Human Geography Economic Geography

GLOBALIZATION
LO: Discuss the characteristics and processes of globalization Discuss the impact of globalization on the world economy Discuss what is meant by the globalization of economic activity Discuss the global, regional and national variations in economic wealth Discuss the development gap Evaluate the usefulness of various indicators used to measure the level of development

Globalization: The increasing interconnectedness and interdependency of peoples, cultures, economies and politics at all spatial scales; involves deep integration of different economies across borders, creation of complex and intertwined relationships. Flows of capital and goods o Cross-border movements of production and investments Movement of people o Migration, tourism Diffusion of information and culture o Advancement of IT the internet o Flows of cultural forms and symbols: movies, consumerism Rise if international organizations o Supranational bodies Driven by: 1. Improvement in transport -> Aeroplanes 2. Improvement in communications ( Internet) 1+2 = Space shrinking Technology 3. Need to find best and more efficient ways of production (Cheap labour, best talents etc.) 4. Need for new markets ->Markets in home country saturated -> Move to Asia because: i. Deregulation -> Open up markets ii. Growing middle class -> Higher disposable income

THE IMPETUS FOR GLOBALIZATION

Why globalization doesnt happen

Disabling factors

Why globalization happens

Enabling factors

Expensive labour on standardized goods Strong unions High expenses on labour welfare Saturated markets

Cheap labour Standardization of production Cheap raw materials Cheap land, low taxes Increased mobility transport & communications Search for new markets

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BENEFITS AND SETBACKS

Reduce Poverty Benefits Booming economies lifted 200 million people out of poverty in China and India in 1990s In 1990s, number of people living in poverty fell 7% and 6% annually in Vietnam and Uganda respectively Between 1981 to 2001, % of rural people living on less than $1 decreased from 79% to 27% in China, 63% to 42% in India, and 55% to 11% in Indonesia Improve the economy From 1980 to 2000, GDP increased 23% to 46% in China, 19% to 30% in India Vietnams economy grew 6% a year. Exploitation of labour -> Sweatshops Salary is low by worlds standard - $1 a day which is minimum wage in Indonesia Tiger Woods paid more to promote NIKE than the entire workforce making NIKE 1000 workers crowded into a crammed factory. Temperatures reach 40 degrees Celsius. Longs shifts which include 16 hours of standing Higher wages for locals in LDCs -> Better standard of living Per-person income in China climbed from $16 in 1978 to $2000 in 2007 Indian citizens can now purchase cell phones, motorcycles, cars and homes by the time they are 30, used to be impossible Shopping malls selling branded stuff like Versace etc. Homogenisation of culture Can find macdonalds, coca- cola etc. everywhere Setbacks Increasing economic gap Combined GDP of the Rich getting richer, poor top 20 richest getting poorer countries were 15 times greater than the 20 poorest in 1964, now its 30 times greater

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Leads to efficient use of resources.

Competition forces companies to be as good and cheap as possible Frees up resources for other investments

Exploitation of natural resources

Flock to poor countries with lax environmental laws. Case; Bohpal Incident in India, 1980s Case: Nigeria Shell Incident, 1990s Water pollution, spills make land barren 40% of Shells oil spills have occurred in the Niger Delta Environmental and human rights activists executed

Exchange of technology

Exposed to outside technology -> Adopt the new ideas and techniques, or modify and improve on it Worlds output is 6 times greater than what it was 50 years ago

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NIDL
LO: Discuss the causes and impact of the emergence of the NIDL on global economic activities

The New International Division of Labour refers (quite broadly) to the global spread of labour use across international borders in the face of globalization and increasing industrial competition.

CHARACTERISTICS OF NIDL
TNC Driven large capital outlay for global investments Hierarchical, tripartite see TNC notes Profit driven capital accumulation near the top of the hierarchy (where R&D is concentrated) Organic and dynamic relationships Producers and actors Uneven some countries benefit from globalization much more than others. NIDL favours Geopolitically stable economics Sub-saharan African countries have civil strife, Indonesia and phillipines contend with terrorism Competent, capable governments Global business studies show that companies shun countries rampant with corruption Good and reliable infrastructure SSA has little roads, communications etc. Landlocked regions with little ccess to coastal areas and no proper airport facilities

CAUSES OF NIDL
Pushes to a NIDL High labour costs, unionisation in DCs Eg. US worker costs $12 an hour. Have to provide additional benefits such as health insurances, day care allowances etc. Saturated markets, product life cycles need to be extended People already own televisions, washing machines etc. Wont be purchasing new ones often -> Decrease in demand Resistance institutions to change from supranational Pulls of a NIDL Cheap, docile workforce in LDCs. Low/no unionisation Eg. Thai worker $1 an hour. China worker 33 time cheaper than US worker. Chinese workers willing to work OT Search for new markets for investments Chinas huge emerging market of 1 billion people have huge demand for consumer products

Improvements in transport and communications = increased mobility and efficiency Eg. India started 5-year, 1 billion dollar project to improve roads, airports, ports etc. Active role of governments in ELDCs in attracting foreign investements EPZs, tax holidays etc. Jurong Island 1. Vertically integrated structure -> Output of one plant is input of another, symbiotic relationships 2. Shared facilities -> great economies of scale -> lowers costs 3. Has road highway, production highway, information highway -> Efficient transport system and information transfer -> Provides decisive edge over others China created SPZs where companies willing to build factories there can enjoy tax holidays . China would also build the relevant infrastructure they needed.

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Impacts of NIDL LDCs Employment -> Increased standard of living Nike employs 23000 direct employees DCs Push towards tertiarisation and beyond More competitive product pricing from NIDL consumers benefit More products -> Larger range of choice for consumers -> Consumers can choose products that are the cheapest and most value for money Profit maximization for TNCs Loss of lower level jobs blue-collar workers Companies move lower-level operations to cheaper alternative locations Socio-political resentment towards LDCs protests and protectionism (EU)

Technology, skills transferred Limited to selected, mainly industries

labour-intensive

Limited transference of technology and skills Profit repatriation Lesser trickle-down effect Coca-cola send 60% profits back to the USA Subject to mobility of TNCs vulnerable to restructuring and reorganization Economic and political dependence

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IMPACT OF NEW TECHNOLOGIES ON WORK

LO: Analyze the impact of new technologies on work

FORDISM: JUST-IN-CASE PRODUCTION

Mass production of standardized goods on assembly lines with strong hierachical systems of reporting,checking and auditing Unions have considerable power, gain high wages in return for discipline Goods produced in large quantities, large number of workers and large storage space Low end jobs easily replaceable and offshored to LDCs o Deindustrialization in DCs. Skilled workers deskilled

POST-FORDISM: FLEXIBLE PRODUCTION SYSTEMS

High efficient use of materials, space and workers to value maximize and product differentiation Just-in-time production Not hierarchical -> personal responsibility and self supervision. All contribute to innovation Allows for flexible product differentiation Positive Negative Cost saving less storage space required Risk of unexpected demand surges Value added latest products available to System is vulnerable should a breakdown eg in customers; customization supply chains - occur Takes advantages of product life cycles by riding on the upward curve of middle stage of PLCs Labour can be adjusted to demand part time workers, hire-fire system Eg. Dell : Does not keep stockpile of systems, every PC is built from scratch and custom-configured to consumers needs. Outsourcing Transfer of non-core jobs to other firms o Back-office: Call centres, accounting, payrolls o Low-end manufacturing: assembly o Low-end services: cleaning, attendants, security Eg. Iomega Asia-Pacific Sold zip drive manufacturing to 3rd party firm in Malaysia. Nike outsources its shoe manufacturing and does not own a single manufacturing plant Insourcing Reasons for insourcing: 1. Outsourcing not beneficial; productivity and control lost 2. Branding is eroded 3. Had a merger with another company, resulting in economies of scale and can also focus on noncore operations Eg. JPMorgan Chase used to outsource it IT operations to IBM. After merger with Bank One , insourced IT operations. It took back 4000 employees it had transferred to IBMs payroll. SOHOs especially prevalent in the dotcom boom Comfort of own home aided with technological advances Low start up costs. Spatial redistribution of workplaces Specific service-based industries: consultations, web-design, graphic design

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ESTABLISHED AND NEW ECONOMIC PRACTICES

Strategic alliances Star Alliance (airlines) Broaden scope of operations -> Offer a broader set of skills and services Mutual benefits for companies involved Joint ventures (see notes on Role of State/Supranational bodies) Common in mega projects like dam-building etc as it requires a lot capital. Fair share of profits, technological transfer, greater economies of scale, internationalise their productions, integrate functions for greater profit maximisation. Business networks Mergers: combination of two or more firms into one (HP-Compaq, ExxonMobil) Acquisitions: one firm buying over another Cell Workers Retrain workers to multi-task -> given training and upgrading to operate in more advanced tasks and functions Labour productivity is much higher and thus outweighs their higher wages Eg. Japan workers are 6 times more productive than their malaysian workers. Cheap wages does not always mean its the best for the company

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QUATERNARY & QUINARY SERVICES

LO: Discuss the impact of global economic change on the service sector

Quaternary services Finance and insurance Quinary services Education, government, health research and development

DECENTRALIZATION OF THE SERVICE INDUSTRY

LO: Discuss the growth and locational shifts in various economic activities

Suburbanization Improvements in infrastructure: transport and communications SOHOs suburbanised -> Do not need highest accessibilitty because of internet Some services still centred in CBDs o Central economic and government services o Highest accessibility (in physical space) o Address prestige is important

CAUSES OF THE GLOBALIZATION OF SERVICES

Developments in IT Service based processes can now be done through the internet o Finance, software development, call centres, data entry, accounting Growing quality of labour in LDCs -> Indian and China to take on service jobs Growing standardization of service products University education mostly conducted in english, based on western models and paradigms Hotels Demand 5 star hotels even in poorest nations Service diversification of manufacturing firms -> Wing Tai Apparels Wing Tai properties/food/retail etc. Growth of international trade Increased need for support services o Logistics, transport, finance, telecoms, administration

NEW INDUSTRIES FROM ECONOMIC CHANGE

Rise of SMEs Maturing of economy, increased literacy Fueled by stable and supportive governments o Pro-business o Provision of financial support Seen as platforms to foster innovation and enterprise flexibility Hub-creation Cluster of industries that generate several economies of scale Concentration of similar activities in one place Eg. Biopolis etc. De regulation, privatization of public services Privatization of government-owned firms Sembcorp, Singtel *READ APPENDICES OF ECONOMIC GLOBALIZATION POWERPOINTS MAN IMPORTANT!

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TNCS
LO: Discuss the characteristics of TNCs

Transnational corporations are firms with two or more branch plants across international boundaries

GLOBAL FDI PATTERNS

Selective and uneven o Japans FDI: USA, W. Europe and Asia o USAs FDI: Canada, the UK, Australia and Latin America Focused on regions: EU (W. Europe), Asia, America Biased against the African continent

Singapores FDI: ASEAN, US, UK Factors Affecting Outward Investments: 1. Free Trade Agreements/ Regional Trading Blocs NAFTA, CAFTA CAFTA has 193 billion dollars of trade in 2009 2. Close Proximity -> Lower Transport Costs

Singapore and Japan invests in Asia

3. Low wages/ Cheap Labour

America invests in SEA, Mexico etc.

4. Cultural Affinities -> Similar Working Styles

Singapore and Japan invests in Asia

5.Language Singapore invests in English-speaking countries such as Australia and New Zealand

THE MAQUILADORA EFFECT

LO:

The Maquiladora refers to the cluster of US TNCs with manufacturing plants located at the USMexico border creates uneven development in Mexico Cluster of TNCs at the borders of two countries o Take advantage of low wages and land costs Examples: Singapore-Johore border; Hong Kong-Shenzhen
Discuss the command and control relationship between TNCs and the host economy Discuss the spatial organization, linkages and the social and economic impacts of TNCs on a specific host economy

WORKINGS OF A TNC
Core HQs, R&D: mainly in EMDCs Semi-periphery Regional HQs: mainly in NICs Periphery Manufacturing plants: mainly in ELDCs

IMPACTS OF TNCS
LO: Analyze the social and economic impact of TNCs to the economies in which they operate

EFFECTS OF OUTSOURCING
Positive Reduces capital inputs of setting up new plants and buying new machinery Able to shift operations quickly in order to find the best, and most efficient contractor Negative Quality of products may be compromised, unless under strict QC Unpredictability of employment of local labour Possible to take advantage of confidential trade information, may lead to piracy problems

Case Study: Nike Directly employs 23,000 workers Outsources to 660,000 contract workers Controversies with activist groups over poor working conditions in ELDCs Branding with top sportspeople 9 of 13

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Developments over the last four decades Shift of manufacturing plants o 70s USA o 80s S. Korea, Taiwan o 90s Brazil, SE Asia, China Global shifts due to changing labour costs Changes in un/employment Continued profits Outsourcing practices Outsources all manufacturing to contractors Focus on core: R&D and marketing High spatial mobility

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IMPACTS OF TNCS
Positive Job Creation: Direct, and Multiplier effect Employment to work in production plants In some ELDCs, TNCs account for over 20% of employment in manufacturing Low wages > no wages Trickle down effect = better social provisions Presence of MNCs also brings in investor confidence Case: Coca-Cola Direct: 138,000 RMB Indirect (multiplier): 414,000 RMB Glass suppliers, aluminium suppliers etc. 8.16b RMB into Chinas economy in 1998 Creation of Industrial Linkages Primary industries stand to gain by supplying raw materials and stuff to plants Joint Ventures Transfer of technology Profits shared to some extent Nurturing of local talent Structural Shifts in Local Economies Enables LDCs to jumpstart their mode of production from agrarian to industrial Africa loses over 20,000 intellectuals annually through brain drain Social Strategies to engage local communities Nike: Social programmes include providing small loans for women in Thailand to set up businesses (microfinancing) Citigroup: Pioneer founder of microfinance programmes in various ELDCs Small loans of ~$100 to poor families for them to start businesses Negative Exploitation of cheap labour Profit repatriation Minimal transfer of skills Low level skills that are transferable to few other industries -> Assembly work High mobility enables TNCs to leave host countries for countries with cheaper labour costs 90s MNCs left Singapore in favour of China Maxtor Repercussions on economies highly dependant on TNCs Stifling of competition & entrepreneurship Hindrance of smaller TNCs/companies trying to break into local markets Chaebols in Korea: Samsung, Hyundai, LG Keiretsus in Japan Hegemony over markets Over-dominate markets at the expense of smaller players Immense diversification and penetration makes it difficult for them to lose out Case: Wal-Mart Flexible production systems means jobs impermanence JIT Outsourcing Hire-fires Violation of labour and human rights Sweatshop phenomenon Poor regulations in waste management Case; Bohpal Incident in India, 1980s Case: Nigeria Shell Incident, 1990s Water pollution, spills make land barren 40% of Shells oil spills have occurred in the Niger Delta Environmental and human rights activists executed

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ROLE OF STATE AND SUPRANATIONAL BODIES

THE STATES ROLE
LO: Examine the roles of the state in economic development Evaluate the effectiveness of the state in economic development

State: Organized body of people under a government, within a defined geographical boundary Mediator and facilitator between FDIs and host economies Extent of mitigation differs from country to country Employer Provides public employment in civil service Regulator of policies Sets and regulates socio-economic policies o Trade, investments, industries etc. Policies Implemented Fair wages: National Wage council in Spore Land allocations Mitigate environmental impacts Provides local protection: Minimum local content o Minimum amounts of RM to be sourced from local suppliers o Reduce profit leakage overseas Increase multiplier effects within local economies o Case: Korea prevents TNCs from bypassing local firms that provide machinery Creation of pull factors for industries and foreign companies o Build infrastructure to attract investors India started 5-years, 150 billion dollar plan to update roads, airports, ports, electric plants etc. o Niche on local strengths of the economy o Focus efforts on specialized areas Linkages between local companies and TNCs o In terms of logistical support, supply-chain supports etc. o Some extent of technology transferred o Local Industry Upgrading Programme in Spore Apple, Macromedia, Microsoft, Oracle, BMC Software assisting local firms by providing access to technology o National Linkage Programme in Ireland local firms married to TNCs = 33% increase in employment Reduce dependency via joint-ventures o Shared profits o Shared technology = technology transferred o Minimum share of local labour Creation of export processing zones (EPZs) o Designated areas built with infrastructure, housing etc. for the purposes of housing manufacturing companies. Companies save startup costs as most things are already built for them. (e.g. Batam EPZ in Indonesia) Collaborator Engages in bilateral trading arrangement with other states: FTAs Competitor against other states

ROLE OF SUPRANATIONAL BODIES

LO: Discuss the role of supranational bodies and evaluate their impact on national and regional economies

Supranational bodies: Organized body of people operating across geographical boundaries and transcending national spheres of interest European Union, (EU) North American Free Trade Association (NAFTA) Group of Eight (G8) Association of SE Asian Nations (ASEAN) etc. Regulator Case: Curbs on Chinese textile imports by EU o Prevents cheap imports form flooding the market o EU has textile manufacturers in Portugal, France and Italy 12 of 13

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Case: threshold safeguards in place by WTO o Host nations allowed to impose quotas to safeguard economies With poof that cheaper imports seriously damage their economies Collaborator: Formation of trade blocs, FTAs

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