Globalisation
1. Introduction to Globalisation
Globalisation means that the world is simultaneously shrinking and expanding. As a result of changes in transport and technology, borders are increasingly irrelevant. On a local scale, transformation is caused by the globalisation of social networks and exchanges of information and cultures so that local communities are influenced by events occurring globally. Introduction to globalisation
Globalisation is defined as the process by which the world’s local and regional economies, societies, and cultures have become integrated together through a global network of communication, transportation and trade.
With reference to industry it is also the shift to a globalised economic system dominated by MNC's (corporate trade and banking institutions) more powerful than governments.
Key learning
What is globalisation and how has it affected development in LEDC's?
What are the causes of globalisation?
How does globalisation impact national economies?
Are there positives to the globalisation process?
Are there negatives to the globalisation process?
Globalisation - How?
Improved transport: Global travel and trade are now easier. There has been rapid growth in air travel, enabling greater movement of people and goods across the globe linked to containerisation. From 1970, there was a rapid adoption of the steel transport container, reducing the costs of inter-modal transport. (See below)
Improved technology: It is easier to communicate and share information globally. The internet allows instant global communication. Consumers are also able to order more goods online. Managers have instant access to information. Finance and banking is immediate.
Global financial system: Allowing mobility of capital (money) with a general reduction in capital barriers, making it easier for capital to flow between different economies. This has increased the ability of companies to access capital and the interconnectedness of global financial markets.
Growth of multinational companies (MNC’s): MNC’s can operate in many different economies. This is linked to the growth of global trading blocks which have reduced tariff barriers. (e.g. European Union, NAFTA, ASEAN) which encourage global trade.
Increased mobility of labour. People are more willing and able to move to different countries in search for work. Global trade remittances now play a large role in transfers from developed countries to developing countries
There are three main forms of globalisation:
Economic globalisation– the growth and spread of MNC's, the rise of NICs, the rise of global economic institutions like the IMF and World Bank.
Cultural globalisation– Initially this was the impact of western culture, art, media, sport, and leisure pursuits on the rest of the world. This is now a multidirectional process, as cultural aspects move all over the globe through the Internet and migration. Hollywood is now rivalled by Bollywood and Nollywood for example.
Political globalisation– Institutions like the United Nations, regional trading blocs and particularly the influence of western democracies and their influence on poor countries have resulted in political globalisation.
Key patterns of globalisation.
MEDCs produce high value manufactured secondary goods.
MEDCs produce high value research and development products
Services including legal, banking and education are important components of MEDC economies.
LEDCs or the poorest countries tend to produce lower value primary products and raw materials
MEDCs import a lot of raw materials at low prices, but sell higher value processed goods. The MEDCs “Win” in this process.
MEDCs make rules that limit poorer countries ability to compete – by paying their farmers subsidies to make their goods cheaper OR taxing Imports (an import tariff).
The control of the trade rests with the major markets (MEDCs) this buying power allows rich countries to control world markets.
NICs are changing this pattern, rivalling the richer “Western” nations (MEDC'S) – manufacturing is in decline in many MEDCs
Trading Blocs have led to trade creation between members; countries outside the bloc have suffered from trade diversion.
Activity 1. Globalisation - getting to know you
Use the information above and your own research
1. Define globalisation using a quote
2. Describe the five main causes of globalisation using an examples
3. Describe the three main forms of globalisation in your own words.
4. List the negatives of globalisation according to the critics.(It's good)
5. List the positives of globalisation according to the supporters. (It's bad)
6. How does globalisation shift the balance toward MNC's from governments?
7. List the key sectors of MEDC economies
8. List the key sectors of LEDC economies
9. How does this pattern handicap development in LEDC countries?
10. How do rich countries control markets according to the theory of globalisation?
11. Define an NIC
12. How have NIC's changed the traditional pattern of globalisation?
13. What is a trading bloc, provide examples?
Background briefing: The humble shipping container
Containerisation changed everything. Malcom McLean figured that big savings could be had by packing goods in uniform containers that could easily be moved between lorry and ship. When he tallied the costs from the inaugural journey of his first prototype container ship in 1956, he found that they came in at just $0.16 per tonne to load—compared with $5.83 per tonne for loose cargo on a standard ship. Containerisation quickly conquered the world: between 1966 and 1983 the share of countries with container ports rose from about 1% to nearly 90%, coinciding with a take-off in global trade.
2. Measuring globalisation
Background briefing: Visualising the core
Do some countries benefit more from globalisation?
The KOF Globalisation Index measures the economic, social and political dimensions of globalisation. It measures the degree to which a country is globalised and helps us visualise the core and periphery countries.
The KOF globalisation Index measures globalisation using the following:
Economic globalisation:
Flows of trade, foreign direct investment, and capital flows. Policies enabling flows and activities, such as trade regulations and tariffs
Social globalisation:
Money transfers, international tourism, trade in cultural goods. Internet usage, television access, international patents and trademarks.
Political globalisation:
Embassies, UN peacekeeping missions, international treaties.
To do: Use Skyscanner to visualise and annotate the the core and the periphery
Activity 2. Measuring globalisation
How can we measure globalisation?
By creating a globalisation participation index.
In this activity you will investigate the level of globalisation for one LEDC country (Periphery) and one MEDC country (Core).
Compare the results for trade and social measures to assess the level of globalisation in each of your countries.
Indicators of globalisation
GDP per capita
Trade % of GDP
Foreign Direct Investment, stocks (percent of GDP)
Imports of goods and services as a % of GDP
Number of import partners
Number of export partners
Membership in International Organisations. (Total number)
Foreign population % of total population
Number of McDonald's Restaurants (per capita)
3. Introduction to remittances
What are remittances and why are they so important?
Globalisation has led to a significant increase in remittances.
When migrants send home part of their earnings in the form of either cash or goods to support their families, these transfers are known as remittances. They now represent the largest source of foreign income for many LEDC's.
It is hard to estimate the size of remittance flows as many take place through unofficial channels.
Worldwide, officially recorded international migrant remittances grew 7.3% to USD$669 billion in 2023. Unrecorded flows through informal channels are believed to be at least 50 percent larger than recorded flows. Not only are remittances large( 4 percent of LEDC GDP) but they are also more evenly distributed among LEDC’s than capital flows, including foreign direct investment.
Remittances in three easy steps.
The migrant sender pays the remittance to the sending agent by e-mail, phone, or transfer.
The sending agency instructs its agent in the recipient’s country to deliver the remittance.
The paying agent makes the payment to the beneficiary.
Case Study: Remittance to the Philippines
1 out of 10 Filipinos works abroad. The money sent home from overseas foreign workers is key to the economy, about 10% of GDP, remittances increase household incomes and, therefore, domestic demand for goods and services.
According to journalist Iris Cecilia Gonzales, “working abroad is no paradise because [OFWs] are separated from their children.” And while the social cost is high, the developmental cost is higher.
Prod Laquian, professor at the University of British Columbia, says “the export of workers has prevented the Philippines from advancing as a self-sustaining nation.
For the [Philippine] government, the easy money from foreign remittances is a major cause of its inability to pursue sound economic development programs.”
Case Study: Ethiopia. The development role of returning emigrants and remittances
About three million Ethiopians live abroad [the Ethiopian diaspora], mainly in Europe and North America. However, in recent years an increasing number of young professionals have returned home to seek business opportunities as the economy has expanded. The government has stressed the importance of investment by returnees, seeing them as ‘development partners’. Many have already started new businesses. About 3000 members of Ethiopia’s diaspora have returned to the country for investment purposes. The total investment capital of return migrants has been estimated at $1.1 billion. The most popular economic sectors among return migrants are real estate development, manufacturing, construction, and tourism.
In addition to investment , return migrants can bring back a range of skills in short supply in Ethiopia.
Ethiopians who continue to live abroad also play a substantial role in economic growth, sending home about $4.2 billion a year. Such remittances provide not just a welcome additional source of income for the families concerned, but also increase the amount of money circulating in the local economy, helping to set off a multiplier effect.
Activity 3: Remittances: Advantages/disadvantages
To Do: Select an LEDC to examine the impact of remittances
Use examples to describe the economic and social impacts of remittances on your LEDC.
Critics of remittances argue that they increase inequality in the source country. Use examples from your LEDC to examine this issue.
Critics also highlight guest worker mistreatment in host countries. Use examples from your LEDC to examine this issue.
Recommend 4 alternative sources of capital for LEDC’s.
How would a decline in guest workers impact host countries?
Activity 4: Remittances workshop
You have been asked to participate in forum to gain a better understanding of the impacts of remittances in LEDC’s.
Prepare the following talking points for our workshop.
The positives of Remittances
Can improve the well-being of family members left behind by smoothing consumption and improving living conditions.
Boost the economies of receiving countries; cash flow for unbanked households in poor rural areas, increase asset and business investments, promote financial literacy, and reduce poverty.
Remittances can increase development; improved sanitary conditions, healthcare, and greater educational attainment.
The negatives of Remittances
Create a culture of dependency in the receiving country, reduce labour supply inhibiting economic growth.
Lowering labour force participation
Promoting conspicuous consumption
Remittances can be reduced by restrictions on migration, by escalating anti- immigrant sentiment, and tougher enforcement practices in host countries.
Remittance workshop discussion points
What are the positives/negatives of remittances for LEDC’s and MEDC’s?
What could be improved?
What are the alternatives?
How would a decline in remittances impact LEDC economies?
How would a decline in guest workers impact host countries?