Globalisation EQ1

Topic 1: What is globalisation and how has it accelerated?

Key ideas

• Globalisation is the widening and deepening of global connections, interdependence and flows of:
  • commodities (goods),
  • capital (money, investment),
  • information (data, ideas),
  • migrants,
  • tourists.
• It is a long-standing process:
  • Ancient trade routes, such as the Silk Road.
  • European colonial empires.
  • The 19th-century "first globalisation".
• 19th century (transport and trade):
  • Railways (opening up continental interiors).
  • The electric telegraph: the transatlantic cable of 1866 cut communication from weeks to minutes.
  • Steamships, plus the Suez Canal (opened 1869).
• 20th century acceleration:
  • Jet aircraft: the commercial jet age began in the 1950s; the Boeing 747 (1970) made mass air travel cheap.
  • Containerisation: standard shipping containers were pioneered by Malcom McLean in 1956. They slashed loading times and freight costs and made global supply chains possible.
• These changes created a "shrinking world", where the relative distance between places falls as travel time and cost fall.
• 21st century: ICT and global communication:
  • Mobile phones, the internet and social networking.
  • Electronic banking.
  • Fibre-optic submarine cables, which carry the great majority of international data.
  • Together these lower communication costs to near zero and create time–space compression (Harvey): the world "feels" smaller and faster.

Glossary

Term	Definition
Globalisation	The growing interconnection and interdependence of the world's economies, cultures and populations through flows of goods, capital, people and information.
Interdependence	Places relying on one another (e.g. for trade or investment), so change in one affects others.
Shrinking world	The idea that places feel closer as transport and communications improve.
Time–space compression	The reduction in the time it takes for capital, goods, people and information to move, which effectively "compresses" distance.
Containerisation	The use of standardised steel shipping containers to move goods.
Flows	Movements between places (of goods, capital, people, information).

Self-test

Q1: Name five flows involved in globalisation. A: Commodities, capital, information, migrants and tourists.

Q2: Why was containerisation so important? A: Standard containers move seamlessly between ship, rail and lorry. This cut handling time and labour costs, so long-distance trade became cheap and global supply chains became possible.

Q3: What is time–space compression? A: The way technological change, especially ICT and air travel, reduces the time taken for interactions, so distance matters less.

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Topic 2: The roles of PLAYERS in globalisation – governments, organisations and TNCs

Key ideas

• International political and economic organisations (IGOs) promote free trade and foreign direct investment (FDI):
  • The World Bank (1944, Bretton Woods) lends for development projects.
    • In the 1980s–90s it attached structural adjustment conditions requiring privatisation, deregulation and opening of markets.
  • The International Monetary Fund (IMF, 1944) provides financial stability and loans to countries in crisis.
    • It often attached conditions that liberalised economies, e.g. Structural Adjustment Programmes, which were criticised for cutting public spending.
  • The World Trade Organization (WTO, 1995, replacing GATT of 1947) negotiates rules that reduce tariffs and quotas and settles trade disputes. It had 166 members in 2024.
    • China joined in 2001, a turning point for the global shift.
• National governments promote:
  • Free-trade blocs:
    • The EU: the single market was completed in 1993, with free movement of goods, services, capital and people.
    • ASEAN (founded 1967), with the ASEAN Free Trade Area from 1992.
  • Policies of liberalisation:
    • Free-market liberalisation, e.g. the Thatcher (UK) and Reagan (USA) governments of the 1980s.
    • Privatisation, e.g. UK utilities such as BT (1984) and British Gas (1986).
    • Encouraging business start-ups, e.g. tax incentives.
• Special Economic Zones (SEZs), subsidies and attitudes to FDI:
  • China's Open Door Policy (1978) under Deng Xiaoping reopened China to foreign trade and investment.
  • SEZs were set up in 1980 at Shenzhen, Zhuhai, Shantou and Xiamen, offering:
    • tax breaks,
    • cheap land,
    • fewer regulations,
    • export orientation.
  • Shenzhen grew from a border area often described as a fishing town into a megacity of about 17.6 million (2020 census).
  • India's 1991 liberalisation was another major opening to FDI.

Glossary

Term	Definition
IGO	Intergovernmental organisation, e.g. the WTO, IMF, World Bank, UN.
Free trade	Trade without tariffs, quotas or other barriers.
FDI	Foreign direct investment: investment by a firm in one country in productive assets in another (e.g. building a factory).
Trade bloc	A group of countries with reduced trade barriers between them (e.g. the EU, ASEAN).
Liberalisation	The removal of state controls on the economy (deregulation, opening to trade/FDI).
Privatisation	Selling state-owned enterprises to the private sector.
SEZ	Special Economic Zone: an area with special tax and regulatory incentives to attract investment.
Open Door Policy	China's post-1978 opening to foreign trade and investment.

Self-test

Q1: Give two ways the WTO accelerates globalisation. A: It negotiates reductions in tariffs and other trade barriers, and it settles trade disputes under agreed rules, which encourages trade and investment.

Q2: What attracted FDI to Shenzhen? A: SEZ status (from 1980): tax breaks, cheap land and labour, relaxed regulation, a location next to Hong Kong, and a pro-investment government.

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Topic 3: TNCs, and why some places are "switched on" or "switched off"

Key ideas

• Measuring globalisation:
  • The KOF Globalisation Index (ETH Zurich) combines economic, social and political globalisation. Small, open European economies such as Switzerland, the Netherlands and Belgium usually top it.
  • The A.T. Kearney / Foreign Policy Globalization Index used similar indicators, e.g. trade, FDI, phone traffic, internet users and treaty membership. It was published in the 2000s.
  • Limitations of these indices:
    • The choice and weighting of indicators.
    • They show national averages, which hide internal variation.
    • Data quality.
• TNCs (transnational corporations) both drive globalisation and benefit from it.
  • How TNCs spread globalisation:
    • Global production networks / supply chains. For example, Apple designs in California and sources components from many countries. Final assembly is largely contracted to firms such as Foxconn in China, and increasingly in India and Vietnam.
    • Glocalisation: adapting global products to local tastes. For example, McDonald's in India serves the McAloo Tikki and no beef.
    • Developing new markets, e.g. in emerging economies.
  • How TNCs take advantage of liberalisation:
    • Outsourcing: contracting work to another firm, e.g. call centres in India.
    • Offshoring: moving their own operations abroad.
    • Both exploit lower labour costs, weaker regulation and tax incentives.
• Switched-off places remain detached from globalisation for several reasons:
  • Historical: colonial legacies.
  • Physical: being landlocked, remote, mountainous or arid.
  • Political: isolationist governments, conflict, corruption.
  • Economic: poverty, poor infrastructure.
  • Environmental: drought, desertification.

Case study: North Korea (switched off – political)

• Juche ideology of self-reliance under the Kim dynasty.
• Very limited trade, heavily dependent on China.
• UN sanctions over nuclear and missile programmes.
• Internet access limited to a tiny elite; most citizens can use only a domestic intranet.
• Tight restrictions on travel and media.

Case study: rural Niger (switched off – physical, economic and environmental)

• Physical: landlocked in the Sahel, with frequent drought and desertification.
• Economic: an economy reliant on subsistence farming, livestock and uranium exports; poor transport and internet infrastructure.
• Social and political: low literacy, a very high fertility rate, and recurring political instability (including a military coup in 2023).
• Niger is consistently ranked near the bottom of the UN Human Development Index.

Self-test

Q1: Distinguish between outsourcing and offshoring. A: Outsourcing means contracting part of a business process to another firm (which may be domestic or foreign). Offshoring means relocating part of the firm's own operations to another country.

Q2: What is glocalisation? Give an example. A: Adapting a global product or service to local cultures and tastes. Example: McDonald's menus in India avoid beef and include vegetarian items such as the McAloo Tikki.

Q3: Give three reasons why rural Niger is "switched off". A: It is landlocked and remote (physical); it suffers drought and desertification (environmental); and it has poverty, limited infrastructure and low literacy (economic/social), plus political instability.

Assessment checkpoint: end-of-EQ1 essay (12 marks), e.g. "Assess the importance of TNCs in accelerating globalisation."

• Weigh TNCs against IGOs, governments and technology.
• A strong judgement: TNCs are key agents, but they depend on enabling technology and government policy.

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