Topic 3 – Globalisation
What are the causes of globalisation and its accelerating pace?
Globalisation – the growing economic interdependence of countries worldwide through
increasing volume and variety of cross-border transactions in goods and services, free
international capital flows, and more rapid and widespread diffusion of technology. (this
is further applied on culture and natural environment)
Key concepts of globalization:
1. New technologies
2. Job creation
3. Better global connections
4. Free markets promote competition and division of labour
5. Improved production efficiency
6. Wealth creation through increased profits (capital formation)
7. Increased global inequality between nations
Development on transport and trade:
o Transnational corporations (TNCs): Increased FDI → build links between the places
that make the product and the places that consume the goods and services.
o Lower transport costs: reduce the costs of moving goods internationally → faster
travel, more common and affordable.
o Computer and internet technology: manufacturing worldwide can be coordinated
→ large supply chains. Increased global communications including social media →
creation of recognizable global brands.
o International organizations: Trade relies on cooperation’s that implement rules.
o World Trade Organization → agrees trade rules
o United Nations → promotes peace and cooperation
o World Bank → provides loans for development
o International Monetary Fund → provides loans for governments
New markets: New markets lead to increased consumers → more potential sales → higher
potential profits. → encourages businesses to invest money…
Development in ICT and mobile communications:
The development of technologies and a ‘digital economy’ has changed the interaction of
people, businesses processes and the exchange of goods, but also culturally.
Increased e-commerce → increased volumes of sales and innovation → decreased costs for
companies and consumers.
Digital marketplaces → increased pressures on suppliers to reduce their costs.
Business have taken full advantage of flexible employment laws to build up supply chains of
goods and services → smaller / self-employed businesses and zero-hours contracts.
,Economic / Social / Cultural / Political --- Globalisation:
Economic globalisation:
Increased efficiency within international communications has helped TNCs to expand into
new territories (for production or selling [new markets]).
Social globalisation:
International communications have provided a cheap and powerful way for migrants to
maintain a strong link with family they have left behind.
Cultural globalisation:
Cultural traits, such as language or music, are adopted, imitated and hybridized faster than
ever before.
Increased cultural links… Westernization [Westernization, the adoption of the practices and
culture of western Europe by societies and countries in other parts of the world, whether
through compulsion or influence.
Political Globalisation:
Social networks are used to raise awareness about political issues and to fight for change on
a global scale.
e.g. Environmental charities; Greenpeace.
Political and economic decision making:
Societies have developed laws to regulate trade, guaranteeing trust and promoting and
increased connection within the world’s economy.
Governments recognize the benefits of increasing trade flows for:
o economic growth
o employment
o taxation
o revenue
Governments make agreements to regulate cross-border trade to encourage greater
flows.
Disadvantages of trade:
1) Domestic companies may become over-specialized, and if the specialism suffers a
decline in demand there can then be a larger fall in employment and tax revenue.
2) Competition from abroad may lead to some domestic firms reducing production or
going out of business altogether.
Governments may impose taxes and tariffs on imported goods, to protect their trade from
competition. → Protectionism.
The growth of free trading blocs:
National governments have promoted the growth of trade blocs…
o Within a trade bloc, free trade is encouraged by the removal of internal tariffs.
,Benefits for businesses:
1. Market growth
2. Firms with comparative advantage in the production of a particular product or
service should grow (increased market efficiency)
3. Increased demand raises the volume of production → lowering manufacturing costs
per unit (economies of scale).
Trade bloc members may also agree a common external tariff and quotas for foreign
imports…
Examples of trading blocs:
, Foreign Direct Investment (FDI):
Foreign direct investment – is a controlling ownership in a business enterprise in one
country by a company or organization based in another country.
o International agreements to promote trade have enabled a significant increase in FDI
since the WW2.
Different types of FDI:
Special economic zones and government subsidies:
Special economic zones (SEZs) – large areas of land set aside by the government in locations
well placed for international trade. e.g. Seaports.
o These areas attract FDI and TNCs, as companies can import raw materials and export
finished manufactured goods from these zones without incurring domestic taxes,
encouraging TNCs to set up branch plants.
Branch plants provide:
o Employment for locals
o Indirect tax revenue
o Technology transfer
The unequal impacts of globalisation:
Globalisation varies by country. Patterns of connection are not uniform across all countries,
the benefits of globalisation are not distributed uniformly.
Global hubs are ‘globalisation cores’ → intense connections to the rest of the world, host
the major TNCs. Demographics flows, as well as flows of finance, trade and ideas, move
towards them.
o The transport and communication networks are focused on the core areas, and this
increases the incentives for people and businesses to invest in the core regions.
What are the causes of globalisation and its accelerating pace?
Globalisation – the growing economic interdependence of countries worldwide through
increasing volume and variety of cross-border transactions in goods and services, free
international capital flows, and more rapid and widespread diffusion of technology. (this
is further applied on culture and natural environment)
Key concepts of globalization:
1. New technologies
2. Job creation
3. Better global connections
4. Free markets promote competition and division of labour
5. Improved production efficiency
6. Wealth creation through increased profits (capital formation)
7. Increased global inequality between nations
Development on transport and trade:
o Transnational corporations (TNCs): Increased FDI → build links between the places
that make the product and the places that consume the goods and services.
o Lower transport costs: reduce the costs of moving goods internationally → faster
travel, more common and affordable.
o Computer and internet technology: manufacturing worldwide can be coordinated
→ large supply chains. Increased global communications including social media →
creation of recognizable global brands.
o International organizations: Trade relies on cooperation’s that implement rules.
o World Trade Organization → agrees trade rules
o United Nations → promotes peace and cooperation
o World Bank → provides loans for development
o International Monetary Fund → provides loans for governments
New markets: New markets lead to increased consumers → more potential sales → higher
potential profits. → encourages businesses to invest money…
Development in ICT and mobile communications:
The development of technologies and a ‘digital economy’ has changed the interaction of
people, businesses processes and the exchange of goods, but also culturally.
Increased e-commerce → increased volumes of sales and innovation → decreased costs for
companies and consumers.
Digital marketplaces → increased pressures on suppliers to reduce their costs.
Business have taken full advantage of flexible employment laws to build up supply chains of
goods and services → smaller / self-employed businesses and zero-hours contracts.
,Economic / Social / Cultural / Political --- Globalisation:
Economic globalisation:
Increased efficiency within international communications has helped TNCs to expand into
new territories (for production or selling [new markets]).
Social globalisation:
International communications have provided a cheap and powerful way for migrants to
maintain a strong link with family they have left behind.
Cultural globalisation:
Cultural traits, such as language or music, are adopted, imitated and hybridized faster than
ever before.
Increased cultural links… Westernization [Westernization, the adoption of the practices and
culture of western Europe by societies and countries in other parts of the world, whether
through compulsion or influence.
Political Globalisation:
Social networks are used to raise awareness about political issues and to fight for change on
a global scale.
e.g. Environmental charities; Greenpeace.
Political and economic decision making:
Societies have developed laws to regulate trade, guaranteeing trust and promoting and
increased connection within the world’s economy.
Governments recognize the benefits of increasing trade flows for:
o economic growth
o employment
o taxation
o revenue
Governments make agreements to regulate cross-border trade to encourage greater
flows.
Disadvantages of trade:
1) Domestic companies may become over-specialized, and if the specialism suffers a
decline in demand there can then be a larger fall in employment and tax revenue.
2) Competition from abroad may lead to some domestic firms reducing production or
going out of business altogether.
Governments may impose taxes and tariffs on imported goods, to protect their trade from
competition. → Protectionism.
The growth of free trading blocs:
National governments have promoted the growth of trade blocs…
o Within a trade bloc, free trade is encouraged by the removal of internal tariffs.
,Benefits for businesses:
1. Market growth
2. Firms with comparative advantage in the production of a particular product or
service should grow (increased market efficiency)
3. Increased demand raises the volume of production → lowering manufacturing costs
per unit (economies of scale).
Trade bloc members may also agree a common external tariff and quotas for foreign
imports…
Examples of trading blocs:
, Foreign Direct Investment (FDI):
Foreign direct investment – is a controlling ownership in a business enterprise in one
country by a company or organization based in another country.
o International agreements to promote trade have enabled a significant increase in FDI
since the WW2.
Different types of FDI:
Special economic zones and government subsidies:
Special economic zones (SEZs) – large areas of land set aside by the government in locations
well placed for international trade. e.g. Seaports.
o These areas attract FDI and TNCs, as companies can import raw materials and export
finished manufactured goods from these zones without incurring domestic taxes,
encouraging TNCs to set up branch plants.
Branch plants provide:
o Employment for locals
o Indirect tax revenue
o Technology transfer
The unequal impacts of globalisation:
Globalisation varies by country. Patterns of connection are not uniform across all countries,
the benefits of globalisation are not distributed uniformly.
Global hubs are ‘globalisation cores’ → intense connections to the rest of the world, host
the major TNCs. Demographics flows, as well as flows of finance, trade and ideas, move
towards them.
o The transport and communication networks are focused on the core areas, and this
increases the incentives for people and businesses to invest in the core regions.
