7. Global Systems and Global Governance
Globalisation The process of global interdependence
Global supply chain International networks that source and supply goods and/or services
Containerisation Freight transport using intermodal containers
Digital divide The gap between those with access to digital technology and those
without
Economies of scale A proportionate saving in costs gained by an increased level of
production
FDI Foreign direct investment
HIC’s/MIC’s/LIC’s High, Middle, Low-income countries
Brain drain The emigration of highly trained or qualified people from a certain
country.
Flows:
Capital – trade, finance and goods
Labour – people
Information – ideas, technology, communication
Production and consumption – products
Services – jobs
Flow Advantages Disadvantages
Ideas Encouraged deregulation and free Free trade isn’t free when TNC’s and
trade = increase trade and freedom of governments exert pressure and form
movement for people, goods and alliances (Free trade agreement)
ideas.
Creates economic growth.
Capital FDI allows foreign countries to take Foreign aid creates dependency – giving
advantage of cheap raw materials and governments low income to develop.
low labour costs, while host countries Foreign aid usually funds conflict.
benefit from foreign capital.
Technology/ HIC’s benefit first from improvements LIC’s tend to get sold obsolete
Information in technology - maximising efficiency technology – leading to slower
of processes, systems and profits. development compared to HIC’s
Labour Helps create economic growth as LIC’s suffer from brain drain – reinforces
more educated people can do highly inequality. Lower skilled migrants work
skilled jobs to help development. for less money so companies depress
wages for population.
Trade/ Volume of trade has increased so Growth in trade is uneven and the least
Products more employment and more wealth is developed countries find it hard to
being created globally. access global markets
Marketing Ability to advertise created global Makes it hard for small business/brands
brands. Having one marketing to compete.
strategy on a global scale creates vast Big brands can be non-sympathetic to
economies of scale. local environments/cultures.
Factors in globalisation:
Security
Globalisation has led to increased security and insecurity
Interdependence promotes peace (disincentive for conflict). Countries create treaties in order
to trade and decrease crime. Technology warfare is more destructive, so security facilitates
these threats.
Linked with labour, information, products and ideas
E.g., EU, C-PTAT, UN, Interpol, International customs, Cybersecurity, Counter terrorism.
o C-PTAT – reduce inspection fees, custom fees, cargo fees and increases speed of
global market.
, Transport
Globalisation has increased the speed at which people, goods, services and ideas are moved
globally.
Transport (air, road, sea, rail etc) allows the flow to be transported efficiently. Greater distances
can be achieved quicker. Larger amounts can be transported at once for less money. More
places are accessible which lead to the development of the global supply chain
Linked with capital, labour, information, products, services and ideas.
E.g., Containerisation – larger ships can carry more intermodal containers therefore less boats
are needed. Less boats = less crew = cheaper transportation = increased profits
Technology and communications
Globalisation has led to more complex technologies allowing global communication
Communication enables the transfer of data and messages instantly. Distance is not an issue
and can lead to trade, peace or conflict is unequally distributed (digital divide).
Linked with information, labour, ideas, services and products.
E.g., Satellites, optical fibre cables and software.
Financial systems
Globalisation has led to the development of flows of capital – mainly via banking, insurance,
currency exchange and investment.
Flows of capital increased with globalisation of trade. This enabled the removal of tariff taxes
and laws.
Concentrated in western cities such as New York, London and Tokyo.
Linked with capital
E.g., Remittances, loans and aid.
Management and information systems
Globalisation has enabled models of production and management to change – helping
globalisation develop further.
A globalised economy brings massive profit to larger companies as they are able to exploit
economies of scale.
Linked with capital, labour and products.
E.g., Wal-Mart’s Just In Time strategy – Outsource and only order supplies when need
therefore there is no expense of stockpiling.
Trade agreements and the WTO
The World Trade Organisation promote the free movement of goods and services across as
many borders as possible while preserving laws and regulations not related to global efficiency.
Trade agreements allow globalisation because it makes the global supply chain more efficient
by promoting interdependence between countries.
Linked with capital, labour, information, products and services.
E.g., WTO, GATT, Trans-pacific partnership (40% of global economy).
Financial deregulations
Globalisation has led to an increase connection of money on a global scale. Technology meant
that money was just a ‘thing’ able to be transported instantly.
There are no laws and customs on money – enabling it to move instantly around the world,
increasing global efficiency.
Linked with capital and information.
E.g., 2000’s economic boom. 2008 – loaning of money to people who were unable to repay
triggered a downward spiral. All governments suffered.
Trade agreements
Globalisation The process of global interdependence
Global supply chain International networks that source and supply goods and/or services
Containerisation Freight transport using intermodal containers
Digital divide The gap between those with access to digital technology and those
without
Economies of scale A proportionate saving in costs gained by an increased level of
production
FDI Foreign direct investment
HIC’s/MIC’s/LIC’s High, Middle, Low-income countries
Brain drain The emigration of highly trained or qualified people from a certain
country.
Flows:
Capital – trade, finance and goods
Labour – people
Information – ideas, technology, communication
Production and consumption – products
Services – jobs
Flow Advantages Disadvantages
Ideas Encouraged deregulation and free Free trade isn’t free when TNC’s and
trade = increase trade and freedom of governments exert pressure and form
movement for people, goods and alliances (Free trade agreement)
ideas.
Creates economic growth.
Capital FDI allows foreign countries to take Foreign aid creates dependency – giving
advantage of cheap raw materials and governments low income to develop.
low labour costs, while host countries Foreign aid usually funds conflict.
benefit from foreign capital.
Technology/ HIC’s benefit first from improvements LIC’s tend to get sold obsolete
Information in technology - maximising efficiency technology – leading to slower
of processes, systems and profits. development compared to HIC’s
Labour Helps create economic growth as LIC’s suffer from brain drain – reinforces
more educated people can do highly inequality. Lower skilled migrants work
skilled jobs to help development. for less money so companies depress
wages for population.
Trade/ Volume of trade has increased so Growth in trade is uneven and the least
Products more employment and more wealth is developed countries find it hard to
being created globally. access global markets
Marketing Ability to advertise created global Makes it hard for small business/brands
brands. Having one marketing to compete.
strategy on a global scale creates vast Big brands can be non-sympathetic to
economies of scale. local environments/cultures.
Factors in globalisation:
Security
Globalisation has led to increased security and insecurity
Interdependence promotes peace (disincentive for conflict). Countries create treaties in order
to trade and decrease crime. Technology warfare is more destructive, so security facilitates
these threats.
Linked with labour, information, products and ideas
E.g., EU, C-PTAT, UN, Interpol, International customs, Cybersecurity, Counter terrorism.
o C-PTAT – reduce inspection fees, custom fees, cargo fees and increases speed of
global market.
, Transport
Globalisation has increased the speed at which people, goods, services and ideas are moved
globally.
Transport (air, road, sea, rail etc) allows the flow to be transported efficiently. Greater distances
can be achieved quicker. Larger amounts can be transported at once for less money. More
places are accessible which lead to the development of the global supply chain
Linked with capital, labour, information, products, services and ideas.
E.g., Containerisation – larger ships can carry more intermodal containers therefore less boats
are needed. Less boats = less crew = cheaper transportation = increased profits
Technology and communications
Globalisation has led to more complex technologies allowing global communication
Communication enables the transfer of data and messages instantly. Distance is not an issue
and can lead to trade, peace or conflict is unequally distributed (digital divide).
Linked with information, labour, ideas, services and products.
E.g., Satellites, optical fibre cables and software.
Financial systems
Globalisation has led to the development of flows of capital – mainly via banking, insurance,
currency exchange and investment.
Flows of capital increased with globalisation of trade. This enabled the removal of tariff taxes
and laws.
Concentrated in western cities such as New York, London and Tokyo.
Linked with capital
E.g., Remittances, loans and aid.
Management and information systems
Globalisation has enabled models of production and management to change – helping
globalisation develop further.
A globalised economy brings massive profit to larger companies as they are able to exploit
economies of scale.
Linked with capital, labour and products.
E.g., Wal-Mart’s Just In Time strategy – Outsource and only order supplies when need
therefore there is no expense of stockpiling.
Trade agreements and the WTO
The World Trade Organisation promote the free movement of goods and services across as
many borders as possible while preserving laws and regulations not related to global efficiency.
Trade agreements allow globalisation because it makes the global supply chain more efficient
by promoting interdependence between countries.
Linked with capital, labour, information, products and services.
E.g., WTO, GATT, Trans-pacific partnership (40% of global economy).
Financial deregulations
Globalisation has led to an increase connection of money on a global scale. Technology meant
that money was just a ‘thing’ able to be transported instantly.
There are no laws and customs on money – enabling it to move instantly around the world,
increasing global efficiency.
Linked with capital and information.
E.g., 2000’s economic boom. 2008 – loaning of money to people who were unable to repay
triggered a downward spiral. All governments suffered.
Trade agreements
