GLOBALISATION

Globalisation as a significant feature of the world in the 21st century:

Definition

The process of international integration arising from the interchange of world views,
products, ideas and other aspects of culture. This unit looks at commerce in particular.

The extent of global interdependence

1

Goods and services are sold in an international market.

Nations maintain high imports and exports.

Countries keep foreign reserves (other currencies) in their banks.

Transnational corporations run international operations.

Goods may require materials, labour and skills from many different parts of the world.

The development of manufacturing and services around the world:

The influence of developments in ICT and transportation

Satellites

Communication satellites relay telephone and data conversations through transponders in

the satellite. These sometimes use geostationary positioning.

Undersea cables

SEA-ME-WE 3 & 4 (South East Asia-Middle East-Western Europe). 3 stretches 39,000 km

whilst 4 is 18,800 km. They use WDM technology to transmit high quality signals almost
instantaneously.

Email

Electronic communication facilitates not only global management but the exchange of big
data (images etc.)

Internet

The internet has created a more accessible interface with customers and a new platform for
advertising.

Aircraft

Planes carry more passengers per flight, have increased in speed and boast more efficient
engines. The number of airports has increased and business trips are consistently
becoming quicker and cheaper.

Containerisation

There are more than 17 million shipping containers of standardised sizes (8ft wide, 20 or
40ft long) that can carry 25 tons of freight. This protects goods from damage or theft and
makes loading and unloading much faster.

Reasons for the development of call centres abroad

1

Operating costs in India are between 10-60% lower than in the UK.

ICT allows equally fast and clear communication.

Cheap labour market - salaries are often a tenth of the wage for the same job in the UK.

In ex-colonial countries like India or the Phillippines, more than 10% of the population speak English
fluently.

Companies include British Airways, BT, Barclays and TSB.

GLOBALISATION

A small industrial region with global connections - Motorsport Valley, Silverstone

1

The land between Oxfordshire and the West Midlands centred around the Silverstone racing circuit houses
8 of the 11 formula one teams (Lotus, Mercedes, McLaren)

3500 other companies associated with motorsport are based in the area employing more than 40,000.

The annual turnover of the regions motorsport industry is 6bn, of which 3.6 is exports earnings.

The proximity to suppliers like B3 technologies in Guilford increases efficiency.

The development of transport (East Midlands, Stanstead & Birmingham airports + the M1) means that
parts can be supplied on a JIT basis.

There is a ready supply of skilled labour, over 80% of the worlds high performance engineers, and the
links to Oxford, Birmingham and Warwick universities provides research facilities and a young and
competitive labour market.

The advantages and disadvantages of TNCs

Advantages

Bring employment
Enforce standardised working conditions and labour practice
Generate wealth
Provide expensive machinery and modern technology
Fund infrastructure (roads, airports and broadband)
Benefit aggregate economy (wider economic base, increased GDP & demand for consumer
goods, investment and foreign reserves

Disadvantages

Labour force exploited with low salaries and unstable contracts

Insufficient trade regulation (working conditions and environment)
No demand for skilled labour
Locals better served by direct funding for health, housing and education rather than relying
on the trickle down effect of investment, especially since profits are often exported.
Trade monopolies prevent countries growing their own industry (countries like Indonesia and
Taiwan succeeded through protectionist measures)
Exportation of pollution (e.g. manufacturing in China)

Toyota case study

Head quarters and
research in MEDCs

R&D in Japan, US (California) and UK. Headquatered in Japan, Aichi.

High profit

$11 billion turnover in 2006.

Large workforce

Employs more than 338,000 worldwide, assembling 10 million vehicles each year.

Branches in many
different countries

52 manufacturing sites across 27 different countries. In Burnaston, Derbyshire there

are 3000 employees.

Exportable/labour
Intellectual property rights on design such as the engine of the Prius, a new hybrid
intensive/univeral market car. Exportable goods are produced for a Western market - North America, Europe
goods.
and the Far East.

GLOBALISATION

The importance of manufacturing to different countries is changing:

Rising industrial growth in some parts of the world and de-industrialisation in other parts
1

Mechanisation and reliance on imports has caused rapid de-industrialisation in Britain.

A free and competitive global market has led to the industrialisation of Asia where there is a cheap labour
market, high education rates and a lack of environmental and labour regulation.
The effects of government legislation, long working hours, health and safety regulations,
prohibition of strikes and tax incentives and tax free zones

Legislation

Working hours

- An EU directive limits working hours to 48 per week, decreasing national productivity.

Health and
safety

- Health and safety regulations ensure that equipment is up to date and safe, workers can take

Strikes

- Strikes led by trade unions can disrupt manufacturing, especially in core industries like coal,

The minimum wage in some countries makes labour expensive.

Governments can decrease interest rates thereby encouraging investment in new businesses.
Assisted areas/enterprise zones or advanced factories are provided to encourage investment.
The use of tariffs protects domestic industry from cheaper foreign imports.

breaks and are well trained. This can impact on productivity and labour costs.
steel and transport.

- In many NICs (newly developing countries) trade unions are banned to minimise working
hours lost to protest.
Tax incentives

- Tax incentives seek to minimise the cost of new businesses. One NorthEast is a development
agency providing job-creation grants and exemption from standard business rates.

- Tax free zones or havens like Dubai or the Cayman Islands levy no tax to encourage
unrestricted growth.

Development of China as the new economic giant

1

Deng Xiaoping created six Special Economic Zones in 1980s on Chinas South-East Coast (Hainan,
Zhuhai, Shantou, Shenzhen, Xiamen & Kashgar). Tax incentives are used ti draw foreign investment to
these regions.

Growth consistently above 7% of GDP. Peaked in 2007 at 14%.

Population of 1.35 billion makes china the 4th largest market in the world.

The one child policy means families have more disposable income.

Industry is largely export driven (electronics, engineering, clothing) and takes advantage of the cheap
labour force (95% cheaper than US) and the low level of environmental and labour regulations.

Shenzhen case study

1

Shenzhen is home to many high-tech companies like ZTE and Foxconn which manufactures Apple
devices.

The city received over $30bn of foreign investment in the last 20 years, fuelling rapid industrial growth.

Expatriates from Malaysia, Singapore, Taiwan and Indonesia (under Xiapings open-door policy) bring
marketing skills, technical specialities and foreign exchange to China, allowing the exports industry to
boom.

The growth has brought extreme wealth inequality, urban sprawl, inhumane labour practices & working
conditions and water & air pollution.

GLOBALISATION

The increasing global demand for energy through sustainable and non-sustainable
developments:

The impact of world population growth, increased wealth and technological advances on the
global demand for energy
1

Global energy demand has grown rapidly because; population has increased, families have greater
affluence leading to higher domestic energy consumption, industrialisation and the ubiquity of
transport use (especially car ownership).

The majority of energy demand is supplied by fossil fuel combustion (coal, oil and gas). Other
production methods (nuclear, renewable & biofuels) are still marginalised in most countries.
The social, economic and environmental impact of increased energy use

Local air pollution can increase risk of lung related diseases (emphysema, asthma and bronchitis).

Carbon emissions are responsible for global warming.

Sulphur dioxide and nitrogen oxide emissions cause acid rain.

Oil spills like the Exxon Valdez near Alaska in 1989 destroy aquatic ecosystems.

Nuclear accidents are devastating (e.g. Fukushima) and waste is hard to dispose of safely.

Biofuels can threaten food security and are planted on deforested land (palm oil in Borneo)

Renewable energy schemes can spoil areas of natural beauty.

New energy facilities are expensive to build and maintain.

Sustainable development must ensure that the environment is protected and that
there are sufficient resources for future generations:

Ways of achieving sustainable development through the use of renewable energy

1

Wind Power - turbines require exposed location but land near the sea is often expensive.
Criticised as an eyesore, for noise pollution and harm to the environment.

Biofuel - the use of crops like maize to produce flammable biogas or ethanol. Threat to food
security.

Hydroelectric power - Harnessing energy from moving water using dams. Involves flooding a
large area and damages water quality downstream.

Solar power - Photovoltaic cells. Only efficient in very sunny climates.

Tidal power - Barrage built across an estuary, reliable energy from tidal movement. Prevents
migration of fish, expensive and disrupts habitats.

GLOBALISATION

A renewable energy scheme - The Three Gorges Dam

Economic

Positive

- The 1998 Yangtze floods caused $26bn of economic damage as 25 million

acres of productive farmland was evacuated.

- The construction project brought mass employment and injected more than
$25bn into the local economy.

- The production of 100TWh p.a. is worth 5bn.

- A tourist industry on the reservoir worth $30.4 million has sprung up.
Negative

- The displacement and resettlement of communities amounted to $100bn

- The dam has disrupted sediment transport and could cause mass damage as
agricultural land becomes infertile.

Social

Positive

- The continual cycle of deaths, refugees and broken communities caused by river
flooding has finally been broken. (10 million homeless in 2011)

Negative

- The project demanded the resettlement of millions of people & communities and
the dust clouds caused by blasting were responsible for high air and water
pollution in Sandouping.

Environmental Positive

- The hydroelectric power produced by the dam will quench a fraction of Chinas
insatiable appetite for coal.

- Landslides around the reservoir sparked demand for a national reforestation

programme.
Negative

- The natural flow of the river and its ecosystem have been disrupted.

The importance of international directives on pollution control and carbon reduction

initiatives
1

Climate change is a global issue and requires international cooperation.

The Earth Summit in Rio de Janeiro 1992 - first agreement to reduce emissions.

1997 Kyoto Protocol - commitment to a reduction of greenhouse gas emissions by 5% below

1990 levels. Carbon Credits can be traded between countries so that countries who achieve a
reduction are rewarded and it is costly to exceed the national allowance.

Ways of reducing the costs of globalisation (local and global)

Global

- Carbon Credits
- Investment in renewable technologies
- Reducing fossil fuel subsidies (Global fossil fuel subsidies amount to 323 billion)

Local

- Conserving energy (Using smart meters, home insulation, turning off lights)
- Recycling (of paper, metal and plastic) organised by local authorities. Also reduces demand for
landfill space.

- Reducing consumption (re-using bags, buying second hand, wasting less food)

GLOBALISATION
The repercussions of the global search to satisfy increasing demand for food:

Environmental
1

Larger carbon footprint due to the increasing number of food miles travelled. People want to eat
foods out of season or demand exotic goods which need to be grown in tropical climates. Cheap
labour in tropical countries mean it is cheaper to import than to grow domestically.

Costs and benefits of importing food versus local energy intensive food production. In Kenya
beans are farmed using manual labour and organic fertiliser is used whereas in intensive
domestic farming, diesel burning tractors and oil based fertilisers are used.

Use of marginal land for production leads to environmental degradation. The use of mountainous
regions speeds up soil erosion as vegetation is removed. In deserts, desalinisation of water for
irrigation requires huge energy and overgrazing and over-cultivation mean that nutrients are
removed from the soil.
Political

Potential for hostilities between countries over the control of water for irrigation. The river Indus
flows through both Pakistan and northern India. The 1960 Indus water treaty allowed Pakistan to
construct a dam upstream and there is resentment in India that their water is being stolen.
Social

Impact of cash crop farming on a subsistence economy. In the floriculture industry around Lake
Naivasha the water levels are falling due to irrigation, the pastoral tribe, the Maasai, have
difficulty accessing the lake and workers often report rashes and chest burns from working with
chemicals.

The municipality of Naivasha has struggled under an influx of migrants looking for work in the
glasshouses and in twenty years the town has expanded fortyfold, putting stress on local
infrastructure and services.

Economic
1

Increase in rural debt due to the increasing need for fertilisers, pesticides and insecticides. Cash
crop farmers are forced to take out loans to intensify their farms and their yields to not pay for the
interest, setting up a vicious circle that eventually results in bankruptcy.
Campaign to encourage the use of locally produced food

Buying locally has widespread economic benefits for the domestic farming industry and
addresses environmental concerns.

A reduction in the demand for foreign produce would be a disaster for the fragile, agriculturally
based industry in LEDCs.

Farmers markets, agricultural shows, and local shops all facilitate support for locally produced
food.