Globalisation is the increasing interdependence and integration of the world's national, regional, and local economies, societies, and cultures into a single, interconnected global system. This process is characterised by the rapid acceleration of cross-border flows.

Characteristics of Globalisation

Increased Trade in Goods and Services

A higher proportion of the world's GDP is accounted for by international trade, facilitated by the removal of barriers like tariffs and quotas (trade liberalisation).

Free Movement of Capital (Finance)

Foreign Direct Investment (FDI)—where a company in one country invests in a company or asset in another—flows easily across borders. Vast sums of money are transferred daily through global stock markets and financial systems.

Increased Labour Mobility

While more restricted than capital flows, there is an increasing flow of economic migrants and skilled workers across international borders seeking employment opportunities.

Free Transfer of Technology and Knowledge

The rapid spread of Information and Communication Technology (ICT) and intellectual property (e.g., software, management techniques) across the globe, often through Transnational Corporations (TNCs).

Interdependence

Countries become increasingly reliant on one another. An economic crisis or supply chain disruption in one part of the world (e.g., the 2008 financial crisis) can have ripple effects globally.

Global Brands and Culture

The spread of universal culture (often Westernisation or Americanisation) through global media, food, fashion, and the ubiquitous presence of TNCs (e.g., McDonald's, Apple).

Deepening and Widening Connections

Connections are deepening as they penetrate more aspects of life (e.g., social media, global banking) and widening as they link previously isolated places (e.g., increasing tourism in Sub-Saharan Africa).

Factors Contributing to Globalisation in the Last 50 Years

The acceleration of globalisation in recent decades is driven by advancements in transport, communication, and economic/political decisions.

1. Improvements in Transport Technology

• Containerisation: The use of standardised containers has revolutionised bulk shipping, allowing for economies of scale and significantly lowering the unit cost of moving goods worldwide.

• Jet Aircraft: Advances in air travel (faster, larger planes) have reduced the time and cost for moving high-value goods and people (business and tourism) internationally.

• Efficient Logistics: Development of sophisticated logistical and management systems (e.g., tracking via GPS) ensures smooth, reliable, and cost-effective movement of goods across complex global supply chains.

2. Improvements in Communication and Information Technology (ICT)

• The Internet and Mobile Technology: Allows for instant, cheap, and reliable communication across the globe, facilitating the management of international supply chains and the rapid transfer of data and finance.

• "Death of Distance": ICT has enabled offshoring and outsourcing of services (e.g., call centres, back-office processing) to distant, lower-cost locations, as coordination is no longer geographically limited.

• Global Knowledge Sharing: Technology allows for the rapid spread of ideas, culture, business models, and best practices.

3. Political and Economic Decisions

• Trade Liberalisation: The establishment of the World Trade Organisation (WTO), its predecessor (GATT), and trade blocs (e.g., EU, NAFTA) has promoted free trade by pressuring countries to reduce or remove protectionist measures like tariffs and quotas.

• Deregulation and Privatisation: Governments have progressively reduced state ownership (privatisation) and relaxed controls (deregulation) on markets, making it easier for TNCs to invest and operate in foreign countries (e.g., the liberalisation of financial markets).

• Neo-liberal Policies: The adoption of free-market, capitalist policies (e.g., in China after 1978 and former Soviet bloc countries) opened vast new markets and sources of cheap labour to the global economy.

4. Transnational Corporations (TNCs)

• Global Strategies: TNCs actively seek new markets, sources of cheaper raw materials, and lower labour costs globally. Their pursuit of economies of scale and higher profits drives FDI and the establishment of complex, decentralised global production networks.

• Foreign Mergers and Acquisitions: TNCs grow by merging with or acquiring foreign companies, further integrating economies and spreading their influence.

Impacts of Globalisation and Global Companies

Impact on Individual Countries

Countries:

Economic Growth and Development due to FDI (jobs, infrastructure, new technology). Specialisation according to comparative advantage increases efficiency and output.

However, increased Interdependence means a local crisis can become global. Increased Inequality (wealth concentrated in urban/connected areas). Cultural Erosion (loss of local distinctiveness).

Governments:

Increased Tax Revenue from TNCs and increased trade (if not avoided). Greater Geopolitical Influence through participation in global organisations (WTO, UN).

However, loss of Sovereignty as governments must abide by WTO/trade bloc rules and international treaties. Tax Avoidance by TNCs (e.g., transfer pricing) reduces national revenue. Race to the Bottom—governments lower labour/environmental standards to attract TNCs.

Impact on Producers and Consumers

Producers:

Lower Costs by relocating production to low-wage countries and sourcing cheaper materials. Economies of Scale from operating in larger global markets. Increased Revenue due to access to new, faster-growing markets (e.g., emerging economies).

However, increased Competition can force less efficient/local firms out of business. Supply Chain Risks—vulnerability to disruptions in distant suppliers (e.g., natural disasters, political instability).

Consumers:

Lower Prices due to TNCs' economies of scale and cost savings. Greater Choice and access to a wider variety of global goods and services (e.g., exotic food, foreign media). Higher Living Standards due to increased overall GDP.

Howver, goods can become Homogenised (loss of local produce/retailers). Increased ethical and environmental concerns over the origin of products.

Impact on Workers and the Environment

Workers:

Job Creation (especially in emerging and developing economies) due to TNC factories and service sector investment. Increased Wages (often higher than local alternatives) and better skills training in host countries.

However, structural Unemployment in developed countries as manufacturing jobs are offshored. Exploitation of workers in developing countries (low wages, poor working conditions/safety, long hours). Migration can lead to "brain drain" from developing countries.

The Environment:

Diffusion of Green Technology and shared knowledge (e.g., in renewable energy). Global Cooperation to tackle issues like climate change (e.g., Paris Agreement).

However, increased Carbon Emissions from the vast increase in global shipping, air freight, and production. Resource Depletion as global demand for raw materials increases (e.g., logging, mining). Pollution Havens—TNCs move polluting industries to countries with weak environmental regulations.