Political & Economic Decision Making (Edexcel A Level Geography)
Revision Note
Written by: Louise Stone
Reviewed by: Bridgette Barrett
International Political & Economic Organisations
Politics & Economics of Globalisation
Globalisation can be viewed as a threat so governments sometimes try to protect themselves from global flows such as Foreign Direct Investment (FDI) from TNCs
International Organisations work with countries to encourage them to consider the idea of a global economy differently
The Role of International Organisations in Globalisation
| World Trade Organisation (WTO) | International Monetary Fund (IMF) | World Bank |
|---|---|---|---|
Role in Globalisation | 1995 - Took over from the General Agreement on Tariffs and Trade Promotes trade liberalisation e.g., for manufactured goods | Transfer loans from HICs to countries that have applied for help Recipients of the loan must agree to run free market economies so TNCs can locate there easily | Lends money on a global scale Gives direct grants to developing countries |
Evaluation of their Role | Failed to stop the USA and EU from subsidising their own food producers which hinders farmers in LDCs | Strict conditions on governments borrowing which may result in the governments reducing spending on healthcare, education etc.…
| Distributed US$65 billion in loans and grants Imposes strict conditions on loans and grants Controversially, all World Bank presidents have been US citizens |
Worked Example
Explain one reason why free trade policies are promoted by international economic organisations.
[4 marks]
1 mark is awarded for one reason why free trade policies are promoted
The remaining 3 marks will be awarded for your explanation
Answer:
One mark can be awarded for any of the following reasons:
The World Trade Organisation (WTO) promote free trade policies so global trade can operate as easily as possible [1]
The WTO aims to reduce trade barriers [1]
Trade blocs such as the EU or ASEAN promote free trade so that no taxes or tariffs are used when trading goods and services [1]
To achieve the full 4 marks you will need to explain one of these points in more detail
Here is an example of how to explain one of these points:
The World Trade Organisation (WTO) promote free trade policies so global trade can operate as easily as possible [1] by reducing taxes or tariffs [1] which helps remove costs from businesses [1] which enables global production and the trading of goods or services [1]
Examiner Tips and Tricks
Your paper 3 is synoptic which means it will be based on a geographical issue with strong connections to topics you have studied and will link to three themes:
Players
Attitudes and actions
Futures and uncertainties
It is important you are aware of the different players and their role in globalisation, for example, organisations such as the World Trade Organisation (WTO), the World Bank and the International Monetary Fund (IMF)
National Governments
National Governments Role
National governments play a vital role in globalisation when they implement strategies to encourage the growth of TNCs, for example:
Free trade blocs
Special Economic Zones (SEZs)
Tax Incentives
Free-market liberalisation
Privatisation
Business start-ups
Free Trade Blocs
Free Trade Blocs allow governments to trade freely with neighbouring countries and allies which brings many benefits:
Companies grow as they gain access to more customers
A bigger market increases demand of products and services
Smaller companies can merge to form TNCs reducing production costs
Government Policies
The growth of TNCs can be encouraged through a range of government policies:
Free-market liberalisation – lifting restrictions for companies and banks reducing the costs for TNCs to locate and operate in these countries
Privatisation – allowing companies to take over important national services e.g., railway and energy supply to reduce government spending. This is attractive to TNCs as they would gain a stake in vital services
Encouraging business start-ups – aims to increase profits for businesses by using strategies such as low business taxes and changes in the law, for example the UK became more attractive to TNCs when Sunday trading was introduced in 1994
Worked Example
Identify the policy used by national governments which contributes to globalisation
[1 mark]
A. Internet censorship
B. Increasing tariffs
C. Restricting migration
D. Privatisation of industries
Answer:
D Privatisation of industries – this is correct because this was used by the UK government under Margaret Thatcher
Incorrect Answers:
Internet censorship, increasing tariffs and restricting migration are all incorrect because they limit globalisation
Examiner Tips and Tricks
Remember that national governments play an important role in globalisation not just Transnational Corporations (TNCs). You should have some specific examples of strategies that governments have put in place to encourage globalisation ready to use in your exam
Special Economic Zones & Subsidies
The Spread of Globalisation
Changing attitudes in regions outside of Europe has contributed to the increase of globalisation in recent decades
There are three approaches that have played a vital role:
Special Economic Zones (SEZs) – the industrial areas, near the coast, where favourable conditions have been created to attract TNCs
Government subsidies - an incentive for TNCs to locate in these countries as costs will be reduced
Changing attitudes to FDI – countries working to attract FDI to increase their global presence, for example Saudi Arabia changed its official weekend to Friday-Saturday to be more in line with other countries to be able to participate in the global market
China’s ‘Open Door Policy’
Introduced in 1978 to begin opening up to FDI whilst remaining under a one-party rule
Rapid urbanisation occurred with over 300 million people leaving rural areas which lead to an increase in low-wage factories in urban areas
SEZs were created which attracted TNCs, leading to rapid economic growth
China is the world’s largest economy but is still not entirely open to global flows
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