We now communicate and share each other's cultures through travel and
trade, transporting products around the world in hours or days. We are in a
huge global economy where something that happens in one area can have knock on
effects worldwide. This process is called globalisation.
What is globalisation?
Globalisation is the process by which
the world is becoming increasingly interconnected as a result of massively
increased trade and cultural exchange. Globalisation has increased the
production of goods and services. The biggest companies are no longer national
firms but multinational corporations
with subsidiaries in many countries.
Globalisation has been taking place
for hundreds of years, but has speeded up enormously over the last
half-century.
Globalisation has resulted in:
·
increased international trade
·
a company operating in more than one
country
·
greater dependence on the global
economy
·
freer movement of capital, goods, and
services
·
recognition of companies such as
McDonalds and Starbucks in LEDCs
Although globalisation is probably
helping to create more wealth in developing countries - it is not
helping to close the gap between the world's poorest countries and the world's
richest.
The animation shows how wealth is distributed. Click on the income
brackets to see where the richest and poorest countries are located.
·
Improvements in transportation - larger cargo ships mean that the cost of transporting goods between
countries has decreased. Economies of scale mean the cost per item can reduce
when operating on a larger scale. Transport improvements also mean that goods
and people can travel more quickly.
·
Freedom of trade - organisations like the World Trade Organisation (WTO) promote free
trade between countries, which help to remove barriers between countries.
·
Improvements of communications - the internet and mobile technology has allowed greater communication
between people in different countries.
·
Labour availability and skills - countries such as India have lower labour costs (about a third of
that of the UK) and also high skill levels. Labour intensive industries such as
clothing can take advantage of cheaper labour costs and reduced legal
restrictions in LEDCs.
·
Transnational
corporations
·
Globalisation has resulted in many
businesses setting up or buying operations in other countries. When a foreign
company invests in a country, perhaps by building a factory or a shop, this is
called inward investment. Companies that operate in several countries
are called multinational corporations (MNCs) or transnational corporations
(TNCs). The US fast-food chain McDonald's is a large MNC - it has nearly
30,000 restaurants in 119 countries.
·
Examples of multinational
corporations
·
Shell
·
·
A Shell filling station
The majority of TNCs come from MEDCs such as the US and UK. Many
multinational corporations invest in other MEDCs. The US car company Ford, for
example, makes large numbers of cars in the UK. However, TNCs also invest in
LEDCs - for example, the British DIY store B&Q now has stores in China.
Factors attracting TNCs to a country
may include:
·
cheap raw materials
·
cheap labour supply
·
good transport
·
access to markets where the
goods are sold
·
friendly government policies
Positive
impacts of globalisation
Globalisation is having a dramatic
effect - for good or ill - on world economies and on people's lives.
Some of the positive impacts
are:
·
Inward
investment by TNCs helps countries by providing
new jobs and skills for local people.
·
TNCs bring wealth and foreign
currency to local economies when they buy local resources, products and
services. The extra money created by this investment can be spent on education,
health and infrastructure.
·
The sharing of ideas, experiences and
lifestyles of people and cultures. People can experience foods and other
products not previously available in their countries.
·
Globalisation increases awareness of
events in far-away parts of the world. For example, the UK was quickly made
aware of the 2004 tsunami tidal wave and sent help rapidly in response.
·
Globalisation may help to make people
more aware of global issues such as deforestation
and global warming - and alert
them to the need for sustainable
development.
Negative
impacts of globalisation
Critics include groups such as environmentalists, anti-poverty
campaigners and trade unionists.
Some of the negative impacts
include:
Protestors in London
·
Globalisation operates mostly in the
interests of the richest countries, which continue to dominate world trade at
the expense of developing countries. The role of LEDCs in the world market is
mostly to provide the North and West with cheap labour and raw materials.
·
There are no guarantees that the
wealth from inward investment will benefit the local community. Often, profits
are sent back to the MEDC where the TNC is based. Transnational companies, with
their massive economies of scale,
may drive local companies out of business. If it becomes cheaper to operate in
another country, the TNC might close down the factory and make local people
redundant.
·
An absence of strictly enforced
international laws means that TNCs may operate in LEDCs in a way that would not
be allowed in an MEDC. They may pollute the environment, run risks with safety
or impose poor working conditions and low wages on local workers.
·
Globalisation is viewed by many as a
threat to the world's cultural diversity. It is feared it might drown out local
economies, traditions and languages and simply re-cast the whole world in the
mould of the capitalist North and West. An example of this is that a Hollywood
film is far more likely to be successful worldwide than one made in India or
China, which also have thriving film industries.
·
Industry may begin to thrive in LEDCs
at the expense of jobs in manufacturing in the UK and other MEDCs, especially
in textiles.
Anti-globalisation campaigners sometimes try to draw people's attention
to these points by demonstrating against the World Trade Organisation.
The World Trade Organisation is an inter-government organisation that promotes
the free flow of trade around the world.
