QUESTION 5 - GLOBALISATION

Key areas of study for this question:

  • What is globalisation?
  • Transnational Companies Case Study - Nestle
  • Trade
  • Fairtrade
  • Benefits and problems of globalisation
  • European Union (EU) enlargement
  • Trading Blocs
  • How has China and India benefited from globalisation?

WHAT IS GLOBALISATION?

WHAT IS GLOBALISATION? - Globalisation, a term first used in the 1950's, is the result of the following:

  • Improvements in technology and telecommunicaitons - computers, internet access, email, mobile phones and video conferencing.
  • Improvements in transport - people now holiday all over the world and businesses ship products and raw materials globally.
  • The growth of transnational/multinational companies (TNC's/MNC's), such as HSBC, Nike and Nestle. These companies are the driving force of globalisation.
  • Greater political cooperation e.g. the World Trade Organisation (WTO), an intergovernmental organisation that promotes free trade.
  • The development of trading blocs.
  • The world becoming more interconnected.

 

GLOBALISATION - This is when human activities take place on a worldwide scale, meaning we increasingly live in a 'global village' or a 'shrinking world'.

INTERDEPENDENCE - This is when countries are linked together economically, socially, culturally and politically so that they are dependent on each other.

 

IDEA OF A SHRINKING WORLD? - The world is effectively shrinking. Information, goods and services can be transferred much more quickly than before. The cost of communication has also fallen.

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lesson-1-what-is-globalisation.ppt lesson-1-what-is-globalisation.ppt

lesson-1-introduction-to-globalisation.docx lesson-1-introduction-to-globalisation.docx

TRANSNATIONAL COMPANIES (TNC's)

Transnational companies (TNC's) (also know as multinational companies) are very large businesses that have offices and factories all over the world. The headquarters and main factory are usually located in developed countries, particularly in the USA and Japan. Smaller offices and factories tend to be in the developing countries where labour is cheap and production costs are low.

In the past 30 years, TNC's have grown in size and influence. Some of the largest ones make more money in a year than all of the African countries put together. The world's 500 largest companies now control at least 70% of the world's trade and produce more than half of the world's manufactured goods.

 

Many people are concerned about the effects of TNC's. They argue that they locate in poorer countries just to make profit, and pay low wages particularly to women and young children.  Others say that without TNC's, the poorer countries would simply not be able to develop their own industries. People would have no jobs at all and their future would be very bleak.

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TNC CASE STUDY - NESTLE

Nestlé is the world's largest food and nutrition company. Founded and headquartered in Vevey, Switzerland, Nestlé originated in a 1905. The company grew significantly during the First World War and again following the Second World War, eventually expanding its offerings beyond its early condensed milk and infant formula products. Today, the company operates in 86 countries around the world, has 456 factories worldwide and employs over 283,000 people. The first half of the 1990s proved to be favourable for Nestlé. Trade barriers crumbled, and world markets developed into more or less integrated trading areas.

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lesson-1-nestle-factsheet.doc lesson-1-nestle-factsheet.doc

TRADE

No country has everything it needs and wants. All countries have to buy from and sell to each other. They buy things that they need or would like to have and they sell things to make money to pay for what they have bought. The exchanging of goods and services like this is called trade, and it is important in the development of a country.

Usually, MEDC's export valuable manufactured goods such as electronics and cars and import cheaper primary products such as sugar, tobacco and coffee.

In LEDC's, the opposite is true - this means that LEDC's earn little and as they remain in poverty, the country is forced to borrow money to pay for its imports and the country goes into debt.

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lesson-2-trade.ppt lesson-2-trade.ppt

 

MAKE SURE YOU KNOW WHAT ALL THESE KEY WORDS MEAN.

  • Trade - Is the movement of goods and services between countries.
  • Imports - Are goods that are bought from other countries.
  • Exports - Are goods that are sold to other countries.
  • Interdependent countries - Countries that work together and rely on each other for help.
  • Trade deficit - Is when the cost of imports is greater than the money made from exports.
  • Trade surplus - Is when the money made from exports is greater than the cost of imports.
  • Tariffs - Are taxes imposed on imports.
  • Quotas - Are limits on the amount of goods that are imported.
  • Subsidies - Are grants of money given by governments to maintain the price of a specific product e.g. milk.

FAIRTRADE

Fair Trade is an organisation that sets standards for trade with LEDC’s.

  • It guarantees a fair price for the farmer.
  • This pays for the product and investment in local community development projects.
  • In return the farmer must farm in an environmentally friendly way and treat their workers fairly too.
  • More than 900 products are labelled fair trade.
  • Retail trade is growing by 40% a year.
  • In Costa Rica coffee growers have formed co-operatives (groups) and now grow and trade their own coffee.

 

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For more information: http://www.fairtrade.org.uk/ 

BENEFITS AND PROBLEMS OF GLOBALISATION

When a TNC opens a new factory or office it can have a positive impact on local people and the local economy. Jobs are created and there a benefits to the local economy. However, the local labour force are usually poorly paid and have to work long hours.


 
BENEFITS OF GLOBALISATION:
  • Investment of TNC's provides new jobs and skills for local people.
  • TNC's bring in foreign currency to local economies when they buy local resources, products and services. This is known as a multiplier effect (see below).
  • The mixing of people and cultures - people can experience foods and products not previously available in the country.
  • Migration of people can fill labour and skill shortages.
  • Globalisation can make people aware of distant parts of the world - e.g. people of the UK were quickly alerted to the impact of the 2010 Haiti earthquake.
  • It may help people be more aware of global issues like deforestation and global warming and alert them to the need for sustainable development.

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PROBLEMS OF GLOBALISATION:

  • Globalisation operates largely in the interests of the richest countries.
  • The role of the developing countries is often to provide the richer countries with cheap labour and raw materials.
  • Profits are often sent back to to the MEDC's where most TNC's are based.
  • TNC's, with their large scale economies, may drive local companies out of business.
  • TNC's might close down local factories and make people redundant.
  • TNC's may operate in a way that would not be allowed in MEDC's - e.g. polluting the environment, taking risks with safety or paying low wages to local workers.
  • Globalisation is a threat to the world's cultural diversity and drowns local traditions and languages.

 
BRAIN DRAIN:

This is a slang term for a significant emigration of educated or talented individuals. A brain drain can result from there being better professional opportunities in other countries or from people wanting a better standard of living.

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EUROPEAN UNION (EU) ENLARGEMENT

The UK is a member of the European Union (EU), a group of countries whose governments work together to make trade easier and improve living standards of its people. It's a bit like a club - to join you have to agree to follow the rules and in return you get certain benefits.

  • The EU has 500 million citizens. Each country pays to be a member and the money is used to change the way people live and do business in Europe.
  • The EU gets rid of controls that stop people moving around freely inside the Union.
  • There are some people who think that the EU does too much and that it tries to create universal rules for everyone in Europe, making people obey them even if they disagree.

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IMPACTS OF THE ENLARGEMENT OF THE EU:

An enlarged European Union has increased trade between member countries and made it easier to travel between countries.  Tourism in cities such as Krakow (Poland) is booming and many workers in eastern Europe are travelling west in search of work.

 

CASE STUDY - POLISH MIGRATION TO THE UK:

People who come from countries in the EU can live and work in any other EU country. Approximately 500,000 people from Poland came to the UK after Poland joined the EU in 2004. People left Poland because of high unemployment, low wages and housing shortages.  They came to the UK because there was more work, higher wages and a big demand for trades people such as plumbers and electricians. It is also easy to move to the UK as English is an international language and the UK allowed unlimited migration.

 

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lesson-5-eu-enlargement.ppt lesson-5-eu-enlargement.ppt

TRADING BLOCS

Some countries have grouped together in an attempt to make trade cheaper and easier between them, whilst increasing taxes on products brought in from outside the block. Although they improve trade between the member countries, they do not necessarily help the development of world trade.

Three examples of trade blocks are:

The European Union: The EU is made up of 15 member countries (Austria, Belgium, Denmark, Finland, France, Germany, Greece, Irish Republic, Italy, Luxembourg, Netherlands, Portugal, Spain, Sweden and the UK.). The EU began as a group of only 6 countries in 1957 and has expanded ever since. Border controls between the countries are virtually non-existent now, and trade is almost exclusively between the 15 countries. This has led to developing counties complaining that they cannot get fair access to the European market.

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Mercosur: Mercosur is the trade group in South America. It has 4 full members (Argentina, Brazil, Paraguay and Uruguay) and 5 associate members, who may become full members in time (Bolivia, Colombia, Ecuador, Peru and Venezuela). It is a relatively new trading bloc, having been set up in the late 1980's and early 1990's but already the benefits are being felt by the four full members as trade tariffs on most products have been scrapped. Trade between them has increased and will continue to do so.

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NAFTA: The North American Free Trade Association is the name given to the trade bloc made up by Canada, Mexico and the United States. It was established in 1994 and broke new ground by incorporating MEDC's and LEDC's together. It aims to eliminate trade barriers, improve trade and increase investment, primarily in Mexico.

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HOW HAS CHINA AND INDIA BENEFITED FROM GLOBALISATION?

China and India are often used as examples of the success of globalisation in improving the lives of people in LEDC's. China's market is huge and only recently, with China's entry into the World Trade Organisation (WTO), is the government opening it up to world trade. China's growth has been impressive but it has created tremendous internal inequalities.

  • Growth has been concentrated in the coastal regions, with the western and northwestern provinces being left behind.
  • Inequalities among the countryside and the city, regions and classes are all growing.
  • Over 120 million people have been lifted out of poverty by China's growth but there are increasing problems arising from tensions between the new classes of 'haves' and 'have nots'.
  • China cannot continue on the path of high speed growth without inccuring serious environmental problems.
  • TNC's from the USA, Europe and Japan have moved to China, not so much to exploit a domestic market but to make it a global manufacturing base.

 

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lesson-5-growth-of-manufacturing-in-china.doc lesson-5-growth-of-manufacturing-in-china.doc

 

COCA-COLA AND INDIA

  • Coca-Cola first opened a bottling plant in India in 1993.
  • Coca-Cola invested $1,000 million in their Indian business between 1993 and 2003.
  • In 2008, the company employed 6000 people in India.
  • They claim a further 125,000 people have indirectly benefited from such jobs as distribution (e.g. lorries drivers who deliver the bottles).

 

lesson-5-coca-cola-india.doc lesson-5-coca-cola-india.doc

lesson-5-sample-answers-to-exam-questions.doc lesson-5-sample-answers-to-exam-questions.doc

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