Rise of the Global Economy (Edexcel IGCSE Geography)

Causes of Globalisation

• Globalisation is where the world has or is becoming interconnected through the processes of economics, culture, politics, trade and tourism

• It also includes environmental globalisation through the impacts of global warming

• Modern transport and communications have made trade almost instantaneous 

• Globalisation removes political borders of countries, which makes them more interdependent on each other, with the more powerful countries and businesses affecting decisions in other parts of the world 

• This has seen a rise in global inequality

• These improvements and developments in communication and transport have made globalisation what it is today—a shrinking world

• Overall, connections around the globe are:

  • Faster: faster speeds for talking, travelling, money exchange, etc

  • Deeper: connecting lives with faraway places

  • Longer: connecting links between places are further apart

• These connections are considered network flows to places and populations through four significant developments:

  • Appearance of large transnational corporations (TNCs)

  • Growth of regional economics and trading blocs 

  • Development of modern transport networks

  • Advances in IT and communications, particularly the WWW and the internet

The Production Chain

• These developments have led to the global economy

• Virtually no country in the world hasn't 'networked' in one way or another

• There are five different network flows:

  • Trade: import and export of raw materials, food goods and services through the reduction of trade barriers

  • Aid: most aid is economic, either through receiving or donating, allowing developing countries to invest in education, health, infrastructure and trade

  • Foreign investment, either directly or indirectly through business opportunities, e.g. Shell oil investing in Niger 

  • Labour is important to the working of the global economy and labour migration fuels this market either with a specialist or cheap labour

  • Information, fast data transfer and communication are vital to the global economy

• The global production, supply or commodity chain pulls these flows together to produce goods or commodity

• At each stage of the flow, value is added to the emerging product

• Despite the miles involved and the number of countries involved, the product is still cheaper to produce in various stages

• This is known as the Economies of Scale: the cost per item reduces when operated on a large scale

• Transport improvements through large container ships mean that costs are reduced and moved further quicker

• Labour costs are cheaper in emerging and developing countries and there are usually reduced legal restrictions

Global Investment

• Investment is not just monetary (economic), although this is a large part of it

• Investment can be in people, research or products

• Foreign investment is when individuals or firms from abroad invest in another country

  • Call centres can be located anywhere, e.g. India

  • Investment is made in the country through building the call centre, paying taxes, etc.

  • Local people are employed and trained

  • Service is provided to the donor country, the UK

• Moving manufacturing from developed to developing or emerging countries

  • China is the main area for manufacturing goods from around the world

  • Investment are made in China to produce goods

  • Completed goods are shipped back to the original country, e.g. Germany

• Investment in people, either for cheap labour or for their expertise

  • Specialist surgeons from the USA to Australia

  • Investment in developments that attract cheap labour—the construction of Dubai attracts many Indian migrants

  • Research and development investment - motor car industry to build more fuel-efficient motoring—Elon Musk's Tesla electric cars

• Investment can come from aid for rebuilding after a disaster. Ukraine will need aid after the war with Russia ends

  • Aid can be funds sent to the government to use as necessary, although this can often lead to corruption and funds not going where they should

  • Aid can be in form of goods and services directed to the affected area - refugee camps or after a natural hazard such as a tropical storm or earthquake