11.3 Globalisation

What is Globalisation?

Globalisation is how businesses, ideas, people and lifestyles are spreading more and more easily around the world due to the increasing importance of global links and international operations for people, governments and countries worldwide. It results in increased global interdependence.

It has been made possible by:

• Revolutions in and the growth of global technology and communications.
• The Growth of TNCs.
• Improvements in transport (e.g. containerisation, jet cargo aircraft, GPS).
• Instant contact via satellite (e.g. video conferencing, phone).
• SEA ME WE (South East Asia – Middle East – Western Europe Fibre Optic Cables).

The Impacts of Globalisation

Trans National Corporations (TNCs) / Multi-National Companies (MNCs)

Globalisation has caused the growth of huge companies which operate in several different countries; they often have their headquarters in MEDCs but smaller offices and factories in LEDCs.

Case Study: Siemens

Based in Munich, Germany, Siemens is the largest engineering group in Europe. It has a presence in 190 countries and employs 400,000 people worldwide. However, although research and development occur in Germany, with a highly skilled workforce with a long technology tradition, manufacturing has moved to LEDCs due to lower costs.

Case Study: Nokia

This TNC employs over 123,000 people in 120 countries and in 2009, was the 85^th largest global company. Based in Finland, it is their largest company, with research and development also taking place there, but much of its production occurs in LEDCs such as Brazil, India and China.

Case Study: Coca-Cola

This TNC has its headquarters in Atlanta in its home country of the USA but has used Germany and India as host countries. In Germany, the company was subsidised to locate 7 manufacturing plants there (one alone attracted €3.5m!) with a requirement to stay for 10 years; as soon as this time period expired, the factories immediately closed and relocated. Meanwhile, there are over 70 factories in India, with many in the country’s driest regions. Profits are maximised as water is almost free of charge, but water pollution is rife, and drought has been exacerbated (in some places groundwater levels have been reduced by 60m) as each 0.33l bottle requires 1l water to produced (resulting in ¹/₂ bn l per year for the 600 bottles produced every minute); this has caused a reduction of 40% in local harvests due to a lack of irrigation. Furthermore, local workers are exploited with poor health and safety standards resulting in serious injuries and low wages of just €1.25 per 8-hour shift.

Localised Industrial Regions

This is where Globalisation allows some specialised industries to cluster together in a very small location. This is advantageous because it allows companies to work closely with each other, reduce shipping costs for individual components, poach staff, be located near the best universities for their field and host social events with companies that share similar business interests.

Case Study: Silicon Valley, South San Francisco Bay, North California, USA

This was one of the first localised industrial regions and is home to many of the world’s largest technology corporations (e.g. Apple, Facebook, Google, HP, Intel, NASA, Twitter, Yahoo).

Case Study: Silicon Alley / Silicon Motorway, M4 Corridor, UK

This localised industrial region is home to quaternary industry (research and development) for companies such as HP and Sony who have links with local universities which produce them with well-qualified graduates. This is possible as they are footloose: they require few raw materials, thus maintaining low transportation costs. The advantages of such a situation are that being located on the edge of cities is cheap, has good access (including motorway and railway links), and there is plenty of space on which to build science and business parks; however, the disadvantages are pressure on green belt land as workers want to live in houses near to their workplaces and such increased demand increases house prices, forcing less skilled, lower paid locals to be priced out of the market in desirable areas.

Case Study: Motorsport Valley, Northamptonshire, UK

This localised industrial region is a cluster of high-tech engineering companies with strong links to high-performance engineering (e.g. F1) within a 25-mile radius of Silverstone Motor Racing Circuit. The area is hugely important to the UK economy (contributing £6bn per year) and employs over 38,500 people (including 25,000 highly skilled engineers) within 4500 companies. 8 of the 12 F1 teams (including McLaren, Lotus and Red Bull) are based here in addition to over 80% of the world market in high-performance engineering.

The Service Industry

Another impact of Globalisation is the movement (or ‘outsourcing’) of services and support industries from MEDCs to LEDCs; this is due to lower operating costs cheaper labour and longer working hours and has been made possible due to reduced/free call charges in addition to other technological advancements such as satellites and fibre-optic cabling (SEA ME WE). 

Case Study: Outsourcing to India

Bangalore is now known as the ‘IT Capital’ of India due to benefitting most from outsourcing, although New Delhi has also benefitted heavily from the country being a hub for call centres. Such occurrences took off in the 1990s when the government adopted a more welcoming stance toward investment by TNCs, thus causing call centres to be worth $17bn to the Indian economy in 2008. Bangalore is now home to 6m people and over 250 technology parks. Although night shifts are commonplace due to the differences in time zones, call centre work is appealing to the 50% of university graduates who struggle to find employment in a country with the world’s second-largest population, and they can even earn twice as much as a doctor (£150 per month) in addition to being driven to/from work where there’s a free canteen, gym and pool table as well as many other desirable facilities. This ‘sun-rise’ industry is currently experiencing phenomenal growth of 30% – 40% per year and is a way of cutting costs for TNCs such as American Express and British Airways in Delhi and Norwich Union in Bangalore (who had a workforce of 3700 in 2005 with plans for increases to 7000 by 2007) for whom it can save a minimum of £10m per year. However, the industry has come in for criticism as the need for a high standard of spoken language and the adoption of anglicised names and accents is said to erode their culture despite the advantages of learning a new skill (call centre colleges, e.g. North Star, have even been set up!) in an economy where demand outstrips supply leading to a traditional lack of customer service.

The Manufacturing Industry

The changing location of the manufacturing industry has caused deindustrialisation in MEDCs (the UK was the first to industrialise and also the first to deindustrialise!) and industrialisation in LEDCs to create NICs (Newly Industrialised Countries); however, not all LEDCs have industrialised since 1950 and have thus remained poor and HIPCs due to not being able to successfully attract industries.

Industrialisation in LEDCs has been the result of several factors:

Case Study: Causes of Deindustrialisation in South Wales (& UK) since the 1950s

• Exhaustion of raw materials (e.g. Coal).
• Loss of British Empire decreasing market for manufactured goods.
• Less competitive due to high wages and working conditions.

This is one of the causes the inner city problem and the decline of the transition zone.

NICs

NICs are countries which have a large proportion of people working in the secondary sector (industry/manufacturing), having undergone recent, rapid industrialisation; NICs industrialised since the 1950s and RICs (Recently Industrialised Countries) are the same but did so slightly later (since the 1970s). Their economy grows by at least 6-8% per year and are export-orientated, having low production costs and wages. There is a high level of governmental intervention and control over the economy through investments in manufacturing, reinvestments into the domestic economy (multiplier effect), taxed imports, tax-free zones and product selection (the ‘copy and improve’ principle).

How to become an NIC

Case Study: South Korea

South Korea is an NIC in Asia whose population works more hours than all other local countries (2,390hrs/yr) and has no trade unions. The city of Kumi is a centre of high-tech development, promoted by the government. The TNC Samsung has a manufacturing plant here with workers living on-site in shared accommodation (‘dormitories’) and food provided (cost is deducted from wages). The workers in the plant work hard with long 8hr shifts and only 1 day off per week, and a standard 5-day holiday per year (in comparison, paid leave is at least 3 weeks in the UK).

Case Study: China

China is a RIC in Asia that is the world’s most populous country which has industrialised since 1979 to the effect that in 2005, it produced 7% of the world’s manufacturing output, thus being the world’s third-largest manufacturing country.

China has been a historically communist country since 1949, after a civil war that ignited the Cold War. In 1976, Mao Zedong died and was replaced by Deng Xiaoping as a leader who modernised the economy, decreased governmental control and encouraged increased private enterprise; for example, rice production (the country’s most popular crop) fell under Zedong but has risen again under Xiaoping as a result of entrepreneurial incentives such as after your quota has been reached you can sell the rest of your rice for profit. This has been the catalyst for its rapid industrialisation.

The province of Guangdong has been important as it attracts much foreign investment due to having 3 of the 5 original SEZs (Special Economic Zones – located on the coast, these have tax incentives to encourage the relocation of TNCs in addition to the country’s already attractive low wages, long working hours and lack of strict workplace regulations. All SEZs also contain an export processing zone where businesses can import raw materials, make them into finished products and then export these without paying any duties or tax. Shenzhen is one of these SEZs and has a growing population of 9m; this SEZ is particularly attractive because it is close to Hong Kong, which, after return to China in 1997 (it was a British Colony), is to be kept separate (e.g. government, foreign policies) from China for 50 years and has a special status as a duty-free port.

As a result, China’s economy now grows by approximately 9% per year and 6-0% of the increase in World Trade since 2004 has been down to its influence. However, the country has 16/20 most air-polluted cities in the world, has serious problems with smog, is the second largest purchaser of new cars, has suffered from huge deforestation 30% of the country suffers from acid rain due to the coal-fired power stations (2 new ones opened every week!), has a 70% pollution rate for its rivers and lakes, has a large incidence of poverty with 20% (≈268m) living on less than $1 per day and a high occurrence of the exploitation of child labour.

The Energy Gap

Fig. World energy consumption 1988-2007

In the future, there is expected to be an energy gap where demand is greater than supply; this could lead to blackouts and increased prices.

Energy demand is increasing (see above) due to:

• Global Population Growth (1830 = 1bn // 2012 = 7bn // 2050 = 9bn) and ageing population.
• Industrialisation of LEDCs to create NICs (China = 10% world’s energy and India = 3%) with large populations that are quickly becoming rich.
• Increased Wealth, Disposable Income & Consumerism.
• Increased Technology, Communications, Labour Saving Devices.
• Increased Travel/Tourism due to Technology Enabling Improved International Journeys.
• Refinery of Fuels (e.g. Oil).
• New Buildings & Factories.

However, energy use per person varies worldwide (see below). 

Fig. Differences in energy consumption between developed and developing worlds, 2007 (million tonnes of oil equivalent).

The consumption per head in North America is double that in Europe due to increased seasonal variations and wastage (e.g. gas-guzzling cars).

Increased energy use has several consequential impacts:

Economic Impacts of Increased Energy Use

• Negative:
• Climate Change costs money (e.g. clean up after natural disasters).
• Decreased crop yields due to reduced rainfall resulting in money loss to people, countries and economies.
• Expensive to reach remote reserves of energy.
• Positive:
• Wealth for the country due to the energy needs of industry and transport.
• Increase in UK tourism as it becomes more expensive to travel abroad.

Environmental Impacts of Increased Energy Use

• Negative:
• Increased CO₂ and thus risk of global warming due to greater use of fossil fuels. 
• Damage to ecosystems due to exploration for fossil fuels (e.g. landscapes scarred by mining and destruction of Natural Habitats due to Oil Spills (e.g. 2010 Gulf of Mexico Oil Spill)).
• Radiation leaks from nuclear power.
• Melting Ice Sheets/Caps = Rising Sea Levels (also due to thermal expansion) = Coastal Flooding (e.g. Bangladesh) = Water Pollution.
• Air Pollution, Smog, Desertification, Climate Change, Freak Weather, Drought, Extinction, Temperature ↑ = Evaporation ↑ = Rain ↑.

Political Impacts of Increased Energy Use

• Negative:
• Dependence & Reliance on each other for supplies.
• Disagreements (e.g. Russia turned Europe’s gas supply off in 2006 & 2008).
• Conflict/War over fuel.
• Aid needed to be given to LEDC governments who cannot afford to use renewable energy sources or deal with the effects of climate change.
• Positive:
• Increased influence of countries with large reserves of fossil fuels.

Social Impacts of Increased Energy Use

• Negative:
• Health/Breathing problems (e.g. Emphysema, Bronchitis) due to Air pollution.
• Famine & Homelessness caused by Drought & Flooding.
• Risk to Health from Radiation leaks.
• Positive:
• Improved ease and standard of living due to electricity and technology; also, people can get around more easily due to private car ownership.

The Food Problem

There is an increasing demand for food due to global population growth and the increase in industrialised countries. Despite increasing supply significantly over the last 50 years, this is still insufficient to counteract the ever-increasing demand. Also, the price of food is rising due to the cost of oil (affects transport and fertilisers), increased ‘food miles’, increased demand and population growth (2012 = 7bn // 2050 = 9bn), increased global wealth (especially in NICs with high populations in Asia), reduction of supply through natural disasters, the growth of crops for biofuels (a renewable alternative to oil), increased demand for meat and climate change reducing arable land through desertification and changing weather conditions.

This has many impacts:

Environmental

• Growth of food on marginal land can lead to environmental degradation: infertility due to loss of nutrients and moisture, reduction of vegetation and thus biodiversity through overgrazing and soil erosion/desertification.
• Increased carbon footprints.

Political

• The Battle of the Nile: Ethiopia supplies 85% of the water but wants to dam the river for HEP which can then be exported at a profit whilst Sudan wants to use river water for irrigation in order to increase food supply; however, Egypt relies on the river for 90% of its water supply and this could thus cause serious problems for this country which is located in the lower course of the river.

Socio-Economic

• Subsistence farmers in Kenya could starve if environmental degradation were to occur on their small plots of land.
• Farmers growing cash crops in Kenya (which is now more attractive than subsistence farming) require reliable water supplies not always available in Africa; this can lead to loss of income and starvation. They also have to utilise expensive fertilisers which can cause debt.
• During the 1960s & 1970s, farmers in India began to grow new high-yielding varieties as opposed to traditional crops; this has caused drought due to increased water usage, debt due to increased cost of crops, over-reliance on companies producing seeds for the crops, debt due to increased demand for fertilisers and pesticides due to loss of nutrients from soil and debt due to the need to construct deeper wells and utilise more powerful water pumps after the water table fell.

Case Study: Haiti Riots, 2008

This incident resulted in 4 deaths in the poorest country in the northern hemisphere, where 80% of the population lives on less than $2 per day. The demonstrations were against rising food prices after the price of rice, beans, and fruit had risen by 50% in the last year alone.

Sustainable Development

Reducing the Costs of Globalisation

Case Study: New Power Stations

Combined Heat & Power Plants (CHP) only waste 5% as opposed to 65% heat energy by recycling waste heat produced and can also use multiple fuels in the same boiler.

Case Study: The Kyoto Protocol

This was a legally binding global agreement made in 1997 to reduce greenhouse gas emissions; it came into force in 2005 but expires in 2012. The overall target was for MEDC greenhouse gas emissions to be reduced by 5.2% compared to 1990 levels; this represented a 29% cut compared to projected 2010 levels. Individually, European countries had targets to cut emissions by 8% and Japan by 5%; together responsible for 25% of emissions, Russia also signed, but the USA didn’t (due to fears of damage to the economy and the fact that LEDCs didn’t have to commit). However, the UN says industrialised countries are now well off target for the end of the decade and predicts emissions 10% above 1990 levels by 2010.

Annual review meetings have been held annually since. Due to its impending expiration, in 2009, The Copenhagen Accord was signed, which recognised the need to limit global temperature and promised to give aid to LEDCs to help them deal with the impacts of climate change, but there were no legally binding emission reduction targets. Despite this, 55 countries did spell out their plans which included the USA reducing emissions by 17% below the 2005 level by 2020, the EU reducing emissions by 20% below 1990 levels by 2020, and Brazil reducing emission growth by 36% – 39% by 2020. At Cancun in 2010, there was formal recognition that current emission pledges need to rise and a principle to pay countries to stop deforestation in addition to the development of The Green Climate Fund, which aims to raise $100bn/yr by 2020 to protect poor nations against climate change and assist them with funding low-carbon developments.

Alternative Energy Sources

Energy use is currently unsustainable, and therefore governments must plan for a future without fossil fuels which are rapidly running out (see above right). It is now preferable to use renewable energy sources  (see right for advantages) such as solar, wind, wave, tidal and HEP as opposed to non-renewable energy sources such as fossil fuels (coal, oil, gas) and nuclear (uranium). In the UK, the options considered are nuclear power, solar power (the government subsidises solar panels) and wind power.

Advantages of Renewables

• do not contribute to global warming, no carbon emissions
• inexhaustible, available for ever
• clean, no local air or water pollution
• widely available, one or more are likely to be available in most countries
• locally available, many can meet small-scale needs, especially useful in developing countries

Case Study: Wind Power in the UK

In the UK, we use 350bn kw hrs energy per year and in 2006 wind energy was our most used and fastest growing renewable accounting for 1% of overall supply. By 2015, there is a government target for 20% of our energy supply to come from wind power which would require 10,000 turbines (compared to 6 nuclear power stations or 12 fossil fuel power stations). This is possible because it is one of the cheapest renewables, and we are one of the windiest countries in Europe, having the capacity to generate 800% of our energy demand from wind power alone. There are many advantages of wind power which include turbines having a small footprint, the ability to generate electricity 80% of the time if well placed, energy used in construction and installation being paid back within 6-7 months, and lack of greenhouse gas emissions (currently saves 4m tonnes CO₂ per year), easy to decommission, job creation, can be built offshore and the belief of some people that they enhance the landscape. However, there are also arguments against wind power; for instance, they are only 30% efficient (compared to 60% for fossil fuel power stations), and this decreases as the incidence of wind farms increases due to the utilisation of poorer sites, high levels of volatility, unable to store electrical energy, need to turn off if too windy for safety reasons, noise (drone) and visual pollution, falling property prices near wind farms, inconsistent supply of wind, concerns about breathing problems during the construction phase, interference with coastal radar systems and the huge number required to provide equivalence for a single fossil fuel or nuclear power station. Some people are also NIMBYs (Not In My Back Yard!!).

Blacklaw is an onshore wind farm in Scotland that powers 70,000 homes per year with 124mW of electricity. Unusually, it has the support of the RSPB (due to limited bird impact on site, which would be less than that of climate change). The site is preferential because there is good road access, it is Brownfield land which previously ahs an abandoned coal-fired power station situated on it, it is close to the national grid and has provided some jobs for the local area.

The London Array is an offshore wind farm, and this type of wind farm is preferential to the government due to an almost constant wind supply and fewer objections/NIMBYs. It will be built in the Thames Estuary, 12 miles off the coast of Kent and will have 271 turbines over a 90 square mile area. The first phase of 175 turbines is expected to be completed in 2012.

Case Study: Biogas in India

By gathering dung and collecting the methane gas given off when it is fermented, women and children can save 2hrs a day due to no longer having to get firewood; this can improve education by giving children time and energy in which to go to school and can also improve living standards as approximately 80% of families use the time saved to earn extra money. Furthermore, the leftover slurry can be used as fertiliser to improve crop yields (thus providing a solution to help ease the food problem), and the biogas can be used for cooking and powering electrical generators (which can, in turn, be used to help pump up groundwater. Finally, the cattle are kept in compounds as opposed to forests, thus preventing overgrazing and loss of biodiversity through the consumption of vegetation

Local Food

It is considered buying more local produce as a way of tackling the food problem by reducing food miles; this would decrease environmental harm, increases freshness, increases security, improves our sense of seasonality, enables more extensive monitoring of production and welfare standards and lowers the incidence of deforestation in LEDCs. Buying local produce is reversing a recent UK trend that has resulted in average food miles increasing by 50% since 1978, imports of food increasing by 2.6m tonnes to 16.1m tonnes within the 10 years before 2002, 95% of fruit and 50% of vegetables being imported, 10 football pitches of rainforest being destroyed every second and the amount of air-freighted food rising by 140% since 1992. 

If all foods were sourced within 20km of consumption, it would save the UK £2.1bn in environmental and congestion costs. However, there are concerns about the unforeseen impacts on LEDCs and The Development Gap, go against the work of The Fairtrade Foundation, negatively impact the 1.5m African farmers who export fruit and vegetable to the UK, the extensive use of fertilisers and greenhouses required to grow crops in the UK and the fact that driving just 6.5 miles to purchase your shopping emits more CO₂ than your green beans flying from Kenya. Also, people wonder how food would be preserved (e.g. increased use of freezers which consume energy) and argue that switching fully to environmentally friendly light bulbs from old style 100W bulbs would reduce our carbon footprint by 500% of that which buying local produce would and thus it is not the most effective or efficient way of tackling greenhouse gas emissions and global warming.

Case Study: ‘Local Food… is miles better’

This UK campaign encourages the purchase of local food. It is a form of direct marketing.

Case Study: The Campaign to Protect Rural England (CPRE)

This organisation promotes the purchase and consumption of locally produced food. They work with the government and supermarkets to encourage increased demand and supply of local produce.

Glossary

Call Centre – a place which handles calls for a company; it is part of the tertiary sector (service industry).

Carbon Credits – each one gives the owner the right to emit 1 tonne of carbon into the atmosphere; they are therefore distributed internationally to governments and by governments to companies as a quota with the means to regulate carbon emissions with an aim for a reduction in them.

Carbon Footprint – a measure of carbon emissions (mostly CO₂ from fossil fuel combustion).

Carbon Trading – this is where companies/nations that have exceeded their carbon credits purchase more from those that have not.

Cash-Crop Farming – crops grown by a farmer for sale instead of for their use.

Deindustrialisation – where the manufacturing industry (the secondary sector) reduces within a country and thus becomes less important to its economy; this occurred in MEDCs since the 1950s due to global shift.

Environmental Degradation – where productive land reduces fertility and quality.

EPZ – export processing zone; a type of SEZ where businesses import raw materials, manufacture them through industry and export manufactured products free from duties, taxes and tariffs.

Food Miles – the distance food travels between farmer and consumption by the consumer; the greater the number of food miles, the longer the distance travelled and thus the more CO₂ is produced.

Global Interdependence – a shared need and reliance between at least two countries worldwide for each other’s goods and services.

Global Shift – the shift of the secondary sector (manufacturing industry) and later tertiary sector (services industry) from MEDCs to LEDCs since the 1950s due to Globalisation.

Globalisation – the way in which businesses, ideas, people and lifestyles are spreading more and more easily around the world due to the increasing importance of global links and international operations for people, governments and countries worldwide; it results in increased global interdependence.

ICT – information and communications technology; this is computers and technology that aid improvements in communication locally, nationally and globally.

Industrialisation – where the manufacturing industry (the secondary sector) increases within a country and thus becomes more important to its economy; this occurred in MEDCs since the 1750s and in LEDCs since the 1950s.

Interdependence – a shared need reliance on each other for providing support, goods or services.

Marginal Land – areas of land not previously considered good enough for farming usage within the primary sector (production of raw materials through agricultural industry); therefore, it is low quality and at the edge of productivity.

MNC/TNC – multi-national company / trans-national corporation; this business operates in many countries over several continents and can thus earn more money than smaller-scale businesses could.

NIC – newly industrialised country; this is a country which has quickly developed large manufacturing industries very quickly since the 1950s, has high levels of governmental control over the economy, and thus experiences rapid growth in exports and GDP (typical economic growth rate of 6-8% per year).

Non-renewable Energy – energy sources that are finite and will eventually run out (e.g. fossil fuels – coal, oil, gas & nuclear – uranium).

Renewable Energy – energy sources that are sustainable and can be used repeatedly and infinitely without running out (e.g. solar, wind, wave, tidal, HEP).

SEZ – special economic zone; this is a region within China which offers tax incentives for foreign companies to invest in building new factories there.

Subsistence Economy – an economy that is domesticated; it is only based on what can be grown by and produced by itself.

Subsistence Farming – a farmer who grows crops for his own usage alone as opposed to for-profit through sale.

Sustainable Development – this is development which meets the needs of people now and in the future whilst limiting environmental harm.

Sustainable Energy – this is a natural renewable source of energy that will never run out and can thus meet the needs of people now and in the future; it will also have limited environmental harm.