Enquiry question 1: What are the causes of globalisation and why has it accelerated in recent decades?

3.1 Globalisation long-standing process accelerated because of rapid developments in transport, communications, businesses Globalisation involves widening and deepening global connections, interdependence and flows (commodities, capital, information, migrants and tourists). (1) Key concept: Globalisation In the past, global connection was achieved through:

o trade – especially after 1492 when Columbus reached Americas and trad world economy began to take shape o colonialism – by end of 19 century, British Empire directly controlled one– 1/4 of world and its peoples o co-operation – ever since WW2 ended in 1918, international organisations similar to today’s United Nations have existed. Four strands of globalisation (diagram) Modern (post-1940s) globalisation differs from global economy which preceded it due to following reasons:

• Lengthening of connections between people and places, with products sourced from further away than ever before • Deepening of connections, with sense of being connected to other people and places now penetrating more deeply into almost every

aspect of life. Think about food you eat each day and many places it is sourced from- more or less impossible not to be connected to other • Faster speed of connections, - can talk to people in real time, using tech e.g. Skype, or travel quickly between continents using jet aircraft.

Not shared by everyone- some nations/regions (e.g., parts of Sahel) experience more ‘shallow’ form of integration - also great disparity among country’s citizens. E.g., citizens in Brazil’s core cities of Rio de Janeiro/Sao Paulo globally connected, either as producers/ or as consumers of music/sports (2016 Olympic Games). However, some Amazon tribes, such as Korubo people= little/no knowledge of outside world, and lack connectivity with other places. Global flows and global networks The connections shown between places represent different kinds of network flow- these flows are movements of:

• Capital: global scale, major capital (money) flows routed daily through world’s stock markets. Range of businesses, including investment banks/ pension funds, buy/sell money in different currencies make profits. 2013, volume of foreign exchange transactions reached US $ 5 trillion daily

• Commodities: Valuable raw materials e.g. fossil fuels, food, minerals always been traded between nations. Flows of manufactured goods have multiplied in size in recent years, fuelled by low production costs in China and even lower-waged economies, e.g. Bangladesh/ Vietnam. 2015, global GDP fell just short of US $ 80 trillion in value. Of this, around 1/3 generated by trade flows in agricultural/industrial commodities.

• Information: internet brought real-time communication between distant places, allowing g/s to be bought at click of a button. Social networks ballooned in size/influence, (Facebook= 1.5 billion users by 2015). Information stored in enormous ‘server farms’ such as Microsoft Data Centre in Washington State and Facebook’s data centre in Luleå, Sweden (where cold temperatures reduce cost of cooling hard drives).

• Tourists: Many of world’s air passengers holiday makers. Budget airlines brought a ‘pleasure periphery’ of distant places within easy reach for moneyed tourists of high-income nations. Increasingly, people from emerging economies travel abroad too, using budget airlines such as AirAsia and East Africa’s Fastjet. China is now the world biggest spender on international travel, with 120 million outbound trips made in 2014.

• Migrants: Of all global flows, permanent movement of people faces greatest number of obstacles due to border controls/ + immigration laws – as result - govs have ‘pick/mix’ attitude towards global flow: embrace trade flows but attempt to resist migrant flows unless special need (Qatar’s encouragement of Indian construction workers). Despite restrictions, record flows of people recorded. Combined number of economic migrants/refugees worldwide reached 1/4 of a billion in 2013. Same year, US $ 500 billion of remittances sent home by migrants.

Developments in transport and trade in the 19th century (railways, telegraph, steam-ships) accelerated in the 20th century (jet aircraft, containerisation), contributing to a ‘shrinking world’.

Developments in transport/trade go hand-in-hand. While transport improvements allowed value of trade to increase, also case that major trading powers, such as USA, seek to maintain competitive edge through continued transport innovation. As transport developments occur, TNCs prosper too. In 1900s, large manufacturing companies, e.g. Ford/General Motors, export products more widely. Over time, connectivity allowed multiple sites of production to be established, both reduce transport costs /take advantage of cheap sites of production where wages lower. Transport essential in allowing TNCs to establish a spatial division of labour on a global scale. Important innovations in transport included:

o Steam power: Britain leading 1800s - used steam tech. Steam ships (trains) moved goods/armies quickly along trade routes into Asia/Africa. o Railways: 1800s, railway networks expanded globally. 1904, 9000 km Trans-Siberian Railway connected Moscow with China and Japan. Today,

railway building priority for govs across world. Proposed High Speed 2 railway (linking London/northern England) will halve some journey times. o Jet aircraft: arrival of intercontinental Boeing 747 in 1960s made international travel more commonplace, while recent expansion of the cheap

flights sector, including easyJet, brought it to masses in richer nations. o Container shipping: 200 million individual container movements take place each year - Some commentators describe shipping as ‘backbone’ of

global economy since 1950s. Everything can be transported efficiently using intermodal containers. Chinese vessel Cosco is 366 m long,

Time– space compression Heightened connectivity changes our conception of time, distance and potential barriers to migration of people, goods, money and information- called time-space compression. As travel times fall due to new inventions, different places approach each other in ‘space-time’: begin to feel closer together than in past- also called shrinking world effect The 21st century has been dominated by rapid development in ICT and mobile communication (mobile phones, internet, social networking, electronic banking, fibre optics), lowering communication costs and contributing to time-space compression. ICT and mobile phone use in 21st century Globalisation can make us think of world as a potentially borderless place. Famous photograph Earth- by Apollo 8 astronauts 1968 - 1st time people seen world as a single object =sense of global citizenship. Since, successive innovations in ICT further altered how citizens, businesses, states interact with others. Technology used by players in a vast array of ways which contribute to globalisation. Some of include:

Economic globalisation: ICT allows managers of distant offices and plants keep in touch more easily (e.g., through video conferencing)- helped TNCs expand into new territories, either to make/sell their products. Each time barcode of a M&S food purchase scanned in UK, an automatic adjustment made to size of next order placed with suppliers in distant countries like Kenya.

Social globalisation: maintaining of long-distance social relationships through ICT use is a factor that supports migration. Since 2003, Skype provided a cheap/powerful way for migrants to maintain a strong link with family they have left behind.

Cultural globalisation: Cultural traits, e.g. language or music, adopted, imitated and hybridised faster than ever before. Political globalisation: Social networks used raise awareness about political issues and fight for change. Environmental charities like Greenpeace

spread message online, while militant group Daesh ( ‘Isis’) used social media to spread message of terror globally, and gain new recruits.

The mobile phone revolution/electronic banking in developing countries In countries where lack of communications infrastructure trad been a big obstacle to economic growth, mobile phones now changing lives for better by connecting people/places. Scale/pace of change extraordinary. 2005, 6% of Africans owned mobile phone. By 2015 risen more than ten-fold to 70% due to falling prices/growth of provider companies, e.g. Kenya’s Safaricom. Rising uptake in Asia (India, over 1 billion people mobile subscribers) means now more mobile phones than people on planet. 2007, Safaricom launched M-Pesa, simple mobile phone service allows credit to be directly transferred between phone users. Revolutionised life for individuals/businesses in Kenya:

o equivalent of 1/3 of country’s GDP now sent through M-Pesa system annually. o People in towns/cities use mobiles to make payments for utility bills and school fees. o In rural areas, fishermen/farmers use mobiles to check market prices before selling produce. o Women rural areas able secure microloans from development banks by using M-Pesa bills as proof have a good credit record- new ability to

borrow is playing a vital role in lifting rural families out of poverty.

3.2 Political and economic decision making are important factors in the acceleration of globalisation. International political and economic organisations (P: role of World Trade Organization (WTO), International Monetary Fund (IMF), World Bank) have contributed to globalisation through the promotion of free trade policies and foreign direct investment (FDI). Work of international organisations For many decades, 3 international organisations acted as ‘brokers’ of globalisation through promotion of free trade policies/FDI. Together, International Money Fund (IMF), WB and World Trade Organization (WTO) striven to build a ‘free trade consensus’. ‘Bretton Woods institutions’ established after WW2. Guiding principle to restabilise world economy after Great Depression of 1930s, when economic downturn led to free trade becoming replaced by protectionism. Nations blocked foreign imports with tariffs, damaging export markets for other countries, resulting in vicious downward spiral of economic output for all major players. Over time, remit of Bretton Woods institutions grown to include persuading developing countries to embrace free market economics/globalisation Will Bretton Woods players maintain influence - several issues to explore:

• global financial crisis (GFC) of 2008– 09, which originated in US/EU money markets and undermined entire world economy. As a result, govs in developing countries become more sceptical of financial advice that IMF and World Bank offer.

• Geopolitical changes mean new alternatives emerging to Bretton Woods institutions. Developing countries in search of assistance can instead approach China Development Bank (CDB). China loaned more than US $ 110 billion to developing countries in 2010, a value exceeded World Bank lending. In 2014, BRICS group of nations announced establishment of New Development Bank (NDB) as another alternative to World Bank/IMF.

• WTO’s continuing lack of success in getting 159 member countries to reach a global agreement on aspect of trade, esp in relation to food, raises questions about its long-term role.

Evaluating role of international organisations in globalisation How foreign direct investment works

Telephone and telegraph

1st telegraph cables across Atlantic in 1860s replaced 3-wk boat journey with instantaneous communication. Revolutionised how business conducted. Telephone, telegraph’s successor, remains core tech for communicating across distance. Parts of Africa, where telephone lines never been laid in many places, people tech ‘leap-frogging’ straight to mobile phone use.

Broadband and fibre optics

With advent of broadband internet 1980s/1990s, large amounts data could be moved quickly through cyberspace. Today, enormous flows of data conveyed across ocean floor, by fibre optic cables owned by national gov or TNCs such as Google. More than 1 million kilometres of flexible undersea cables, about size of garden watering hoses, carry all world’s emails, searches and tweets.

GIS and GPS 1st global positioning system (GPS) satellite launched 1970s. Now 24 situated 10,000 km above Earth. Satellites continuously broadcast position/time data to users throughout world. Deliveries can be tracked by companies using vehicle-tracking systems, helping the growth of global production networks to be managed.

Internet, social networks and skype

Internet began life as part of scheme funded by US Defence Department during Cold War. Early computer network ARPANET was designed during 1960s as way of linking important research computers in just handful of different locations. Since then, connectivity between people and places grown exponentially. By 2014, 5 billion Facebook ‘likes’ being registered globally every day.

Bretton Woods institutions created a global legal and economic framework that is suited to free trade and FDI. TNCs have thrived in this environment, helped by changes in rules that dictate how can operate. In 1980s, financial deregulation for many European countries and USA led to banks/finance companies globalising rapidly. (below) All involve injection of capital into economy of a foreign state in absence of any political barriers.

Different types of foreign direct investment o Offshoring Some TNCs build own new production facilities in ‘offshore’ low-wage economies. o Foreign mergers Two firms in different countries join forces to create a single entity. Royal Dutch Shell has HQs in both UK and Netherlands. o Foreign acquisitions When TNC launches takeover of a company in another country. 2010, UK’s Cadbury subjected to a hostile takeover by US

Kraft. UK few restrictions on foreign takeovers. Contrast, Committee on Foreign Investment in USA closely scrutinises inbound foreign takeovers. o Transfer pricing Some TNCs, such as Starbacks and Amazon, have sometimes channelled profits through a subsidiary company in a low-tax

country such as Ireland. The Organisation for Economic Cooperation and Development (OECD) now attempting to limit this practice National govs are key players in terms of promoting free trade blocs (P: role of European Union (EU), Association of Southeast Asian Nations (ASEAN)) and through polices (free-market liberalisation, privatisation, encouraging business start-ups). (P: role of govs in economic liberalisation) National govs key players in globalisation when adopt policies that allow TNCs to grow in size/influence using strategies above these gov policies include:

Free-market liberalisation: (neoliberalism), this governance model associated with policies of US President Reagan/ Thatcher’s UK gov during 1980s. Followed 2 simple beliefs. 1st=gov intervention in markets impedes economic development. 2nd= overall wealth increases, trickle-down take place from richest members of society to poorest. In practice, meant restrictions lifted on way companies/banks operated. Deregulation of City of London in 1986 removed large amounts of ‘red tape’ /paved way for London to become world’s leading global hub for financial services/home of many super-wealthy ‘non-dom’ billionaires.

Privatisation: Successive UK govs led way in allowing foreign investors to gain stake in privatised national services/infrastructure. Until 1980s, important assets, e.g. railways/energy supplies, owned by state. However, running these services proved costly: sold to private investors in order to reduce gov spending and raise money. Over time, ownership of many assets passed overseas. For instance, French company Keolis owns a large stake in southern England’s railway network and EDF energy company owned by Électricité de France. Since global financial crisis, UK gov approached Chinese/Middle Eastern sovereign wealth funds (SWFs) to help fund new infrastructure projects

Encouraging business start-ups: Methods range from low business taxes to changes in law allowing local/foreign-owned businesses to make more profit. When Sunday trading introduced in 1994, UK became more attractive market for foreign retailers, from Burger King to Disney Store. Italy eased restrictions on Chinese investors wanting start up textile companies inside EU; result, city of Prato has largest Chinese pop in Europe.

Growth of free trade blocs National govs promoted growth of trade blocs- To trade freely with neighbours or more distant allies, agreements been drawn up allowing stateboundaries to be crossed freely by flows of goods and money. Within a trade bloc, free trade encouraged by removal of internal tariffs. Brings benefits for businesses:

1. Removing barriers to regional trade= markets for firms grow. E.g., 10 new nations joined EU 2004= UK- Tesco access to 75mil extra customers. 2. Firms that have comparative advantage in production of a particular g/s should prosper. Thus French wine-makers, thanks to advantageous

climate and soil, produce a superior product that is widely consumed throughout a tariff-free Europe. 3. An enlarged market increases demand, raising volume of production and thereby lowering manufacturing costs per unit. An improved economy

of scale results, meaning products can be sold more cheaply and sales rise even further for the most successful firms. Other benefits too Smaller national firms within a trade bloc can merge to form TNCs, making operations more cost effective. Airtel Africa is mobile phone company headquartered in Kenya whose expansion into 17 African states been helped by existence of EAC and COMESA trade blocs Trade bloc members may also agree a common external tariff/quotas for foreign imports. In 2006, EU blocked imports of underwear from Chinese manufacturers on the basis that annual quota had been exceeded, jeopardising sales of EU clothing makers (media dubbed incident ‘bra wars’).

Some trade blocs include nations at varying levels of economic development. E.g., Mexico and USA both part of NAFTA (North American Free Trade Agreement). Makes sense because Mexico is an emerging economy with a cheap labour force, while the USA has management and research expertise. This

allows American TNCs, such as General Electric and Nike, to exploit human resources of both nations, cheaply manufacturing goods in branch plants in Mexico (called Maquiladoras) that are designed and marketed by white-collar staff in the USA

Special economic zones, government subsidies and attitudes to FDI ( China’s 1978 Open Door Policy) have contributed to spread of globalisation into new global regions (P: role of governments in attracting foreign direct investment FDI)) The actions of governments in new global regions Important reason for acceleration of globalisation in recent decades = changing gov attitudes in regions outside of Europe/North America. Asia’s 3 most populated countries – China, India and Indonesia –all embraced global markets as a means of meeting economic development goals. In all three cases, establishment of Special Economic Zones (SEZs), government subsidies and changing attitudes to FDI played important roles.

o Indonesia late 1960s, President Suharto turned back on communism and opened up Indonesia’s markets. American/European TNCs met with Suharto’s advisors and collectively built an attractive new legal and economic framework for foreign investors. Indonesia instantly became a popular offshoring location for TNCs like Gap and Levis. WB lending funded speedy modernisation of its roads, power supplies and ports. However, HR campaigners expressed concern that capital city Jakarta’s export zone become a low tax haven for sweat shop manufacturing.

o India Globalisation began in 1991, when sweeping financial reforms took place. Since then, Indian TNCs grown in size/influence. Tata and Bharti Airtel, India’s mobile network operator, both become major global players. Until 2013, however, foreign retailers only gain a presence on India’s own high streets by agreeing to form a partnership with a local Indian business. Thus, McDonald’s restaurants in North India and East India are a joint venture between Vikram Bakshi and McDonald’s Corporation. India’s high street rules deterred many other foreign retailers, such as IKEA, however. As a result, 90% of India’s shops are still family owned

Sovereign Wealth Funds

government-owned investment funds and banks. Some countries have created SWFs to diversify their revenue streams. For example, the UAE relies on oil exports for its wealth. Therefore it devotes a portion of its reserves to an SWF that invests in diversified assets that act as a shield against oil-related risk. Normally, the amount of money in the SWF is substantial. As of June 2015, the UAE’s fund was worth about $773 billion. There has been concern that SWFs may be used or political rather than economic gain e.g. with Hinkley C.

Special Economic Zones and growth in new global regions Special economic zone: industrial area, often near coast, where favourable conditions are created to attract foreign TNCs, e.g. low tax rates, no tariffs and

export duties Special zones: China, India and Indonesia China and its 1978 Open Door Policy

Before 1978 China was a poor/ politically isolated country- millions died from famines under the communist leader- in 1978 the Open Door Policy allowed China to embrace globalisation while remaining under one party rule. (e.g. farmers (farm communes) were allowed to make a small profit.)

Over the next 30 years- largest migration in history took place, 300 million people left rural areas in search of better life in cities. Soon there will be 200 Chinese cities with 1 million inhabitants or more. Initially urbanisation fuelled growth of low-wage factories that gave China the nickname ‘workshop of the

world’. By 1990s, 50% of China GDP was being generated in SEZs, by 2015 workers were earning $40 a day or more making quality goods e.g. iPhones. Today China is the world’s largest economy with 400 million people said to have escaped poverty.

(Role of government in attracting FDI)

3.3 Globalisation has affected some places and organisations more than others. Degree of globalisation varies by country and can be measured using indicators and indices (AT Kearney index, KOF index). (2) Measuring globalisation Uneven levels of globalisation can be measured using indicators and indices.

o Swiss Institute for Business Cycle Research, KOF, produces an annual Index of Globalisation. 2014, Ireland/Belgium were world’s most globalised countries according to KOF index. A complex methodology informs each report, using diverse data such as participation in UN peace-keeping missions and TV ownership. While is merit in KOF’s multi-strand approach to measuring globalisation, validity of these criteria might be debated.

o A.T. Kearney World Cities Index ranks New York, London, Paris, Tokyo and Hong Kong as top five ‘Alpha’ world cities for commerce. The ranking is established by analysing each city’s ‘business activity’, ‘cultural experience’ and ‘political engagement’. The data supporting this include a count of the number of TNC headquarters, museums and foreign embassies, respectively.

The KOF Index and Kearney Index combine many data sources that can be critiqued on grounds of either reliability or validity. Some data suffers from crude averaging and statistical gaps. Other indicators arguably poor proxies for globalisation (hours spent watching TV, for instance). However, they provide an interesting starting point for the statistical analysis of globalisation. Calculating a country’s globalisation score using the KOF index

1) Collect data relating to: o economic globalisation (trade and FDI figures from WB; import tariff rates) o political globalisation (number of foreign embassies in a country; number of UN peace-keeping missions a country has participated in) o social and cultural globalisation (volume of international ICT traffic, tourist flows and international mail; households with a TV set; imports

and exports of books) 2) Analyse new data by:

o converting all 24 variables into an index value with a scale of one to 100 o substituting missing data with most recent data available o averaging the individual scores to give a final score out of 100

3) Compare the new scores with previous scores dating back to 1970

EU ASEAN

Single trade bloc in multi-governmental organisation with its own currency and shared legislations

• Member states are eligible for EU structural funds to develop economies and agricultural producers benefit from farm subsides by Common Agricultural Policy (CAP)

• 1958- EEC comes into operation • 1978- Uk joined • 2002- Euro circulation 12/15 • 2004- 10 new members join (Poland, Hungary) • 2009- Eurozone financial crisis (Greece, Spain, Ireland) • 2016- Uk leave EU

Have freedom of movement

10 members- population of 600 mil- established in 1967 - founding members include high income Singapore and

emerging economies of Indonesia, Malaysia and the Philippines

They work to eliminate tariffs in favour of free trade- this has helped Indonesia’s manufacturing industries to thrive- while the Philippines gained a global reputation for call centre services.

- Now expected to develop into a single market called ASEAN Economic Community (AEC)- will operate along same lines as EU- free movement of labour/capital

- It also promotes peace and stability- and members pledge to not have nuclear weapons

TNCs are important in globalisation (P: role of TNCs) both contributing to its spread (global production networks, glocalisation and the development of new markets) and taking advantage of economic liberalisation (outsourcing and offshoring). TNCs build bridges between nations through supply chains/marketing strategies – however some benefit more than others from FDI from TNCs because:

- Not all places suitable sites of production for goods, for range of physical/human reasons (e.g. accessibility, natural resources, gov policies and levels of education)

- Not all places have enough market potential to attract large retailers (Due to low incomes, or culture) Therefore TNC s do not always adopt same strategies listed above in different national contexts internet companies failed to gain access to China’s market (Example) other strategies come into place… instead often use outsourcing/ forging business partnerships. Large corporations ranging from Dell to Tesco established 10s of thousands of outsourcing partnerships while building global businesses resulting series of arrangements called global production network (GPN) as globalisation accelerated so has size/density of GPNs food giant Kraft/Electronics firm IBM both have 30,000 suppliers providing ingredients they need – an amazing 2,500 different supplies provide parts to assemble BMW’s Mini Car. Some parts outsourced form suppliers within EU (to avoid import tariffs) – in contrast engine comes from offshore factory in Brazil owned by BMW. GPN growth owes much to trade liberalisation/changing attitudes of national govs developing countries benefited from GPN growth because outsourcing arrangements are economically beneficial local owners of factories in China’s SEZs have profited from work that foreign TNCs have outsourced to them. However some TNCS discovered outsourcing brings risks poorly monitored= damage corporate profits/image:

- National hazards e.g. 2011 Japanese tsunami disrupted global supply chains - UK supermarkets found horsemeat entered supply chains in 2013 - Collapse of the Rana Plaza textile factory in Bangladesh in 2013 killed 1100 people making clothes for Wal-Mart as part of outsourcing

Developing new markets Strengthening of Latin American, Asian and Middle Eastern economies has prompted an explosion of TNC interest in these emerging markets, where over 2 billion people moved from dollar a day poverty into higher income brackets since 1990 – building a GPN helps TNCs gain access to these new markets- in order to maximise profit, any TNCS adapted products to suit local tastes … called: globalisation (Changing design of products to meet local tastes/laws e.g. Domino’s pizza only offers vegetarian food in India’s Hindu neighbourhoods) many TNCs view localising integral to globalisation however when evaluating importance of globalisation remember that not all companies need to gloacise products… e.g. oil companies

Walt Disney Company McDonalds Lego 2009 Disney released 1st Russian film- book of Masters ,based on Russian fairy tale/produced using local talent Disney acquired Marvel 2009 – gaining rights to superhero characters that sometimes been globalised e.g. ‘Spiderman India’

2012 McDonalds established 35,000 restaurants in 119 countries in India had to cater for Hindus and Sikhs also Muslims who do not eat pork chicken burdgers served alongside McVeggie and McSPicy Paneer in 2012 McDonalds opened vegetarian restaurant for Sikh pilgrims visiting Amritsar home to Golden Temple

Unlike Disney/McDonalds Lego no glocalised products since 1949 Danish plastic brick maker producing gradually more complex designs in Denmark, Hungary, Czech Republic and Mexico however lego exports identical products to all global markets -> like Apple/Samsung Lego makes products with genuine global appeal- not take local taste into account

There are physical, political, economic and environmental reasons why some locations remain largely ‘switched off’ from globalisation ( North Korea or Sahel countries). (3) Switched-off places A few of very poorest nations of world remain relatively switched off from global networks (aside from small elite groups of citizens). For physical, political, economic or environmental reasons, these countries still lack any strong flows of trade and investment with other places and economies. North Korea Nearly 70 years, ruled as an autocracy by single family (King Jong-un current leader). Chosen deliberately to remain politically isolated from rest of world.

• Ordinary citizens do not have any access to the internet or social media. • are no undersea data cables connecting North Korea with anywhere else.

North Korea divided from South Korea in 1948. South Korea since become a developed country which is home to Samsung and other global brands. A comparison of the two countries, and the policies of their governments, illustrates clearly how political decision making affects globalisation. Sahel region Poverty affects a massive majority of people in Africa’s Sahel nations, e.g. Chad and Mali, are some of world’s least developed countries (LDCs). Mismanagement of natural/human resources played a role in this lack of development . These countries also landlocked, and do not have coast, which means they struggle to attract FDI. Arid conditions and desertification also lead to further development challenges. In particular extreme environmental conditions increase the cost of providing infrastructure, e.g. railways or ICT networks, in regions where poverty has lead to a limited market to begin with. When people in these countries to become linked with wider world, tends to be shallow form of integration. E.g. subsistence farmers dependent on flows of food aid from charities in OECD nations. Some farmers also grow cash crops for TNCS, e.g. cotton producers in Mali. Wages so low however, workers have negligible spending power. Thus global brands not yet view these places as visible markets, leaving them relatively switched off from consumer networks. Change may soon come to the region though, Rapid economic growth is happening in neighboring countries like Nigeria. A minority of Sahelian people do interact with the world in surprising ways:

• Mali’s folk musicians have a large global following on YouTube • Conflicts in region involve groups linked with al’Quaeda’s global terror network

Switched off from Globalisation

Political isolation- North Korea isolated itself- shunning world trade- no access to internet/ social media, no undersea data cables connecting anywhere else

Physical Isolation- Himalaya mountain countries of Nepal, Bhutan and Chinese Tibet isolated by terrain and winter snow limiting outside connections

Economic isolation- rural parts of Sub-Saharan Africa (Sahel) dominated by subsistence farming economy – capacity to create connections limited (poor)- Sahel lacks coastline e.g. Chad- struggle to attract FDI- arid conditions/ desertification rises cost of infrastructure

Environmental barriers- harsh desert climates, extreme polar cold/ dense tropical forests limit developing of transport/ trade connections

Globalisation Knowledge test

1. Name one of the three T’s that have accelerated globalisation. _________________

2. Name two of the four strands/types of globalisation.

1________________________________________

2________________________________________

3. The world becoming effectively smaller is known as what? _____________________

4. Cross out the incorrect words.

HIC’s have deep/shallow and near/far connections in globalisation. NEE’s are somewhat connected to globalisation. An example of a NEE is Canada/Mexico/Mali.

5. Name two types of global flows.

1__________________________

2__________________________

6. What does interdependent mean? ________________________________________________________________________________________________________________________________________________________________________________

7. What is containerisation? ___________________________________________________________________

8. Which country and city in Eastern Europe is a good example of an area being opened up to globalisation as a result of EasyJet flying there often? Country = _____________________________ City = ________________________________

9. Give two examples of technological improvements that have accelerated globalisation

10. What does FDI stand for? ________________________________________

11. What is offshoring? _______________________________________________________________________________________

12. The World Bank and the WTO are examples of what? __________________________ 13. What controversial features does the IMF include in their terms when loaning capital to developing nations?

______________________________________________

14. Name the three national government attitudes that accelerated globalisation in the UK in the 1970’s and

1980’s. 1_______________________________________________________ 2_______________________________________________________ 3_______________________________________________________

15. Large amounts of FDI invested into British companies have come from the large reserves of money in areas such as China and Qatar. These are known as what? _____________________________________________

16. Name one British business or company that is partly owned by another TNC or government. _______________________________________

17. The EU is an example of what type of group? ______________________

18. Including the UK, how many EU member states are there? __________________

19. What does either NAFTA or ASEAN stand for? Only choose one. ___________________________________________________

20. What does SEZ stand for? _______________________________

21. Name two ways in which SEZs offer incentives to attract FDI. 1_____________________________________________________________________________ 2_____________________________________________________________________________

22. In what year was China’s Open Door policy? ___________________

23. By 1990 how much of China’s GDP was being generated in SEZs? ________________________

24. Name two physical reasons some countries may be switched off from globalisation.

1___________________________________ 2___________________________________

25. Name two human reasons some countries may be switched off from globalisation.

1___________________________________ 2___________________________________

Globalisation question for revision:

In your sleep (1) Easy (2) Let me think (3) I’ll need a little time for that! Tricky tricky!

Define globalisation

Explain the term ‘a shrinking world’ in reference to globalisation

How did containerships contribute to globalisation?

Explain how China’s open door policy may have led to its rapid growth

To what extent do TNC’s exploit people and the environment

Give examples of how you are a ‘global

Why are some countries better connected to the global network?

Explain how changes in technology have contributed to the process of globalisation

Explain the term liberalisation of trade

Assess the extent to which the globalization of trade can bring problems as well as benefits

Name 2 international trade blocs

Define tariffs and ‘red tape’?

How does being in a trade bloc help countries to develop

Assess the benefits for countries of being in a trade bloc

Assess the impacts of the global shift on one named country

What is a SEZ? Explain 2 ways in which TNCs promote globalisation

How have the IMF, World Bank and WTO contributed to globalisation?

Using examples explain the impacts of international migration on host nations

Assess the contribution of globalisation to cultural diffusion

Name one switched on and one switched off country

What are global hubs and what are the physical and human resources that have created them?

What impact has China’s rapid growth had on different people and the environment

Compare the measures of KOF index and AT KEarney

Assess the nature of social, political and environmental tensions that have resulted from changed caused by globalisation

Define the term global shift

Why use a variety of development indicators to measure development

What does Lee’s model show?

In what ways do we have a globalised culture?

Assess the actions taken by NGOs and local government in promoting ethical and environmental concerns about unsustainability

How Globalization Saved the World and Damned the West A dispatch from Davos on the verge of a nervous breakdown FEB 7, 2019 Derek Thompson Staff writer at The Atlantic

The values of free thinking, free markets, and free trade have led to a historic reduction in global poverty, ever-rising life expectancy, and ascending IQ levels. Undernourishment and maternal deaths are both down more than 40 percent since 1990. “All this has happened chiefly because countries—from China to India to Ethiopia—have adopted more market-friendly policies,” the CNN host Fareed Zakaria wrote in The Washington Post.

If these statistics were the only thing you knew about the world, you would be shocked to read just about any news article about the state of Western democracy. In country after country, in Europe and in the Americas, nativist movements are gaining power by opposing the values of openness and empiricism. These nativists have often thrived by arguing that free markets and globalization have impoverished the middle class and destroyed all sense of national identity or sovereignty.

Global capitalism appears to be saving the world and destroying the West, at the same time. I went to Davos to see whether I could resolve the paradox or, in failing to do so, at least drown my ignorance in hot chocolate.

My first lesson, however, wasn’t in global economics, but local real estate. A month before my trip, there was no available hotel room within three hours of the conference hub. Davos, a tiny Swiss village, doesn’t have enough space for WEF’s thousands of attendees. Hotels along the town’s main artery, the Promenade, jack up their rates to levels only corporate executives or multimillionaires can afford. This forces the conference’s ordinary joes either to settle in nearby villages connected by train or (as in my case) to stuff themselves into basements, bunks, and pullout couches.

This might sound like an irrelevant aside, but for those in the market for a globalization metaphor, it may be impossible to beat: At a conference symbolizing the promise of capitalism, every non-plutocrat is fighting for scraps.

IN 2009, IN THE NADIR of the Great Recession, the elites who convened at Davos agreed that the solution to the failure of globalization was more globalization. Then–British Prime Minister Gordon Brown called for a new Bretton Woods Agreement, referring to the 1944 conference that established the postwar order by creating the World Bank and the International Monetary Fund. “We live in an interdependent world, and the only way to move forward is to cooperate,” Kofi Annan, former secretary-general of the United Nations, said in agreement.

Ten years later, it seems obvious that the reaction among the richest countries in the world has been quite the opposite—not global integration, but global disintegration.

To get a handle on what’s happening, I first met James Manyika, the director of the McKinsey Global Institute (MGI), in the lobby restaurant of the Ameron Hotel. If you want to know where the nativist revolution is coming from, he said, a simple story must be told.

In 2016, Manyika co-wrote a landmark report on earnings growth in advanced economies over the previous 20 years. It was a tale of two decades, he said. In the first 10-year period, from 1995 to 2004, wages grew for at least 98 percent of households in just about every advanced economy. But in the second decade, from 2005 to 2014, everything fell apart.

“We found inequality, yes. But that was the least interesting thing we found,” Manyika told me. “The more interesting thing was wage stagnation in almost all the advanced economies.”

This was an entirely new phenomenon. Wage income declined for the majority of households in France, the Netherlands, the U.K., and Italy. The U.S. had it even worse. Four out of five households saw flat or falling income before accounting for taxes and transfers. Between globalization, the Great Recession, and the not-so-great recovery, the middle class was slammed.

And they felt it, too. Manyika’s research team asked more than 6,000 people in the United States, the U.K., and France to describe their economic status. Between one-third and 40 percent of respondents in each country felt that their incomes were falling behind. “And these people tended to blame free trade and immigrants for hurting their wages and ruining their culture,” Manyika said.

MGI was putting its finishing touches on the report in early 2016, but held its publication for the Brexit vote in March. “We weren’t surprised by the outcome,” Manyika told me. “We had been sitting on this research showing widespread resentment toward globalization as a result of people feeling like they were being left behind.” In June, MGI published the paper under the title “Poorer Than Their Parents.” That same week, the labour economists Brian Bell and Stephen Machin published a separate analysis of the Brexit outcome. The economic statistic most closely aligned with “Leave” votes wasn’t unemployment or income at the local level. It was poor wage growth.

Anti-elite sentiment “has become the most potent political force in Europe,” writes Martin Gurri, author of The Revolt of the Public and the Crisis of Authority in the New Millennium. “It brought Brexit in Britain, electoral defeat to German chancellor Angela Merkel, drove protests in France, shattered so many political coalitions that governed Europe since World War II, and raised to prominence new parties and persons nominally attached to the right or the left but always fractious, sectarian, ‘populist.’”

But economic challenges probably aren’t sufficient to explain the emergence of these “new parties and persons” that prey on xenophobia and racism as much as they appeal to class resentments. The changing media landscape is part of the story, too.

For years government elites could silence political outsiders by denying them an audience. In the late 20th century, the Democratic and Republican Parties were terrifically effective at marshaling elite power to shape public opinion during the presidential-election process. Voters didn’t select candidates at random; rather, as political scientists like to say, “the parties decided” on the favored candidates and used their power to funnel voters toward these insiders.

That was before the Cambrian explosion of digital media made it impossible for insiders to control their nomination processes. Social networks large and small, such as Facebook and Gab, allow fringe ideologues to find one another, build an online movement through angry online rhetoric, and bypass the traditional party and media structure to reach disaffected voters.

Around the world, far-right movements have excelled at using new media to stir anger against the establishment. In the United States, YouTube has become“ground zero for far-right movement recruiting.” In Germany, the right-party AfD has more than twice as many Facebook followers as Angela Merkel’s party. In the Czech Republic, online news is dominated by the “virulently xenophobic” ParlamentniListy, which feeds its audience stories of radical Islamic atrocities and alt-right talking points.

Globalization and poor governance created the conditions in which nativist insurgencies can grow. Social networks made it possible for political cults to organize around outrage.

ON MY LAST DAY AT WEF, I was sitting at the juice bar of the Kongresszentrum, which is either the Mecca or the Mordor of Davos. My companion was Adam Tooze, the Columbia University economist whose recent book Crashed is a magisterial history of the Great Recession’s legacy.

Too often, Tooze said, commentators describe the populist wave as if it’s a monolithic movement. “I don’t like the word populism, because populism isn’t any one thing,” he said. “It’s diverse, it’s idiosyncratic.” Donald Trump may call himself Mr. Brexit, but Brexit and Trump are distinct expressions of anger.

But there’s a good reason that commentators tend to lump together Trump, Brexit, and other “populists” and “populist” movements: They’re built to oppose rather than lead, and right now it’s fair to say they’re in a shambles, unable to fulfill their nativist promises. In the U.K., Prime Minister Theresa May’s Brexit deal was voted down in humiliating fashion. In the United States, Trump’s record-breaking government shutdown led not to a wall but to declining poll numbers for the president. Both May and Trump had to cancel their appearances at the Swiss conference.

Right-wing nationalism is the solution that solves nothing. What’s needed instead is a movement that doesn’t just succeed in outraging voters, but actually seeks to use government to address the source of their outrage.

In the United States, those on the left are trying to build such a movement within the Democratic Party. What they seek, in brief, is to pay for universal programs with a new set of taxes for winners in the capitalist system.

There are features of the new American left that some might find reminiscent of the new American right, like a deep distrust of global capitalism, an exasperation with the establishment, and a talent for social media that sometimes devolves into self-described dirtbaggery.

But it would be a mistake to say that left-wing populism is simply the mirror equivalent of the right. While Trump is perhaps the least popular president in modern history, Senator Elizabeth Warren’s proposed wealth tax is quite popular among Democrats. Representative Alexandria Ocasio-Cortez’s suggested 70 percent marginal rate on American deca-millionaires is supported by, conveniently, 70 percent of all voters. “Medicare for All” also attracts large majorities, though the slogan seems to mean different things to different people.

What’s more, taxing the rich to fund universalist programs directly addresses middle-class insecurities caused by global capitalism—unlike, say, building a giant border wall. Free markets without income security have been a recipe for instability. So have socialist policies that stamp out free markets. But some members of the American left seem to be pointing to a compromise: a new system of universal guarantees supported by higher taxes and higher peacetime deficits in this context of a capitalist system. That would include health care for all, a child allowance, and an expanded system of wage subsidies to ensure a basic standard of living for Americans.

If this movement is going to succeed, however, it will have to identify not only global capitalism’s problems, but also its benefits. There is no question that free trade and increased immigration have reduced poverty and improved global living standards at a historic rate in the past 30 years. For all the hatred directed toward the Davos crowd, there will be no economic growth in the West without policies that promote entrepreneurship and innovation.

Climate change offers an interesting challenge for the movement. The Green New Deal, an environmentalist platform that would include massive public-sector investments in clean energy and infrastructure, is a part of the left’s effort to rebalance the economy away from free markets and private goods. But any realistic plan to decarbonize the U.S. economy will almost surely require the sort of commercial technological breakthroughs that tend to come from private entrepreneurs tinkering with the products of publicly funded research. And to reduce global emissions, the United States will have to share its eco-technology with China, southeastern Asian countries, and African nations, which account for most of the growth in future emissions. In other words, saving the American middle class might take a leftist intervention, but saving the world will also require something very much like free-market globalism.

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Globalization Doesn't Make as Much Sense as It Used To Since its founding, America has swung from protectionism to free trade. What’s next?

CLYDE PRESTOWI TZ DEC 12, 2016

A large number of American voters are tired of globalization—that much is clear. With Donald Trump calling for the abandonment of the North American Free Trade Agreement (or, more commonly, NAFTA) and Hillary Clinton turning her back on the Trans Pacific Partnership (TPP) free-trade agreement she herself had originally helped launch, both major-candidates abandoned what had come to be the standard pro-globalization position of those vying for the nation’s highest office. Most economists and many think-tank researchers have bemoaned this development, insisting that globalization generally leaves most nations—and most people—better off. But a review of American economic history suggests that something fundamental has changed: Increased globalization may make less sense now than it did in the recent past.

In the earliest days of the United States, globalization and competitiveness were some of the biggest issues on its founders’ minds. Adam Smith’s The Wealth of Nations was published in 1776, and the framers later debated Smith’s arguments for deregulation, free markets, and open trade. Thomas Jefferson saw the United States as primarily an agricultural producer and spoke for the Southern planters, who depended on foreign markets and who embraced Smith’s notion of minimal government. Alexander Hamilton felt differently: Aware of the mercantilism-fueled Industrial Revolution in the U.K. and the unprecedented wealth it created, he took the side of the nascent manufacturers of the Northern colonies by calling for subsidies to support the development of technology and manufacturing industries, as well as high tariffs to protect them.

Hamilton understood Smith’s free-market, free-trade arguments and agreed that if all nations played by Smith’s rules, free trade would be the best policy for the fledgling United States to adopt. But he noted that neither the U.K. nor any other nation yet adhered to the conditions Smith laid out, and warned that it would be folly for the U.S. to be the exception. George Washington sided with Hamilton on the issue. In contrast to most of his upper-class peers, Washington wore only garments made of domestically produced fabric, and emphasized that he bought no cheese or beer “but such as is made in America.”

When the War of 1812 was nearly lost for want of the young nation’s capability to produce the necessities of war, Jefferson changed his mind. Declaring that “manufactures are now as necessary to our independence as to our comfort,” he came around in support of high tariffs to protect American industry. Thus, from shortly after the war to about 1950, the United States enacted mercantilist trade and industrial policies; by 1900, it had become the richest country the world had ever seen.

By the end of World War II, with the economic infrastructure of Europe and Japan in ruins, virtually every American industry could out-compete those in the rest of the world. American industry was so strong, in fact, that it no longer needed the help and protection of the government. Rather, it needed the rest of the world to recover economically from the war, so that there would be markets open to its exports and investment. And once there were, the U.S. would gain from pursuing policies that promoted globalization.

The theory behind globalization was first enunciated in 1817, when the British banker David Ricardo outlined the concept of comparative advantage. Using the example of the production of cloth and wine in Britain and Portugal, Ricardo posited that Britain needed 100 hours of labour to produce a unit of cloth and 120 to produce a unit of wine, while in Portugal the time required was only 90 hours for cloth and 80 for wine. Portugal was the lower-cost producer of both products, but Ricardo’s key insight was that the Portuguese had a bigger advantage in wine than in cloth. If both countries specialized in the product in which they held a comparative advantage and traded for the rest, the global amount produced of both products would be greater and each country would have more of both.

Economists after Ricardo added more specifics to his ideas. They theorized that global trade flows were determined by a given country’s endowments of labour, capital, and natural resources. Nations with lots of cheap labour would produce labour-intensive products (shoes, textiles) while those with a lot of capital would produce capital-intensive products (machinery, cars), and those with abundant natural resources (oil, ore) would mine and export them.

So, in theory, free trade was a win-win proposition, but only as long as a few key assumptions held true: There needed to be fixed exchange rates, full employment, an absence of international flows of labour or capital, an absence of economies of scale, and perfectly competitive markets.

Such conditions could almost never be found in reality, but as it happened, the features of global economy in the late 1940s and 1950s came pretty close to matching them: The International Monetary Fund maintained a system of fixed exchange rates, such that the dollar was valued at a fixed amount of gold and all other currencies were fixed to the dollar; most international trade was in commodities like sugar and iron ore, which were traded in more or less perfectly competitive markets with no economies of scale; and the rise of multinational corporations was mostly still in the future, so international financial, labour, and technological flows were limited. These circumstances made free trade newly viable, and the country swiftly abandoned mercantilism.

For about 30 years it worked splendidly, with the U.S. profiting greatly from the global postwar recovery and participating in the foreign markets it revived. With Washington taking the lead, a series of international negotiations dramatically reduced tariffs and trade barriers. In addition, advances in shipping dramatically reduced transport costs, while corporations started making more foreign investments, carrying new technologies with them. The period between 1945 and 1975 saw the appearance first of a miraculous German recovery in the 1950s and then a miraculous Japanese recovery in the 1960s. Meanwhile, in the U.S., median household income and per-capita income roughly doubled during that postwar period, while unemployment and inflation remained generally low.

Then circumstances changed. As the productivity of other countries rose faster than America’s in the rush of recovery from the war, exchange rates initially set in the late 1940s should have been adjusted to reflect the changes in relative productivity. But for various reasons—in part because of the U.S.’s desire during the Cold War to strengthen the economies of its allies—exchange rates were held steady, and was reflected in the U.S.’s balance of international payments, which went into a steep deficit as America increasingly imported more than it exported. In 1971, the United States ran its first trade deficit—$1.3 billion—since 1888. The dollar was at that time convertible into gold, and the metal flowed out of the country as foreign exporters cashed in their dollars for something they deemed safer for the long run.

Despite government efforts to stem the deficit, it only continued growing. In 1972, President Nixon threw out the postwar fixed-rate system by refusing to make further gold payments and letting the value of the dollar be determined by the forces of the currency markets. That provided some relief for America as currencies adjusted to more realistic exchange rates, but many countries continued to maintain substantial barriers to imports and began buying and selling dollars in efforts to keep their currencies somewhat undervalued versus the dollar. By 1980, America’s trade deficit was nearly $20 billion and growing, as globalization broadened.

These shifts represented departures from those crucial base-state theoretical conditions upon which free trade depended. First, the advent of shipping containers and the construction of huge vessels dramatically reduced the costs of international transport. Also, trade that in the past had been largely in commodities came to be dominated by the manufactured goods of industries characterized by economies of scale, such as steel, cars, and chemicals—which violated another theoretical assumption in the argument for free trade.

Further deviating from those assumptions were the policies of major trading countries such as Japan, which accounted for half of the U.S.’s trade deficit. In theory, nations were expected to concentrate on producing and exporting what they did best while importing most everything else. But, like Alexander Hamilton and a number of early American leaders, Japan and others chose not to go along with that thinking. Some of the key elements of Japan’s approach were a focus on exports, the protection of domestic markets, government-guided investment in industries that featured economies of scale (steel, ship-building, and semiconductors, to name a few), and the management of the yen to be undervalued versus the dollar. As an architect of Japan’s strategy, Naohiro Amaya, explained to me for my 1988 book Trading Places, “We did the opposite of what the American economists told us.”

This was not the comparative-advantage theory of Ricardo—it was catch-up industrial policy, and it worked so well that it was quickly imitated by countries in Asia and beyond. It was through a strategy like this, in which the government favored certain industries, that South Korea—a country with little in the way of natural resources, capital, or skilled labour—could come to gain an edge in producing cars, semiconductors, and other goods.

These policies, along with expanded international flows of finance and technology and trade dominated by industries with economies of scale, essentially negated the assumptions upon which the postwar conventional wisdom of free trade was based. Indeed, in the early 1980s, the economists Paul Krugman, James Brander, Joseph Stiglitz, and others began to note that the standard assumptions of free trade had become unrealistic. Krugman in particular emphasized that economies of scale are a driver of trade flows as important as land, labour, and capital, at least in industries such as aircraft- and car-manufacturing. For this work, he was eventually awarded the Nobel Prize in economics in 2008.

Some thought that these economists’ work would influence trade policy. But there was a problem. Incorporating economies of scale into the equation meant that comparative advantage depended not only on the factors of production—labour, land, capital—but also on quantities produced. Advantage, as Hamilton had long ago perceived, could thus be created by policies that would, through the selective imposition of tariffs, subsidies, and other policies, encourage certain industries to thrive. This is what Naohiro Amaya meant when he spoke of rejecting American advice on free trade: He was in the business of picking winners.

But the notion that the government could pick winners and losers did not fit with the American suspicion of government, not to mention with the established views of academics and pundits heavily invested in orthodoxy. Conservatives automatically rejected the idea of such government intervention, and national-security groups that had become accustomed to using free-trade deals as bargaining chips for foreign geopolitical support were also strongly opposed. Some academics added that mercantilism might work in theory but would be captured by special interests in practice. (Still, none seemed to recognize that having little policy in the face of other countries’ policies was still a policy—one that deserted the industries targeted by other governments.)

So, there came to be a consensus that the fix was for America to negotiate more and better free-trade deals, and that is what Washington tried to do until about a year ago. The result has been the establishment of the World Trade Organization (WTO), NAFTA, the U.S.-Korea (KORUS) free-trade agreement, and China’s entrance into the WTO. These developments have been accompanied by a steady increase of the U.S.’s annual trade deficit (from the roughly $20 billion in 1980 to the current $500 billion), the offshoring of much formerly U.S.-based production (even in capital- and technology-intensive industries), and the widening of inequality in U.S. incomes and wealth.

The results of the election seem to indicate that—the views of economists and foreign-policy experts notwithstanding—America is about to change course on trade policy. That doesn’t necessarily mean a return to pre-World War II protectionism. It could instead simply mean a revival of the spirit that inspired the foundations of the postwar economic order. That spirit, articulated by the economist John Maynard Keynes, focused on assuring balanced trade—the avoidance of chronic surpluses on the part of some trading partners and chronic deficits on the part of others. Thus a new order might operate to prevent the misalignment of currency valuations, to abolish or offset the impact of tax subsidies, and to mitigate the implicit subsidization of state-owned enterprises. It has been largely forgotten that one of the key objectives of postwar free-trade policy was to maintain a roughly balanced trade account—a goal that the country is likely about to pursue anew and that will likely affect its policies touching on not just trade, but investments, currency, technology, and labour as well.

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