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What is globalisation?
The increasing integration and interdependence of countries around the world.
How are flows of capital a feature of globalisation?
Capital is wealth in the form of money or assets held by a individual or organisation. Flows of capital include money that is invested. Historically, investment was usually within a country but now there are huge amounts of FDI - global FDI has increased from $3000 billion in 1996 to $12,000 billion in 2006. This has been made possible as a result of improvements in ICT - money can be moved around the world via the internet.
How are flows of services a feature of globalisation?
Services are economic activities that do not produce a material good. Improvements in ICT has allowed services to become global industries in recent decades - firms can locate in other countries and still serve the needs of customers. Deregulation of financial markets in the 1970s and 1980s has allowed banks and financial institutions to do business elsewhere in the world. High level services tend to be located in more developed countries.
How are flows of labour a feature of globalisation?
International migration has increased dramatically. Some move to escape war, for leisure, but most for work. Highly skilled workers move to more developed countries where wages and working conditions are better. Low skilled workers move to escape high levels of unemployment and low wages. This has been made possible due to improvements in transportation. This has made world more interconnected - brining aspects of culture.
How is the flow of goods a feature of globalisation?
The flow of goods has been made possible by improvements in the ease and cost of transport systems e.g. increased aircraft size, growth of low cost airfreight companies and bulk container shipping.
What is global marketing?
Marketing is the process of advertising and selling goods and services. As goods and services are now sold in international markets, marketing has become global. This has allowed firms to use the same marketing strategy all over the world - this allows firms to take advantage of economies of scale. However firms may have to make regional changes due to different laws and attitudes e.g. some countries have different laws on alcohol.
How has the patterns of trade changed?
Historically, manufacturing industries were located in more developed countries where the products were just sold within their country of manufacture. In recent decades there has been a decline in developed countries as companies move to less developed countries were labour costs are lower - this is known as the global shift. This has meant world trade has increased as developed countries have to import more goods. This increases the interdependence of economies.
What is the global shift?
The movement of economic activity from more developed countries to newly industrialising countries, and more recently to less developed countries.
What are some of the reasons for the global shift?
The growth of large TNCs and MNCs; transport revolution; information and communications revolution; movement towards freer trade
Give examples of different industries which have been affected by the global shift?
Garment manufacture were first to shift and operate in many LEDCs - they are labour intensive and perform routine tasks, easy to transport.
Industries which produce heavy bulk items such as steel were originally confined to MEDCs with well developed internal markets. Growth of large TNCs such as Indian TATA Company beginning to operate and dominate globally. Due to improvements in technology and transport.
Car manufacture until recently was dominated by USA, Europe and Japan. This has shifted to other countries such as Brazil, South America and China due to low costs and increasing markets within country.
Certain market orientated industries such as fashion rarely shift from MEDCs e.g. New York, Paris, Milan
What is the impact of the global shift on MEDCs?
Imports of low cost imports from LEDCs may help to lower the cost of living.
Growth of LEDCs may create export market for MEDCs.
Loss of jobs - often low skilled workers - leads to increase in inequality.
Can lead to deindustrialisation and structural unemployment in certain areas.
What is the impact of the global shift on LEDCs?
Increase in demand for exports leads to export led growth with potential multiplier effect.
Increase in employment in labour intensive work.
Workers may be exposed to new technologies which increase the skills and productivity of workers.
Social impacts of low wages and poor working conditions - potential exploitation of workers.
May lead to over-dependence on a narrow economic base.
People may give give up on agriculture, damaging food supplies.
Environmental impacts of rapid-over industrialisation.
Lead to rapid rural to urban migration.
Why and what were the impacts of Dyson's shift of production to Malaysia?
Factory opened in Wiltshire. It was very successful and Dyson wanted to expand onto land next to factory, but planning permission was refused. It then decided to relocate to Malaysia. Union leaders and local people outraged as it would lead to increase in unemployment. Productivity has been increased in Malaysia and the cost of making a vacuum is about one third of that in the UK. The factory in Wiltshire has been turned into an R&D centre, employing more people than before, who are highly skilled.
What are NICs?
Countries that have undergone rapid industrialisation.
Who were the Asian Tigers and what was the main reasons for their growth?
Hong Kong, Singapore, South Korea and Taiwan all began to rapidly industrialise in the 1960s. This was as a result of investment from large TNCs, who began to set up manufacturing here due to: low labour costs, cheap and widely available raw materials and land, reasonable standard of infrastructure such as roads, favourable government policies such as subsidies and grants to attract investment, fewer environmental, labour and planning laws, reduced tariffs and expanding markets.
What industries were the first to set up in the Asian Tigers and how did this develop?
Manufacturing was first due to low production costs and labour intensive. As this was successful companies began to invest in the industries such as improved technology. Began to produce higher value goods which were more expensive to make but had higher profit margins e.g. Hong Kong started manufacturing electronic goods. Workers in Asian Tigers became more skilled and educated. This led to increased wealth and living standards.
Why did the development of Asian Tigers slow down?
As the economies became wealthier, it became more expensive to produce goods here and wages became higher. To keep costs low TNCs began to move to lower cost countries. Also TNCs grew out of Asian Tigers e.g. Samsung originated in South Korea. They then set up in less developed countries.
Which countries were in the second wave of NICs?
Indonesia, Malaysia, Philippines and Thailand.
How has growth been achieved in these countries?
Through strong and labour intensive primary sector - most people earn a living from farming and forestry.
Through growth in the secondary sector - by encouraging import-substitution industries by manufacturing primary products to increase their value, and through encouragement to MNCs and TNCs who are incentivised by low land and labour costs.
Strong links with Japan.
They are the founding members of ASEAN - this helps to increase their power.
How did Malaysia achieve growth?
It has many natural resources such as timber, oil and tine. In the 1980s the government began to encourage export orientated industries and provided incentives for MNCs such as Japanese electronics manufacturer Matsushita. Malaysia soon founded its own car company called Proton and is expanding into more.
When did China begin to grow and at what rate of growth did it grow by?
Since the 1970s China has experienced rapid economic growth with growth averaging around 10% per year.
What are some of the reasons for China's rapid economic growth?
China was a communist country up until 1976. Since 1978 a number of economic reforms have created an open door approach to inward investment.
Reduced tariffs have encouraged imports and exports.
FDI encouraged through SEZs such as EPZs which provide tax breaks to foreign companies who set up.
Investment in healthcare and education to create a healthy, skilled labour force.
Investment in infrastructure to make it easier for manufacturing companies to operate.
China has a massive population and natural resources.
China joined the WTO in 2001 which has helped open its markets up.
What are the positive economic impacts of China's growth?
Increase in demand for exports - leads to strong export led growth with potential multiplier.
Increase in employment in manufacturing.
Large balance of trade surplus.
Large amounts of FDI.
What are the negative economic impacts of China's growth?
Has led to an increase in the cost of living.
Some companies looking to relocate again to cheaper places due to rising costs.
Concerns over the safety of some Chinese products has caused the demand for some companies to fall.
China has a high and unsustainable level of economic debt - currently 250% of GDP - this could lead to a debt crisis and possible economic crash in the economy.
There has been a slowdown in the construction industry due to excess supply over demand - led to ghost towns e.g. Ordos Kang Bashi.
What are the positive social impacts of China's growth?
Increased economic growth means there is more money available for education, health, housing, social services.
Increasing incomes, working conditions and standards of living.
What are the negative social impacts of China's growth?
The worlds largest rural to urban migration.
Concerns over the safety of working conditions and sweat shops e.g. In 2010, 130 workers were killed in a toxic leak at a factory making products for Apple Inc.
Massive ageing population with a highly dependent population.
Rising regional inequality - growth is focused on eastern areas near coast and inland areas relatively poor.
20% of the population live on less than US$1 a day.
What are the political impacts of China's growth?
China has increasing power around the world and in the UN. However, China's large trade surplus is straining relationships with USA and EU.
What are the positive environmental impacts of China's growth?
As China grows it will have more money to invest in environmental improvement, as more developed countries have done in the past.
What are the negative environmental impacts of China's growth?
Increase in land, water and air pollution due to increasing number of factories and power stations.
Large demand for raw materials is damaging environment.
70% of China's lakes and rivers are polluted.
There are severe problems of water shortages and 360million people do not have access to safe drinking water.
Increased air pollution results in a number of premature deaths.
Which industries has India specialised in and what growth rates has it achieved?
Services, pharmaceuticals and software development - growth achieved through FDI - grown by an average of 7% a year since 1997.
What are some of the reasons for India's rapid economic growth?
In the 1990s the government reduced barriers to trade and introduced policies to encourage FDI.
India has a highly educated and skilled workforce.
English is widely understood and spoken.
Low labour costs
Good infrastructure and technology.
Rising middle class population with increasing purchasing power.
Explain the nature of India's growth
In the 1980s and 1990s, Indian services companies started up and began to supply foreign TNCs. The low costs of labour meant that these firms could provide the same service but at a lower price. As service industry grew, more TNCs began to outsource their services to India. Average salary in India for a call centre is £1200 a year, compared to £12,500 a year in the UK. Other services such as IT technical assistance and financial admin grew e.g. KPMG. There was also growth in software development - Bangalore is the centre of this - Google started up in 2004 followed by Microsoft in 20005 - highly skilled jobs. These services don't employ that many people but produce high returns.
What are the social impacts of India's growth?
Increasing inequality between rich and poor - benefits and employment opportunities only available to the educated middle class.
High levels of poverty - 60% of the population of Mumbai lives in poverty.
Rapid population growth - projected to have 25% of worlds population by 2050.
HIV/AIDS has the ability to damage progress.
What are the economic impacts of India's growth?
Growth in services industry has increased economic growth, employment and standards of living.
In 2011, the service sector accounted for 56% of GDP.
Much of growth is from FDI from TNCs so profits go abroad.
What are the environmental impacts of India's growth?
Diminishing water resources, increased pollution etc.
What are some of the reasons for growth in the 21st century?
High levels of international trade and investment.
Newly emerging markets have high populations - as countries develop, creates a growing demand for goods, creates new markets for countries such as the UK.
Oil producing countries e.g. Saudi Arabia
Countries have shifted from being closed markets to open markets e.g. Russia.
Why are these NICs important?
China has been responsible for 20% of global economic growth since 2000. New markets become more important in world trade and investment. Some people think the balance of world power could shift to these countries.
What rates of growth has Brazil managed to achieve?
Has 8th largest GDP in the world and predicted to become 5th largest by 2050. It has a number of large TNCs, such as Petrobras.
What are the reasons for Brazil's growth?
Increased political stability - however, there are some concerns over corruption e.g. Petrobras.
Brazil can export commodities - such as iron ore and agricultural products such as meat and soya. These are increasing in value due to commodity boom.
Main exports include steel, aircraft and automobiles.
Oil - Brazilian state owned Petrobras.
Therefore, Brazil's growth based on high value exports not just commodities.
What is the impact of new technologies on globalisation?
New technologies in IT and communications have been a major driving force of economic growth in recent years. For example, CAM (computer aided manufacturing) has increased manufacturing efficiency. Huge profits can be made from new technologies and sale and distribution to emerging markets. There are high levels of investment in new technologies.
What are some of the economic benefits of groups of nations?
Reduction of tariffs in free trade groups allows increased trade between members.
A common external tariff may help to protect jobs.
Access to larger market may allow firms to expand.
May allow firms to exploit potential economies of scale.
May allow country to exploit its comparative advantage.
Create a more flexible labour market.
How may global groupings promote development?
Countries can work together to tackle development issues to help member countries or issues of a global concern e.g. diseases and epidemics. The UN is an international organisation of over 190 countries, in 2000 it set eight MDGs to help promote development.
How may global groups promote peace?
Global groupings increase security as countries in a group are less likely to go to war as it will impact their economies and development. Countries can also agree policies that increase security e.g. ASEAN is a group of 10 countries which have banned nuclear weapons.
What are the benefits of global groupings?
Increased economic growth; improvements in standards of living; increased employment due to more flexible labour markets; increased security and better international relations; groupings can provide support for declining regions e.g. EU's regional policy
What are some of the negative impacts of groupings?
Countries may lose control on aspects of how they run their country.
Countries may have to share resources.
Trade restrictions with countries outside group may damage their economies e.g. LDCs.
May damage countries economy's e.g. UK is a net contributed to EU - paid around £4 billion to the EU bailout of Portugal in 2011.
When was the EU set up and how many members does it have and what are its main policies?
In 1957 by the Treaty of Rome - now has 28 members. It allows the free movement of goods, services, labour and capital. Member states have accepted common laws on agriculture and fishing. Has regional policies to support rural and declining areas and industries.
What are some of the benefits of the EU?
Increased trade - trade with EU accounted for 23% of GDP in 2002.
Euro has made it easier for certain members to trade.
Residents free to move around to find work.
Members contribute taxes to central fund which provides support e.g. EU regional policy provides support to poor and rural areas.
Protects certain industries e.g. CAP provides subsidies to farmers and imposes a tariff on imports - helps to protect jobs of farmers, protect food supplies, lower the cost of food for consumers.
Increased security e.g. Counter-terrorism policy which introduces biometric passports and border control.
Cohesion Fund invests in renewable energy.
What are some of the negative impacts of the EU?
Countries must share resources e.g. fishing grounds must be shared between member states under the Common Fisheries Policy.
Policies such as CAP have a negative impact on countries outside the EU.
Increased immigration putting pressure on UK and leading to lack of skilled workers in Eastern Europe.
In October 2013 the UK was paying £55 million in child benefit to migrant children living outside the UK.
What are TNCs?
TNCs are large companies which operate in two or more countries. Important for global economy - in 2010 contributed a quarter of global GDP.
How are TNCs usually structured?
Headquarters are often in big cities in developed countries. R&D centres are normally located in same country as the HQ, in developed countries. Factories are often located in NICs where production costs are low. They may also have factories were there markets are to reduce barriers to trade.
By how much have TNCs grown in recent years?
They have increased in size, wealth and number - in 1970 there were 7000 and in 2012 there were over 80,000.
How have TNCs grown?
They can move production to low cost countries.
They can take advantage of different government policies.
They can operate in countries where environmental, labour and planning laws are less strict.
They can expand to newly emerging markets.
They can benefit from economies of scale.
They can switch production between different countries and control their supply chain as to increase profits.
They can expand through mergers and takeovers.
The growth has been allowed through improvements in ICT and transport.
What are the economic impacts on the country of origin of TNCs?
Profits sent back to shareholders as dividends.
Taxes on TNCs income goes to government.
Increase in unemployment, usually of low skilled work. However there is still employment in high skilled work such as R&D.
May lead to wider decline of an area - negative multiplier effect.
What are the social impacts of TNCs in the country of origin?
TNCs can supply things in bulk and and supply goods which small smaller companies cannot afford.
High unemployment and decline of areas can lead to social problems such as increased crime.
What are the environmental impacts of TNCs on the country of origin?
Closed factories may lead to reduced pollution.
What are the economic impacts on the host country from TNCs?
Increase in employment creates increased wealth for local people - money spent in shops - positive multiplier effect.
TNCs may cause local businesses to shut down by outcompeting them.
Profits sent back to country of origin.
What are the social impacts of TNCs on the host country?
May invest in social development such as education to improve the skills of the workforce.
May bring new technologies which improve workers productivity and skills.
Potential exploitation of workers - poor working conditions and wages.
Managerial roles taken by people from country of origin
Lead to rapid urbanisation.
Decisions made by TNCs with no thought of implications on host country.
What are some of the environmental impacts of TNCs on the host country?
May invest in environmentally friendly technologies.
Manufacturing can cause pollution.
Agricultural and wildlife habitats may be lost when TNC buys land.
Greater integration of the global economy
Clarke Fisher Model diagram
Clarke Fisher Model
Pre industrial: Primary
Post industrial: Tertiary and some Quaternary
Growing or extracting raw materials
Manufacturing goods in factories or workshops
Services e.g. education, retail, banking, health service
As countries move through the Clarke Fisher model
Increase in pay and income
Better working conditions
Change from informal to formal jobs
Primary working conditions
Hard, labour intensive work
Children have to work
Work for food, not money
Secondary working conditions
Long hours, repetitive work
Mostly under 30 years old
Tertiary working conditions
Good working conditions, health and safety regulations
Paid holiday and pensions
Quaternary working conditions
Very good working conditions
Very high pay
Highly stressful job
Impacts of globalisation
Most countries have become richer
300 million people in China have been lifted out of poverty
Elsewhere incomes haven't increased at all e.g. Africa
Foreign direct investment
Why FDI has become easier
Communication is cheap and instant
Jet aircrafts reduce cost of travel
Container ships have been developed and improved
TNCs help globalisation
They invest all over the world
They outsource their work to poorer countries
They have complex networks all around the world
When two or more TNCs join together
When work is relocated out to another company (known as off-shoring when it is moved overseas).
Economies of scale
The ability to reduce costs proportionally by increasing the scale of production.
Race to the bottom
Situation when companies and countries try to compete with each other by cutting wages and living standards for workers, and production is moved to an area with low wage workers.
Process by which people, culture, finance, goods and information transfer between countries with few barriers.
Refers to the phenomenon that alters the qualities of the relationship between space and time. 'Shrinking world'.
An important person, company, in a particular area of activity.
A global organisation which took uses bank deposits placed by the world's wealthiest countries to provide loans for development in other countries.
International Monetary Fund (IMF)
A global organisation whose primary role is to maintain international financial stability.
A global organisation which looks at the rules for how countries trade with each other.
When countries have grouped together to promote free trade between them. The EU is an example of a trading bloc.
Grants given by governments to increase the profitability of key industries.
Foreign Direct Investment (FDI)
Investment made by an overseas company or organisation into a company or organisation which is based in another country.
Special Economic Zones (SEZ).
Set up by national governments to offer financial or tax incentives to attract FDI. China uses the term 'Export Processing Zones'.
A business which exists separately from its owners. Its owners are shareholders, who mostly appoint directors to run the business.
Wealth in the form of money or assets.
Just in time
The means by which the time gap between production and delivery to the customers is sharply reduced- cutting warehouse and storage costs.
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