Globalisation

• what does the term globalisation mean?


  used to describe a variety of ways in which places and people are more connected with one another than they used to be
• In the past, global connection was achieved through:

  trade- especially after 1492 when columbus reached the Americas and the modern world economy began to take shape

  colonialism- by the end of the 19th century, the British Empire directly controlled one-quarter of the world and its people

  co-operation - ever since the First World War ended in 1918, international organisations similar to today's UN have existed.
• What are the 4 types of globalisation?


  Economic, social, political and cultural
• Economic globalisation


  - The growth of TNC's accelerates cross border exchanges of raw materials, components, finished manufactured goods, shares, portfolio investment and purchasing.

  - ICT supports the growth of complex spatial divisions of labor for firms and a more international economy.

  - Online purchasing using Amazon on a smartphone
• Political globalisation


  - The growth of trading blocks ( e.g. EU, NAFTA ) allows TNCs to merge and make acquisitions of firms in neighbouring countries, while reduced trade restrictions and tariffs help markets to grow.

  - Global concerns - e.g. free trade, economic recessions and the global response to natural disasters

  - The World Bank, the IMF and the WTO work internationally to harmonise national economies.
• Social globalisation


  - International immigration has created extensive family networks that cross national borders - world city-societies become multi-ethnic and plurastic.

  - Global improvements in education and health can be seen over time, with rising life expectancy and literacy levels, although the changes are by no means uniform or universal.

  - Social interconnectivity has grown over time thanks to the spread of universal connections such as mobile phones, the internet and e-mail.
• Cultural globalisation


  - 'Successful' Western cultural traits come to dominate in some territories, e.g. the Americanisation or McDonaldisation of tastes and fashion

  - Glocalisation and hybridisation are a more complex outcome that takes place as old local cultures merge and meld with globalising influences

  - Circulation of ideas and information has accelerated thanks to 24-hour reporting, people also keep in touch using social media such as Facebook and Twitter.
• Transnational corporations:


  Businesses whose operations are spread across the world, operating in many nations as both makers and sellers of goods and services. Many of the largest are are instantly recognizable 'global brands' that bring cultural change
• Modern globalisation differs from the global economy which preceded it due to the following reasons:


  - Lengthening of connections between people and places - products sourced from further away than ever before

  - Deepening of connections -> the sense of being connected to other people and places penetrating more deeply into almost every aspect of life

  -Faster speed of connections -> e.g. zoom
• What is the Silk Road an early example of?


  early form of globlalisation - a network of interlinking trade routes which were built from the 1st century BC. Connected Asia with Europe.
• What is Gross Domestic Product?


  A measure of the financial value of goods and services produced within a territory. Often divided by population size to produce a PER CAPITA figure
• Remittances:


  Money migrants send back to family and friends in their home countries, often in cash, forming an important part of the economy in many poorer countries
• Developments in trade and transport went hand-in-hand during the 19/20th centuries... the result is a constant feedback loop:


  Trade - Capitalist economies are always seeking to increase profits -> one way to achieve this is involves conducting research into transport technology to help build new global markets.

  Transport - Communication and transport technologies have been improving for thousands of years. Each new breakthrough has helped trade to grow in a geographical scale.
• Important innovations in transport include:


  - Steam power -> Britain became the leading world power in the 1800s using steam technology. Steam ships moved goods and armies quickly along trade routes in Asia / Africa.

  - Railways -> in the 1800s, railway networks expanded globally. By today, China has constructed 35,000 km of high speed railway since 2000.

  - Jet aircraft

  - Container shipping -> Around 200 million individual container movements take place each year. Some commentators describe shipping as the backbone of the global economy since the 1950s. The South Korean HMM Algeciras is 400m long and can carry 23,964 containers.
• Spatial division of labour


  The common practice among TNCs of moving low-skilled work abroad (or 'offshore') to places where labour costs are low. Important skilled management jobs are retained at the TNC's headquarters in its country of origin.
• Intermodal containers


  Large capacity storage units which can be transported long distances.
• Shrinking world


  Thanks to technology, distant places start to feel closer and take less time to reach.
• Technology is used by different players in a vast array of ways which contributes to globalisation. Some of these include:


  - Telephone and the telegraph --> first telegraph cables across the Atlanic in the 1860s replaced a 3-week boat journey with instantaneous communication. The telephone, remains a core technology for communicating across distance.

  - Broadband and fibre optics --> with the advent of broadband internet in the 1980s / 1990s, large amounts of data could be moved quickly through cyberspace. More than 1.2 million kms of flexible undersea cables carry all the world's emails, searches, tweets.

  - GIS and GPS --> these satellites continuously broadcast and time data to users throughout the world. Deliveries can be tracked, helping the growth of global production networks to be managed.

  - The internet, social networks and Skype
• Global flows may be viewed as a threat because:


  - Imports of raw materials and commodities can threaten a nation's own industries

  - Migrants can bring culutral change and religious diversity: not everyone welcomes this.

  - Information can bring citizens with knowledge that their gov. is threatening.
• Foreign Direct Investment (FDI)


  A financial injection made by a TNC into a nation's economy, either to build new facilities or to acquire, or merge with, an existing firm already based there.
• BRICS group


  Since 2009 an association of emerging economies (Brazil, Russia, India and China), which South Africa joined in 2010.
• What are the different types of foreign direct investment?


  Offshoring, foreign merges, foreign acqusitions, transfer pricing
• Offshoring


  Some TNCs build their own new production facilities in offshore low-wage economies.
• Foreign mergers


  2 firms in different countries join forces to create a single entity
• Foreign acquisitions

  When a TNC launches a takeover of a company in a different country.
• Transfer pricing


  Some TNCs, such as Starbucks and Amazon, have sometimes channelled profits through a subsidiary company in a low-tx country, such as Ireland.
• National governments have become key players in globalisation where they adopt policies that allow TNCs to grow in size and influence. These gov policies include:


  Free-market liberalisation and privatisation and encouraging business start ups
• Free market liberalisation


  Also known as neoliberalism

  1) Gov. interaction in markets impedes economic development.

  2) As overall wealth increases, trickle-down will take place from the richest members of society to the poorest.
• Privatisation


  Successive UK gov have led the way in allowing foreign investors to gain a stake in a privatised national service and infrastructure. Until the 1980s, important assets, such as the railways and energy supplies were owned by the state. However, running these services often proved costly and they were sold to private investors to reduce gov. spending and raise money. Over time, ownership of many assets has passed overseas.
• Trade blocs:


  Voluntary international organisations that exist for trading purposes, bringing greater economic strength and security to the nations that join.
• Tariffs


  The taxes that are paid when importing or exporting goods and services between countries.
• Special Economic Zones ( SEZs )


  Special economic zones: an industrial area, often near a coastline, where favourable conditions are created to attract foreign TNCs. These conditions include low tax rates and exemption from tariffs and export duties.
• Open door ' approach to global flows


  - FDI from China and its TNCs is predicted to total US$1.25 trillion between 2015 and 2025

  - China agreed to export more 'rare earths' minerals to other countries

  - Foreign TNCs are now allowed to invest in some sectors of China's domestic markets, including its rail freight and chemical industries
• Closed door ' approach to global glows

  - Google and Facebook have little or no access to China's market

  - China's Government sets a strict quota of only 34 foreign films to be screened in cinemas each year.

  - There are strict controls on foreign TNCs in some sectors, China's Government blocked Coca Cola acquisition of Huiyan Juice in 2008
• What are the 2 main ways to measure globalisation?


  KOF ( The Swiss Institute for Business Cycle Research )

  A.T. Kearney World Cities
• Offshoring


  TNCs move parts of their own production process to other countries to reduce labour or other costs.
• Outsourcing


  TNCs contract another company to produce the goods and services they need to rather than do it themselves. This can result in the growth of complex supply chains.
• Some parts of the world have benefited far more than others from FDI from TNCs because:


  - Not all places are suitable of production for goods, for a range of physical and human reasons.

  - Not all places have enough market potential to attract large retailers
• Global production network:


  A chain of connected suppliers of parts and materials that contribute to the manufacturing or assembly of the consumer goods. The network serves the needs of a TNC, such as Apple or Tesco.
• What is glocalisation?


  - changing the design of products to meet local taste or laws