Globalisation

Globalisation

1. How does the economy of the globalised world function in different places?

   • Changing employment structure
     • Despite globalisation countries are at very different stages of economic development, with different dominant employment sectors, as illustrated in the Clark fisher model.
       • pre industrial - primary sector dominates e.g. Ethiopia (85/5/50) and Nepal (75/7/18).
       • industrial - secondary sector is dominant initially, followed by the tertiary sector e.g. China (38/29/35) and Mexico (14/23/63)
       • post industrial - tertiary sector is dominant e.g. the UK (2/18/80) and Japan (4/26/70)
   • Globalisation
     • globalisation has accelerated over the past 30 years, and the term refers to the greater integration of the global economy.
       • globalisation means that jobs and wealth in one country are becoming increasingly reliant on trade and investment from other countries.
       • globalisation leads to countries specialising in different fields of economic activity. For example, finance in the UK and manufacturing in China.
       • globalisation means that jobs move from high cost countries to low cost countries, and the amount of trade in goods, services and money is increasing.
       • as a result of globalisation, the world is increasingly connected by air travel, shipping routes, the internet, and other forms of communication.
   • Contrasting employment sectors
     • as countries develop the working conditions change. for example pay increases, working conditions improve and there is a reduction in the informal sector.
       • Primary - a subsistence farmer in etheopia will receive no pay (may receive a little for selling surplus produce), yet the work will be hard and laborious intensive farm work. additionally, the children are often expected to work in order to support the family. also, the workers lives depend on producing enough food which makes then very vulnerable, and the job is already vulnerable to the weather e.g. floods and droughts and the climate is likely to become more difficult to deal with due to climate change.
         • jobs in the informal sector (e.g. a subsistence farmer or street seller) are jobs that are unregulated, untaxed and often dangerous. they have no contracts, paid holiday or health and safety regulations
       • Secondary - a factory worker in China is likely to receive a small wage of £1000-£3000 per year. however, they will have to work long hours of repetitive work with much (sometimes unpaid) overtime.to make matters worse, unions are often banned so employees have limited opportunities to exercise their rights. Also, most factories only want workers under 30 years of age.
       • Tertiary - a nurse in the NHS in the UK is likely to have a good pay of £20000-£40000 per year. the working conditions will be good and there will be effective health and safety regulations and union representation. the workers will be provided with paid holidays and pensions. however, this sector will also have unsociable working hours and a high stress working environment.
       • Quaternary - a pharmaceutical researcher in the USA is likely to receive a good/very good salary of £25000 - £100000 per year. work in this sector will come with very good working conditions, but it is a high stress job with demand from TNCs to develop new products.
   • global institutions and globalisation
     • As a result of globalisation, there have been some interesting changes to the employment sectors over the last 30 years. in the developed world the number of jobs in the secondary sector is decreasing (de-industrialisation) (e.g. in the UK) whilst in industrialising countries (e.g. China), there has been a boost in secondary sector jobs. also, in industrialising countries the number of people working in the primary sector ha fallen considerably. this is partially due to rural-urban migration, as people to the cities to work in factories. finally, even some tertiary sector jobs have moved from developed countries to developing countries. for example jobs in call centres have moved from the UK to India. these changes in the location of jobs are referred to as the global shift.
     • three global institutions have had a significant impact on creating a more globalised world economy.
       • World Trade Organisation (WTO) - promotes free trade by persuading countries to reduce or remove trade barriers like taxes, tariffs and quotas.
         • International Monetary Fund (IMF) - gives loans to developing countries for infrastructure and encourages countries to allow FDI to create new jobs.
           • Transnational corporations (TNCs) - Aim to reduce costs and increase profits by moving factories to cheaper locations. this creates new jobs in developing countries.
   • The impact of Globalisation on different groups of people
     • globalisation has had a significant impact on a range of people in the last 30 years. firstly, most countries have become richer (particularly in the developed world), about 300 million people in china have been lifted out of poverty. that being said, elsewhere (especially in Africa) incomes have not improved much at all. different groups of people have been effected by globalisation in different ways.
       • Male car factory workers in the USA - companies like ford and general motors have shut car factories in cities such as Detroit in the USA, and moved them to Mexico and brazil. Hundreds of thousands of male, well paid workers lost their jobs as the jobs moved overseas to cheaper locations.
         • Female factory workers in China - women who work Foxconn, the company that makes ipads and iphones for apple, earn about £180 per month. Most live in dormitories within the factory and work up to 60 hours of overtime, but pay is much higher than it would be in the rural areas, from which most workers migrated.
       • Male coal miners in china - Coal has powered China's economic growth ,providing jobs for 5 million coal miners who mined 3500 million tonnes in 2011, though mining is dangerous. up to 2000 miners die each year working 7 hour shifts underground for £5-£8 a day.
         • Female call centre workers in the UK - about 900,000 people in the UK work in call centres. many are part time and most are women. they earn around £15,000 a year. this industry has grown in the last 20 years, and has provided many women with jobs, although it is low skilled work and promotion prospects are limited.
           • male TNC executives - most of the top jobs at TNCs are taken by men, with women making up 18% of senior managers. TNCs have grown because of globalisation and so have the executives wages; since 1980, their wages have increased by 3000%.
             • Female textile workers in Bangladesh - many low-priced clothes are made in Bangladesh by women working for up to 80 hours a week but only earning as little as £12. Accidents, factory fires and exploitation are common.

2. What changes have taken place in the flow of goods and capital?

   • International trade and FDI
     • money flows around the world through trade in goods (imports and exports) such as manufactured products, oil, food and raw materials.
       • money flows around the world through stock market.
         • money flows around the world through foreign direct investment (FDI). this is where money (capitol) from one country is invested in another (for example to build a factory)
   • The drivers of change
     • Communication is cheap and instant because of fibre optic internet cables, satellites and technology such as computers and mobile phones
     • Jet aircrafts have reduced the cost of travel and connected up distant places
     • container ships have revolutionised trade n goods, making it easier, cheaper and more efficient to transport goods from the producer to the consumer.
       • 1 container ship can carry around 12,000 pairs of shoes, and it costs £3,000 to travel from China to the UK via container ship. consequently, the cost of transport only adds 25p to the cost of each pair of shoes.
     • TNCs have also helped to globalise the worlds economy
       • TNCs are large wealthy and powerful, with the ability to transfer investment around the world. they try to reduce costs (in order to maximise profits), and often move production to low cost places such as Asia. TNCs have complex networks of factories, offices, HQs and suppliers, as well as expertise in managing these global networks. The number of TNCs has risen from about 7,000 in 1970, to around 80,000 today.
       • Mergers have made some TNCs even larger and more powerful. one of the biggest Exxon - Mobil formed in 1999 between Exxon and Mobil. in 2011 it had sales of $486 billion which is almost as much as Belgium's GDP for that year.
     • state lead investment also encourages trade and FDI. In China, india and other countries in Asia governments have set up free-trade zones (FTZs) and Special economic zones (SEZs). TNCs can build factories and offices in these purpose build industrial estates cheaply. Unions are usually banned, taxes are low and regulations on pollution and health and safety are minimal.
       • state lead invetestment also refurres to when goverments invest in other countries, often through government owned companies. for example, China has three government owned oil companies (e.g. CNOOC) and to secure china's oil supply they have undertaken FDI in Indonesia, Burma, Sudan, Gabon, Thailand and Canada.
   • Secondary sector TNC - NIKE
     • Nike was founded in Oregon (USA) in 1964, and this is where its HQ remains today. Nike produces and sells a range of sports clothing and equipment, with offices in 45 countries and 700 stores worldwide. most of their products are outsourced and manufactured in Asia. the components for their goods are sourced from a range of countries worldwide. Nike maintains its market and reputation by sponsoring various sports events.
       • Nike has a website and consequently has access to markets worldwide. nike has been criticised for pawing low wages, causing pollution and environmental damage, having poor working conditions in factories (sweat shops), some workers have been sacked without notice, fewer manufacturing jobs in MEDCs (due to outsourcing of labour). Nike have also been criticised for having workers work in sweatshop conditions and when they demanded more rights, closing the factories and moving to a new location where they could continue to exploit workers.
         • A tertiary sector TNC - Tesco
           • Tesco is the worlds 3rd largest retailer brand. Tesco has its HQ in the UK, but operates in 14 countries, employing 500,000 people. notably, Tesco has 6300 stores world wide. Tesco has developed a large online business as a way of expanding by delivering groceries via online ordering, selling larger items e.g. furniture (Tesco diect) and also introducing banking and insurance services (Tesco Bank). Tesco has concentrated its expansion in Europe as the tastes of the consumer are simiiler to in the UK. also, Tesco have concentrated their growth around asia, because the market is huge and incomes are growing. notably, Tesco does tailor its stores to suit local tastes.
             • Tesco also outsources its administrative functions e.g. data processing and accounting. notably, Tesco employs 6000 people at Hindustan service centre (HSC) in Bangalore. this has been done because the wages of the local people are 25% of the wages of people in the UK, many Indians speak English and many are educated graduates, HSC can communicate via th internet with the UK HQ and all Tesco stores very easily and cheaply, and Bangalore is known for this type of outsourcing so there are many trained workers available.

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