Global governance

• Globalisation


  The process of the world's economies, political systems and cultures becoming more strongly connected to each other
• If there was no globalisation, there wouldn't be any interaction between different countries
• If there was complete globalisation, the whole world would act like a single community
• The real world is somewhere in between, but countries are becoming more and more closely integrated
• Factors that promote globalisation

  • Flows of labour
  • Flows of capital
  • Flows of products
  • Flows of services
  • Flows of information
• Flows of information


  Information (such as financial data or news of current events) can be spread across the world very quickly and easily
• Flows of information


  • The development and rapid spread of e-mail, the internet and social media mean that large amounts of information can be exchanged instantly across the globe
  • Increasing flows of information are making the world more interconnected, e.g. people can learn a lot about different countries and cultures without leaving their own country
• Flows of products


  Historically, manufacturing industries were located in more developed countries. The products being produced were also sold in the country where they were made
• Flows of products


  • In recent decades, manufacturing has decreased in more developed countries
  • Lower labour costs overseas have caused many companies to relocate the production side of their business abroad — they then import the products to the countries where they're sold
  • As a result of these changes, international trade in manufactured goods is increasing
• Flows of capital


  Capital is money that's invested — it's spent on something to produce an income or increased profit from it
• Flows of capital


  • Historically, capital was mostly invested within a country
  • Over time though, the amount of capital invested in foreign countries has increased — this is foreign direct investment (FDI)
  • Improvements in information and communications technology (ICT) have encouraged flows of capital round the world — it can instantly be moved around the world via the internet
  • Increasing flows of capital are making the world more interconnected, e.g. most countries' economies are now dependent on flows of investment to and from other countries
• Flows of services


  Services are economic activities that aren't based around producing any material goods, e.g. banking
• Flows of services


  • Improvements in ICT have allowed services to become global industries in recent decades
  • During the 1970s and 1980s there was also deregulation (removal of rules to increase competition) and opening up of national financial markets to the rest of the world
  • Services can be split into low level (e.g. customer service) and high level (e.g. financial services). High-level services tend to be concentrated in cities in more developed countries (e.g. London and New York). Companies are increasingly relocating low-level services to less developed countries where labour is cheaper
  • Increasing flows of services are making the world more interconnected, e.g. people are connected to other countries just through having a bank account — many banks are huge international organisations
• Flows of labour


  Flows of labour are movements of people who participate in the workforce from one country to another
• Flows of labour


  • More people are moving overseas — international migration increased by over 40% between 2000 and 2015
  • Some migrants are highly skilled workers (e.g. ICT and medical workers), moving to more developed countries where 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
  • Increasing flows of people between different countries are making the world more interconnected, e.g. people bring aspects of their culture with them, and countries are connected because people have family all over the world
• Global marketing


  Marketing is the process of promoting and selling products or services
• Global marketing


  • Nowadays, many products and services are sold all over the world, rather than just in the country where they are produced
  • Global marketing involves treating the world as one single market (a fully globalised world) and using one marketing strategy to advertise a product to customers all over the world
  • 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 every country
  • Global marketing can create a global brand awareness — consumers around the world identify a name or logo with a particular product or service, so they will purchase that product rather than a lesser-known competitor
  • Marketing needs to be adapted to regional markets though — different populations still have different laws and cultural attitudes
• Patterns of production


  • Developed markets dominate the global exports in manufactured goods, especially the EU and the US
  • Agricultural products: The EU and the US are the top exporters, but many other emerging economies are in the top 10
  • Fuels and mining products: Although the EU is the top exporter, a large majority of emerging economies in the Middle-East are also large producers due to the oil industry
  • Steel and iron: The EU dominates the exports, but many LICs are also large exporters
  • Clothing: Although the EU is the second largest exporter, the majority of clothing exports are highly concentrated in LICs
  • Automotive products: HICs and developed markets make the majority, but emerging markets are also becoming large exporters
• Patterns of consumption


  In general, HICs consume manufactured products more than LICs. In developing economies, there is a demand for fuel and minerals due to the rapid industrialisation. In the least developed countries, imports are low.
• Factors in globalisation


  • New systems, technology and relationships
  • Global financial systems
  • Trade agreements
  • Improved transport and communications systems
  • Improved management and information systems
• New systems, technology and relationships

  The development of new systems, technology and relationships in a range of sectors including finance, transport and management have been the driving force behind globalisation
• How the financial system became more global

  1. Information technology allowed greater access to information

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

  3. Governments undertook financial deregulation, removing barriers to capital coming in and out of countries

  4. These changes led to a greater range of companies getting involved in finance
• Trade agreements


  Trade agreements act like contracts — one country agrees to remove controls in exchange for the other country doing so. This benefits both countries' companies and consumers.
• The global trade system

  It is governed by the World Trade Organisation (WTO). The WTO sets rules on how countries can trade with each other and acts as a forum for countries to negotiate trade deals and settle trade disputes.
• Improvements in transport and communications systems

  • Improved transportation methods
  • Shipping containers
  • Communication satellites
  • Optic fibre cables
  • Free communication software
• Improvements in transport and communications systems

  • Improved transportation systems (e.g. high-speed rail networks, larger and faster ships and faster planes) have allowed people and products to get to places around the world more easily than ever before
  • Uniform metal containers (known as shipping containers) were introduced in the 1950s — this allowed more goods to be loaded onto ships at once and transferred straight onto other forms of transport
  • Communications satellites were first launched into Earth's orbit in the 1960s. They allow relatively cheap wireless communication between two devices, regardless of where they are
  • Optic fibre cables use signals of light to transmit more information than any other cable. They allow fast communication between two devices, allowing almost-instant communication between two people or companies
  • Over the past twenty years there has been a significant growth in software that allows free communication from anywhere in the world, e.g. email hosts, text messaging services and video messaging services
• Management and information systems

  New ways of working have made companies more efficient — they can make the same products more cheaply
• Management and information systems

  • Companies' supply chains have become global — a company's supplier may be in a different country to their factory, which is in a different country to their research and development department. This allows companies to minimise costs
  • Large companies can benefit from economies of scale. The average cost to a firm of making an item is usually high if they don't make very many of them. Large companies can reduce the average cost of making each item by purchasing specialised equipment and using production lines
  • 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
• Containerisation


  • Goods can be loaded onto ships at once and transferred straight onto other forms of transport, e.g. trains
  • This has made it easier for goods to be moved quickly and cheaply around the world
• Communication satellites


  • Communications satellites were first launched into Earth's orbit in the 1960s
  • They allow relatively cheap wireless communication between two devices, regardless of where they are
  • This means even people and companies based in rural or remote areas can access the Internet and communicate with others
• Optic fibre cables


  • Optic fibre cables use signals of light to transmit more information than any other cable
  • They allow fast communication between two devices, allowing almost-instant communication between two people or companies
• Free communication software


  Over the past twenty years there has been a significant growth in software that allows free communication from anywhere in the world, e.g. email hosts, text messaging services and video messaging services
• Management and Information Systems Have Increased Companies' Efficiency
• New ways of working

  Have made companies more efficient — they can make the same products more cheaply
• Companies' supply chains


  • Have become global — a company's supplier may be in a different country to their factory, which is in a different country to their research and development department
  • This allows companies to minimise costs
• Large companies


  • Can benefit from economies of scale
  • The average cost to a firm of making an item is usually high if they don't make very many of them
  • Large companies can reduce the average cost of making each item by purchasing specialised equipment and using production lines
  • They may also be able to buy raw materials at a lower price as they are able to buy in bulk
  • This gives large companies an advantage over smaller companies
• 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
  • E.g. rather than developing its own call centre, a company might pay another company to take on these services
  • Cheap labour costs mean many companies choose to outsource abroad
• Companies' working practices


  • Have also changed
  • E.g. casual and temporary contracts allow companies to take on workers as and when they are required — they don't have to pay them a fixed yearly wage, so they save money
• Globalisation creates new trading relationships between countries
• Trade agreements


  • By forming trade agreements, countries become interdependent — if two countries need each other to buy and sell their products, it would not be in their interests to be at war with one another
  • This means trade makes war less likely