Globalisation

What is it?
•This is the increasing interconnectedness in the worlds economic, cultural and political systems.

There are 3 main forms:
•Economic:
-World trade has expanded rapidly under GATT (General Agreement on Tariffs and Trade) and its successor WTO (World Trade Organisation).

-TNCs (Trans-National Corporations) have played a vital role in this growth resulting in the emergence of NICs (Newly Industrialised Countries)

•Cultural:
-Western cultrure has diffused to all parts of the world through TV, cinema, the interenet, newspapers and magazines.

-This can be seen in media, sport, art and leisure pursuits.

•Political:
-The influence of countries has diminished as countries organise themselves into trade blocs

-This influence of Western democracies on developing countries (many ex colonies) has been strong.

•Globalisation can also be seen in terms of:
-Urban: A hierarchy of global cities has emerged to act as centres for the global economy.

-Demographic: The growth of international migration and the rise of multi-cultural societies.

-Linguistic: The emergence of English as the working language

-Environmental: The impact of activity in one country impacting others eg. acid rain.


History of Globalisation

•Some suggest it began in the late 19th century when:

-transport and communication networks expanded rapidly around the world

-world trade began to grow with increasing interdependence between rich and poor nations

-Capital flows began to expand as European companies started operations in other parts of the world

-Events in the early 20th century (eg. the Great Depression) caused countries to rely on their own resources with production being within national economies.

•Since the 50's a new global division of labour has emerged, reflecting:

-Fragmentation of production processes

-International trade is becoming more complex

-Increasing NICs eg. Taiwan and Singapore

-New generation NICs (2nd generation: Malaysia, 3rd generation: India)

-The integration of the Soviet Union and Eastern European countries into the capitalist system

-The opening up of the large economies of China and India to the outside World


Markets

•In the late 20th century 2 major events shaped the processes of globalisation:

-Free market ideas promoted in the 1980s by Thatcher and Reagan which were copied to an extent by other economies

-The degradation of the world financial markets
     •Before this financial institutions (banks, insurance and investment companies) were mainly confined to national boundaries

•They could now look around the world for best returns on their capital

•Labour markets are less advanced in the process of globalisation because people move less easily (immigration rules, family, etc)

•But since the late 20th century there has been more migration across international borders for work
-From developing countries of Africa, South Asia and Latin America to North America and Europe

-Since the growth of the EU, from Eastern European nations (Poland, Estonia, etc) to the richer west (particularly the UK)


Trade and Trade Blocs

•By the 1970s an international economy had been established

•GATT (established in 1947) sought to lower the barriers of international trade, with free trade as its aim

•This has not been easy but trade tariffs have shrunk to a tenth of their levels when GATT began, although agreements are becoming harder to reach

•World Trade has therefore increased at a much faster rate than GDP

•Since the 1950s countries have joined together to form trade blocs

•This was to stimulate growth between themselves and to get economics benefits from cooperation            
•They come in various forms:

-Free trade areas
-Customs unions
-Common Markets
-Economic unions (eg. the EU)


The IMF and the World Bank

•The International Monetary Fund and the World Bank play major roles in running the world economy

•The IMF was established to oversee the global financial system

-It offers financial and technical assistance to its members

-It renegotiates the terms of debt on behalf of nations in financial difficulties

-It imposes conditions on its financial assistance eg. severe cuts in welfare and education spending in developing countries causing controversy

•The World Bank (International Bank for Reconstruction and Development) deals mainly with internal investment projects with the aim of reducing poverty

-Loans are set at the current market rate

-The International development Association (IDA) (one branch of the bank) provides interest free loans with very low per capita income.

-Since the 1990s the bank claims that it promotes sustainable development with most funding going to small-scale projects

-Its critics argue that conditions attached to loans haven't always reduced poverty and dependency.