Global systems and governance

• What is globalisation


  Globalisation is the process by which the world is becoming increasingly interconnected economically, socially, politacally and culturally.
• Factors that promote globalisation: Flows of information

  1) Information (eg. financial data or news of current events) can be spread across the world very quickly and easily.

  2) The development and rapid spread of e-mail, the internet and social media mean large amounts of information can be exchanged instantly across the globe. This allows people living in different countries to communicate and work together.

  3) Increasing flows of information is making the world more interconnected, eg. people can learn a lot about different countries and cultures without leaving their own country.

  
• Factors that promote globalisation: Flows of capital

  Capital is money invested.

  1) Historically, capital was mostly invested within country, eg. companies would expand by doing things like building new factories or setting up new branches within their country of origin.

  2) Over time, the amount of capital invested in forge in countries has increased (FDI). Global FDI has increased from $400billion in 1996 to $1500billion in 2016.

  3) Improvements in ICT have encouraged flows of capital round the world eg. via online banking so It can be easily moved around the world.

  4) Increasing flows of capital are making the world more interconnected eg. most countries' economies are now dependent on flows of investment to and from other countries.

  
• Factors that promote globalisation: Flows of products

  1) historically, manufacturing industries were located in more developed countries. The products being produced were also sold in the country where they were made.

  2) In recent decades, manufacturing has decreased in developed countries eg. the number of people employed in manufacturing In the UK fell from more than 5 million in 1985 to around 2.6 million in 2014.

  3) Lower labour costs overseas have caused many companies to relocate the production side of their business abroad - they import the products to the countries where they are sold. eg, vacuum manufacturer Dyson moved its production to Malaysia in 2002, but the vacuums are still sold in the UK.

  4) As a result of these changes, international trade in manufactured goods is increasing.

  5) Changing flows of products are making the World more interconnected.

  
• Factors that promote globalisation: Flows of services

  Services are economic activites that aren't based around producing any material goods.

  1) Improvements in ICT have allows services to become global industries in recent decades. Things like banking and insurance depend on communication and transfer of information. Improvement to ICT means that services can relocate to anywhere in the world and still serve the needs of customers.

  2) During the 70s and 80s there was also deregulation(removal of rules to increase competition) and opening up of national financial markets to the rest of the world. This meant that it was easier for banks and financial institutions to do business in other countries.

  3) Services tend to be split into low level (eg. customer service) and high level (eg. financial services). High level services tend to be concentrated in cities in more developed countries eg. London and New York. Companies are relocating low level services to less developed countries where labour Is cheaper.

  4) Increasing flows of services is making the world more interconnected eg. many people are connected to other countries by just having a bank account.
• Factors that promote globalisation: Flows of labour

  People moving from the workforce in one country to the workforce in another country.

  1) More people are moving overseas - international migration increased by over 40% between 2000 and 2015. Some people move because they have to eg, war torn countries. but many people choose to move for work.

  2) Some migrants are highly skilled workers eg. ICT and medical workers, moving to more developed countries where the wages and working conditions are better. Others are unskilled workers who move to more developed countries to look for work because of unemployment or poor wages in their own countries.

  3) Increasing flows of people between different countries are making countries more interconnected eg. people are bringing aspects of their own culture with them.
• Marketing


  Marketing is the process of promoting and selling products or services.
• Why has marketing become global?

  1) Many products and services are sold all over the world, rather than just the country they are produced. This means marketing had to become global.

  2) Global marketing includes treating the world as one single market and using one marketing strategy to advertise a product to customers all over the world.

  3) Global marketing gives economies of scale - it is cheaper to have one marketing campaign for the whole world rather than having a different campaign for very country.

  4) Global marketing can create a global brand awareness - consumers around the world identify a name or logo with a particular or product to service, so they will purchase that rather than a less known brand.

  5) Marketing needs to be adapted to regional markets - different markets have different laws and cultural attitudes eg. alcohol consumption.
• Globalisation as a result of of new systems, technology and relationships.


  - Systems include ways of working, procedures and methods of organisation that allow a particular function to be carried out eg. just in time manufacturing system is a way of making products in response to the demand for them.

  - The technology used for information, communications and transport has advanced rapidly. For example, the internet allows people to access information and planes allow people and goods to be transported around the world swiftly and efficiently.

  - Before the second world war, most relationships involved one country losing and another gaining. Nowadays, relationships are based on trade and common rules - in theory everyone involved to gain.
• Financial systems promoting globalisation

  1) Financial systems are based on investment banks. The main role of investment banks is to help companies raise capital by selling shares on behalf of those companies.
• What happened In the 1980s to make the financial system more global.


  1) Information technology such as the internet, allowed investors greater access to information. Investors and investment banks could easily find out whether a company was doing well or struggling and help make informed decisions about whether to invest.

  2) Investment banks created new financial products that made foreign investment less risky.

  3) Government around the world took part in a process known as financial deregulation, where they relaxed rules about what banks could do. Financial deregulation included allowing banks to charge people more for their services, as well as letting banks invest in a greater range of businesses.

  4) Financial deregulation also involved removing barriers to capital coming in and out of a country, making it easier for investment banks to buy and sell shares and other products across the world.

  5) These changes led to a greater range of companies getting involved in finance eg. commercial banks, also began selling shares. It also enabled investment banks to take on a greater number of services, such as exchanging currencies between countries to allow them to trade across boarders.
• Tariffs


  Trade is primarily regulated by a countries government. Which controls which products they let in and out of the country and at what price.

  Controls include:

  Tariffs- taxes on products coming into the products going in and out of the country.

  non- tariff barriers - rules on the quality of products coming into the country.

  - And the banning of certain things eg. illegal drugs.
• Effects of controls on trade

  Controls make it more expensive for companies to sell their products abroad and consumers to buy them.
• Trade agreements (Bilateral and multilateral)

  To make trade cheaper, countries can enter trade agreements like a contract. One country agrees to remove controls in exchange for another country doing so. Benefits both. Between 2 countries is a bilateral trade agreement.

  - multilateral trade agreement is between several countries and all countries involved agree to remove tariffs and other controls eg. the EU.
• How the world trade organisation governs global trade

  It sets rules on how countries can trade with each other. eg. to stop countries imposing unfair tariffs on each other's companies.

  - It also acts as a forum for countries too negotiate trade deals with each other and settle trade disputes.
• How transport has improved global business:

  - Improved transport systems (eg. high speed rail networks, larger and faster ships and faster planes) have allowed people and products to get to place around the world more easily than ever before.

  - Containerisation began in the 1950s , it allows more goods to be loaded onto a ship at once and straight onto other forms of transport eg. trains. This has made it easier for goods to be moved quickly and cheaply around the world.
• How communication systems have improved global businesses

  - Communication satellites - 1960s. They allow relatively cheap, wireless communication between any 2 devices no matter where they are. This means that even people and companies based in rural or remote areas can access the internet and communicate with others.

  - Over the past 20 years, there has been a significant growth in software that allows free communication from anywhere in the world.
• How companies have become more efficient ( management and information systems)

  1) Companies supply chains have become global - a company's supplier may be in a different country to their factory, which is different country to their research and development department. This allows companies to minimise costs.

  2) Large companies can benefit from economies of scales. It gives them an advantage over smaller companies.

  3) Outsourcing is when a company pays another company to do work that in the past may have been done in house, usually to save costs. Cheap labour costs mean many companies choose to outsource.
• How globalisation affects security

  1) Globalisation creates new trading relationships between countries. By forming trade agreements, countries become interdependent - if two countries need each other to buy and sell their products. It is not in there best interest to be at war.

  2) By working together they can improve security eg. The North Atlantic treaty organisation (NATO) was founded by several countries in 1949, with the aim of providing security during the Cold War - by grouping together they were able to deter common threats.

  3) However, globalisation can make conflict more likely eg. developed countries have intervened in conflicts in developing countries to secure resources like oil.
• Economic interdependence


  Countries rely on each other for economic growth. eg. oil is produced by one group of countries and consumed by another group of countries. Consumers rely on producers to sell them oil, while producers rely on the money the consumers give them when they buy the oil.

  
• Political interdependence


  Countries are dependent on each other to solve issues that cannot be addresses by just one country - eg. in 2015 -2016 European migrant crisis, the European countries worked together to support refugees from the conflict in Syria.

  
• social interdependence


  Greater connections between people living in different countries means there is social interdependence between nations. For example, the 244 million number of migrants in 2015 built new relationships and became interdependent with people from other countries.

  
• Environmental interdependence


  Every country in the world is dependent on the rest of the world to look after the environment eg. in 1986 a reactor in a nuclear plant in Ukraine exploded. Radiation from the explosion led to an increase in some cancers and birth defects in the Ukraine, Russia and Belarus and possibly further afield.

  
• Consequences of interdependence


  It creates in equality, both between countries and between people within the same country. It tends to have benefits for developed countries rather than less developed and to richer people rather than poorer people. This Is because flows are unequal.
• Benefits of unequal flows of people

  - Immigrants can create economic growth as they do jobs a countries citizens can't do eg. skilled jobs like engineering or don't want to do eg. dangerous jobs like logging or mining.

  - Migrants send remittance payments back to their home countries. remittance payments can significantly increase the amount of capital flowing into less developed countries. This can create economic growth in the home country because local people can afford to spend more, boosting local industries.
• Issues with unequal flows of people

  - Inequalities occur because less developed countries often suffer a 'brain drain' - skilled people leave and take their knowledge with them. This reinforces existing inequalities between countries.

  - Conflict can occur because low-skilled migrants are often happier to work for less Money. By employing them, companies may depress wages for the local population. This can cause conflict between the local and migrant populations.

  - Migrant workers are sometimes made to work in dangerous conditions for little money eg. for Qatar, several thousand migrants have died building facilities for the 2022 World Cup.
• Benefits of unequal flows of money

  - FDI allows foreign companies and countries to take advantage of cheap raw materials and low labour costs, whilst the host country can benefit from foreign capital and expertise. Foreign aid can be used to improve giving standards or to rebuild local infrastructure after a disaster.
• Issues with unequal flows of money:

  - Foreign aid can create dependency, which gives governments little incentive to improve their own countries.

  - FDI can force out local businesses, because foreign companies with superior capital and technology can make products more efficiently.

  - Injustice - companies may pressure governments of less developed countries to pass laws that make it cheaper to invest there.
• Neo-liberalism


  - Before the 80s, most national governments took responsibility for providing welfare for their citizens and controlling imports through trade barriers, to protect their national industries.

  - However, in the 80s many developed countries began to think that the economy would work better without state intervention - maximum economic growth would only occur if trade were removed. State owned companies were privatised, and government spending was cut.
• Benefits of Neo-liberalism


  - It has increased free trade, which has led to more development within countries and less conflict between some countries.
• Issues with Neo-liberalism:


  - Inequalities as Neo-liberalism started in developed countries and has spread globally. It tends to concentrate wealth in the hands of a few eg. large, wealthy businesses.

  - Governments and TNC's may argue that free trade and privatisation are the best way to help a country develop, and this justifies poor working conditions and environmental degradation In the less developed country.
• Benefits of unequal flows of technology

  - This can lead to rapid innovation that can help people all over the world. eg. technology companies in Silicon Valley, US have developed innovations in communications and healthcare.
• Issues with unequal flows of technology:


  - Developed countries can afford the latest technology whereas developing countries cannot.
• Negative impacts of globalisation

  1) The unequal flows have created unequal power relations between countries, with some countries having much more power than others.

  2) Developed or emerging countries with a lot of money and tech are able to drive global systems to their own advantage. These countries have a lot of control over the global economy and political events.

  3) Many less developed countries lack money and technology. These countries have limited power - rather than controlling the global economy and political events they are only able to respond to it.
• Example of unequal power relations: Climate change


  - Many of the biggest contributors of climate change are also the richest countries. These countries can be reluctant to agree to proposals that limit climate change as they think it may harm they're economy (eg. through loss of jobs in the fossil fuel industry and higher energy prices)

  - In contrast, some of the countries that are most affected by climate change are also the poorest. For example, countries like Bangeldesh and Tuvalu are likely to be affected by rising sea levels but find it difficult to influence other countries to reduce greenhouse gas emissions because they lack power.
• The International monetary fund (IMF)

  - The IMF monitors the global economy and advices governments on how they could improve their economic situation. It also gives out loans to countries with Economic problems.

  - The world bank provides loans to less developed countries to invest in areas like health and education. The money comes from subscriptions from its member countries - all members pay in, but only those who need it can take money out. This means funds are distributed from developed to less developed countries. However, less developed countries are expected to pay back the loans.
• Critisms of the IMF

  Some people believe the IMF is reinforcing unequal power relations between nations.

  1) The IMF and the world bank are both based in the USA and are led by the USA and other developed countries. Less developed countries. Less developed countries (who are most likely to need a loan) therefore have less influence over the decisions of the organisations.

  2) The IMF and world bank's loans are conditional - the less developed country has to make changes in order to receive the loan.

  3) The WTO generally works to reduce trade barriers between countries - but, many developed countries have kept trade barriers in place, reducing imports from less developed countries. This tends to boost the economies of developed countries at the expense of less developed countries.
• Impacts of globalisation on trade

  1) Thevolumeof global trade has increased hugely since the 1980s - its value has increased by nearly8 timesbetween 1980 and 2008.

  2) The pattern of global trade is also changing. Developed countries remain the biggest global trades but some emerging economies are catching up eg.Chinais now the biggest exporter of goods in the world, due to the rapid growth of its manufaturing.

  3) Less developed countries are also becoming bigger traders, but growth is slow - in 1995, African countries accounted for around 2% of world trade.

  4) Many countries are opening themselves up for international trade by removing barriers to trade. This is partly due to the formation of trade blocs.
• Impacts of globalisation on investment

  - Foreign investors may be attracted by thesize of the market,thestabilityof the market, the possibility of extracting resources for themselves or the ability to access financial services.

  - The volume of FDI rose dramatically from about$400billion in 1996 to nearly $1500 billion in 2016.

  - The pattern of investment has also changed, until the 1980s developed countries mainly invested in other developed countries. In the past 10 years, China, Brazil and India were some of the largest receivers of foreign investment.

  - Another big chance has been where the investment has come from.Emerging economies now invest heavily in less developed countrieseg. China invests a lot of money in Africa and South America.
• Protectionism


  - Some countries limit trade using tariffs and non - tariff barriers to sheild their industries from foreign competition.