


  Apple channel their profits through Ireland and was ordered by the European Commission to pay 14.5 billion euros in back taxes to Ireland. This decision came in 2016 after the European Commission ruled that Apple had received illegal state aid from Ireland, allowing the company to pay very low taxes on its profits made in Europe.
• What is the case study for accelerated globalisation?


  China's Open Door Policy
• What year did the Open Door Policy come into place in China


  1978
• Before 1978 what was China like?


  A poor, politically isolated country, 'switched-off' from the global economy.
• How many people left rural areas to move to big cities in China after 1978?


  300 million people
• After 1978 how many new cities, that had over 1 million people in, were created?


  over 200 new cities
• What did the creation of densely populated new cities fuel the growth of?


  Low-wage factories
• How many people in China escaped extreme poverty after the introduction of the Open Door Policy in 1978?


  Over 400 million
• What is Shenzhen?


  A Special Economic Zone (SEZ)
• What is a SEZ?


  A specific area within a country where business and trade laws are more liberal than the rest of the country. These areas are designated to attract foreign investment, boost economic activity, and promote industrial growth through incentives like tax breaks, reduced tariffs, and less regulation.