Globalisation

Definition of Globalisation

• Globalisation refers to the growing interdependence and integration of economies, cultures, and societies across the globe.
• It involves the flow of goods, services, capital, technology, information, and people across national borders.

Key Features of Globalisation

1. A Single Interdependent Global Economy:

• Different regions play distinct roles in the global economy, creating a core-periphery structure.

2. Global Economic Interdependence:

• Trade, foreign direct investment (FDI), and multinational corporations (MNCs) connect economies.

3. Basic Processing Units Spread Globally:

• Manufacturing and production activities are outsourced to developing countries due to lower costs.

Core and Peripheral Regions

Core Regions: Developed countries (e.g., USA, Germany, Japan) dominate global trade, manufacturing, and technology.

• Characteristics:

• High wages, advanced infrastructure, and innovation.

• Headquarters of most MNCs are located here. Peripheral Regions: Developing countries provide raw materials and low-cost labor for core regions.

• Examples: Countries in Sub-Saharan Africa and parts of Asia.

• Challenges:

• Limited industrial development and reliance on low-value exports.

Regions Excluded from Global Manufacturing Activity

Characteristics of Excluded Regions:

• Lack of infrastructure, political instability, and inadequate education systems. Examples:

• Parts of Sub-Saharan Africa and conflict zones like Syria and Afghanistan.

• These regions often depend on subsistence farming and face extreme poverty.

Impacts of Globalisation on World Trade

Growth of Multinational Corporations (MNCs)

• MNCs like Walmart, Toyota, and ExxonMobil control significant portions of global trade.
• Statistics:
  • Some MNCs have revenues larger than the GDP of many countries.
  • For example, Walmart's revenue surpasses the GDP of many developing nations.

Foreign Direct Investment (FDI)

• FDI inflows facilitate economic development in host countries:
  • 1970s: Majority of FDI concentrated in developed countries.
  • 2000s: Developing countries received increasing shares of FDI, especially in Asia and Latin America.
• Reduction of tariffs and trade barriers has increased the volume of global trade.
• Example: Formation of trade blocs like the European Union (EU) and ASEAN.

Drivers of Globalisation

Market Drivers:

• Convergence of lifestyles and tastes across countries.
• Growth of global brands like McDonald's and Coca-Cola.
• Increased travel and tourism create global consumers.

Cost Drivers:

• Advances in technology and transportation reduce costs.
• Outsourcing to newly industrialised countries (e.g., India, China) with lower labor costs.

Government Drivers:

• Reduction of trade barriers and tariffs.
• Policies promoting privatisation and open-market economies.
• Integration of countries like China and India into the global economy.

Competitive Drivers:

• Rise of global competitors and strategic alliances among companies.
• Growth of financial markets and cross-border investments.

Advantages of Globalisation

1. Economic Growth:

• Higher GDP and income levels due to increased trade and investment.

2. Technology Transfer:

• Developing countries benefit from advanced technologies introduced by MNCs.

3. Job Creation:

• FDI and outsourcing generate employment in host countries.

Disadvantages of Globalisation

1. Exploitation of Workers:

• Low wages and poor working conditions in developing countries.
• Countries such as China may compromise worker's rights in order to attract foreign investment by making their services more competitive and affordable.

2. Environmental Damage:

• Overuse of natural resources and pollution due to industrial activities.

3. Economic Inequality:

• Wealth is concentrated in core regions, widening the gap between rich and poor.