UNIT 4 - POWER, PLACES & NETWORKS
4.1 - Changing global interactions and global power
How global power and influence varies spatially
Globalisation and the concept of 'interconnectivity'
Globalisation refers to the the growing interdependence of countries worldwide through the increasing volume and variety of cross-border transactions in goods and services and of international capital flows, and through more rapid and widespread diffusion of technology.
​
Factors that have led to a more globalised world (the driving forces of globalisation):
-
ECONOMICAL FACTORS:
-
The emergence of TNCs (transnational cooperations) and NGOs.
-
Global commodity chains promote globalisation, since manufacturing is increasingly globalised as there are more worldwide networks extending from the raw material to the final consumer. Raw materials are often sourced in a different country, then where the final product is manufactured and sold. ​
-
TNCs seek economies of scale and therefore expand their business beyond a single country. Domestic markets may be regarded as too small to satisfy the selling needs of the TNC and therefore they have to invest on an international scale.
-
The development of trading blocs and unions (EU or NAFTA), which allows for free trade between member countries.
-
Establishing interlocked financial systems and IGOs.
​
2. TECHNOLOGICAL FACTORS:
-
The digital revolution and the development of the internet has allowed for rapid information transfer. This is also known as “the death of distance”, which is a key factor behind trade in knowledge products using web technology.
-
The improvement and development of the transport sector (aviation, railway and cars), has reduced travel times. A reduction in travel time has led to increased tourism and international migration. The more people move around the globe, the more global connections there tend to be.
-
The movement of goods, by either ships or planes across international waters and borders.
​
3. POLITICAL FACTORS:
-
The collapse of Communism in the 1990s meant the end of the divided ‘cold war’ world, and now these ex-communist countries are themselves democracies and integrated into the global economy.
​
4. CULTURAL FACTORS:
-
Introduction of global sporting events, such as the Olympic Games in 1896 and Formula 1.
​
5. ENVIRONMENTAL FACTORS:
-
Battling global problems, such as climate change and poverty together and establishing internationally recognised NGOs such as PETA and WWF.
-
Having common interests and working together as a group of nations to put laws and intergovernmental treaties into place, such as the Paris Climate Agreement. ​
Globalisation indicies
KOF Index
The KOF Index is calculated annually on a scale from 0 to 100
(0 representing very little globalisation). The Netherlands have the highest
KOF Index with a value of 92 and the Cayman Islands to have the lowest
with 32. It is a composite measure and measures globalisation on three
different dimensions:
-
Economic globalisation (36%): Volume of cross-border trade (import
and export), FDI and number of restrictions on trade (import tariffs).
-
Political globalisation (27%): Number of embassies and international
organisations, the number of international agreements signed and the
number of UN peace missions
-
Social globalisation (37%): Cross-border information flows (internet
access) interactions between individuals (telephone calls), tourism
flows and cultural proximity
​
The Kearny Globalisation Index
The Kearney Globalisation Index (GI) was developed by American company A.T. Kearney. It is a composite measure and measures globalisation on four different dimensions:
-
Political engagement: The flow of cross-border remittances and travel.
-
Technological connectivity: The number of internet users.
-
Personal contact: A country’s membership in a variety of representative international organisations.
-
Economic integration: FDI done by a country and international trade.
​
​
The Ernst & Young Index of Globalisation
The Ernst & Young Index of Globalisation was published in 2012, primarily as a guide for commercial investors. Globalisation is measure on three different dimensions:
-
Economic (60%): This sub-index provides indicators for trade of goods and services, as well as wages and capital flows.
-
Social dimensions (20%): Cultural proximity and personal contacts are taken into account.
-
Politics (20%): This takes into account the number of international treaties or memberships in international organisations.
​
​
The Maastricht Globalisation Index (MGI)
This index was developed by researchers from the Maastricht University in the Netherlands.​
-
It takes into account political, economical, social, cultural, technological and ecological factors. The MGI is the only index that recognises and values environmental globalisation, by using the ecological footprint of a country.
​
​
The New Globalisation Index (NGI)
It is a composite index constructed to measure the relative globalisation level of a group of countries. With its 21 variables, it accounts for multidimensionality instead of relying purely on economic indicators.
-
It focusses on finance, trade, politics and social factors. These include: Income, internet access, trade in goods and tourism.
Timeline of global superpowers
​A superpower is a country with a large population, strong economy, great military power, great political and cultural influence. Superpowers are nations or groupings of nations (EU), that have a large amount of power compared to other nations.
-
1450: Portugal was considered the first maritime superpower.
-
1500: The Spanish Empire, the Ottoman Empire and the Ming Dynasty were all superpower contenders. However, the Ming Dynasty had a vast economy and huge population, which made it the most powerful country in the world.
-
1700: France became the most powerful country in Europe and the Ottoman Empire gained a vast amount of power. But when looking at the total population and economy, the Qing Dynasty takes the global superpower position.
-
1815: The Industrial Revolution has started to elevate the power of European countries above all others. Russia and the Qing Dynasty both have large empires. But Great Britain, as the center of the early Industrial Revolution and as the country with the strongest navy in the world, is probably the strongest country in the world at this point.
-
1914: The Europeans have a major technological advantage on all others at this point. Russia, France and Italy are all great powers, but they do not compare to the USA, Germany and Great Britain, who have the three largest economies in the world.
-
1919: At the end of World War 1, most European countries have suffered huge economic and population losses. Therefore the USA had a major economic advantage over other countries, making it extremely powerful.
-
1939: The USA, Great Britain, and Germany are again the main superpower contenders.
-
1942: After Germany lost World War 2, it has no longer a superpower status. Now the USA, the USSR and Great Britain are superpower contenders.
-
1947: The USA and the USSR became rival superpowers after World War 2. This led to the Cold War between these countries. Although no physical war was fought, they engaged in ideological battles.
-
1992: Gorbachev's decision to allow elections with a multi-party system and create a presidency for the USSR began a slow process of democratisation that eventually destabilised the communist control and contributed to the collapse of the Soviet Union. The collapse of the USSR left the USA as the sole superpower.
-
2009: The USA remain the sole superpower, since no military or economy can compare.
-
2010: China has experienced massive economic growth and high military spending strengthened the Chinese army.
-
2020: Currently, the USA are still considered the sole superpower, however China is gaining momentum and is predicted to overtake the USA by 2030.
​
Countries gain superpower status through economic, military, cultural and technological dominance over other countries. This could be done through the use of ‘soft power’ (cultural influence and diplomacy) or ‘hard power’ (use of military force, economic and trade policies). A combination of hard and soft powers leads to the development of a 'smart power'.
Today, emerging superpowers have arisen to compete with the United States for recognition. Some of these countries China, Russia, India, Japan and the European Union.
→ The EU countries have also been considered a superpower, however this has been re-thought, due to too large internal differences within the member countries.
CASE STUDY: CHINA AND THE USA AS GLOBAL SUPERPOWERS
DETAILED EXAMPLES OF TWO ACTUAL OR POTENTIAL GLOBAL SUPERPOWERS
CHINA
Emerging Superpower
​
​Although China is not yet recognised as a global superpower, it is predicted to become one in the next couple of years. This prediction was done considering the following factors:
-
China has a great economic power, as it has two of the worlds richest companies (ICBC and the Chinese Construction Bank).
-
China has a great agricultural activity.
-
China is becoming more involved in trade through the “Belt Road Initiative” and the “Economic Belt”.
-
President Xi wants to build a maritime silk road to fuel trade and inter-connectivity.
-
China invests into trade infrastructure within other countries, to control global trade and to be more interconnected.
-
A large population and many neighbouring countries, promotes globalisation and superiority.
-
The Chinese government spent $42 billion on the the 2008 Beijing summer Olympic games. It was seen as a way to promote China as a welcoming and friendly country.
However, it is predicted that China's GDP should grow by 5%
annually until 2030. Its forecast says that China, now the world’s second-largest economy, would overtake the number one ranked US economy by 2030. China’s struggles under the “Zero-COVID” policies have delayed the country taking the top spot by about two years.
→ Other potential superpowers competing for global recognition are: Russia, India, Brazil, Germany and Japan.
UNITED STATES
Superpower
The USA has remained the sole superpower for a period of time. The following factors highlight its superpower status:
-
The US has the world’s most powerful military with access to nuclear weapons. The USA spends approximately 4.4% of its GDP on the military (= hard power).
-
The United States has the world's largest economy, with a GDP of $20.93 trillion in 2020. Its GDP is 24% percent of the global GDP.
-
The US culture is very powerful (Hollywood and Disney) and the process of "Americanisation" is creating a global culture.
-
It has the third largest population in the world (350 million) and its economy produces around 25% of the world's wealth.
-
The USA is a full member or has observer status in 87 international organisations.
-
The US dollar has been the world's most important reserve currency since the second world war.
Intergovernmental Organisations (IGOs)
In an Intergovernmental Organisation (IGO) at least two nations come together to form an entity (the 'group') for the purpose of working together in areas of common interest.
​
The G7
The G7 (Group of Seven) is an informal organisation made up of the world's seven largest so-called advanced economies. It is an informal organisation, which includes industrialised and high income countries (HICs). These include the United Kingdom, United States, Italy, Germany, France and Japan and Canada.
-
It was formed in 1975.
-
The GDP of the G7 is about 50% of total global economy.
-
They discuss geopolitical issues, such as trade and climate change.
The G20
The Group of Twenty (G20) is an intergovernmental forum comprising
of 19 countries and the European Union (EU).
-
It was established in 1999.
-
The G20 countries account for about 85% of the global GDP and 65% of the world’s population.
-
They coordinate macro-economic policies and support developing countries to become stronger.
Aim: The G20 addresses global issues that require the collective
responsibility of various countries to solve. They design policies
to promote international financial stability, climate change
mitigation and sustainable development.
Criticisms of the G20:
-
Africa and Central Asia are underrepresented.
-
Many have criticised the G20 as not being transparent, as most meetings are held behind closed doors.
-
Non-member EU countries, such as Norway which is a major economy and the seventh largest contributor to the UN budget, are not represented.
​
​
Organisation for Economic Cooperation and Development (OECD)
The OECD was established to help rebuild European economies
after the World War 2. It is an international economic research and
discussion organisation based in Paris. Its mission is to 'promote
policies that will improve the economic and social well-being of
people around the world' and to 'build a stronger, cleaner, and fairer
world’.
-
Founded in 1961 by 18 European countries, the USA and
Canada.
-
The GDP of the OECD countries accounts for about 60% of
the total global economy.
​
Criticisms of the OECD:
-
The OECD has been criticised by some as a 'club for HICs' with limited access for the MICs and LICs.
-
Asia and Africa are not represented.
Organisation of Petroleum Exporting Countries (OPEC)
The OPEC is an intergovernmental organisation of 13 countries, created with the intention to take away price control from western oil corporations and give it to the oil producing nations. With the establishment of OPEC the member countries were also able to put adequate energy policies into place.
→ An energy policy is a national strategy put in place by a government to ensure that the energy requirements of a country are met in
future on a timescale defined by that strategy. This is known as energy security.
​
-
OPEC was founded in 1960 by Iran, Iraq, Kuwait, Saudi Arabia and Venezuela.
-
OPECs headquarters are located in Vienna (Austria).
-
OPEC currently has 13 member countries. Indonesia, Qatar and Ecuador have left the organisation, as their countries either battled with inflation, became more resource nationalistic, could no longer meet the oil production quota, or they could not withstand the rising oil prices.
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
The formation and rise of OPEC:
-
In 1900 the oil reserves and industries were dominated and controlled by western multinational companies (UK and US).
-
These companies determined the price of oil and thus the revenues received by the oil-producing countries, which were considerably lower (10-15 cents on every dollar of their profits).
-
In 1960 oil rich countries formed the OPEC with the intention of seizing the control of oil production, and therefore taking the oil market away from the Western multinationals.
-
OPEC prevented further price cuts and the member countries were able to generate more profits .
​
OPEC was established to give its members a greater share of revenue from their own oil resources:
-
It is estimated that OPEC members hold 80% of the world's oil reserves, with the Middle East accounting for 69% of them. Saudi Arabia holds the greatest share of oil reserves and thus has the most power within OPEC.
-
Non-OPEC reserves are being exploited at a faster rate and will last another 15 years on average while OPEC reserves will last for another 80 years. Studies say that OPEC also holds a vast amount of undiscovered and unexploited oil reserves.
​
The influence of OPEC on energy policies (DECREASING DEPENDENCY ON OPEC):
-
The US: The dependence on imported oil has decreased, and therefore the influence of OPEC has dropped since 2005. This is due to the growing renewable energy sector in the US. Also after the 1973 oil crisis, a Department for Energy was established, which coordinates energy usage and extraction.
-
Europe: The 1973 oil crisis accelerated the oil and gas extraction developments of the Northern Sea, allowing the countries to become self-sufficient.
-
International cooperation: As a result of the 1973 oil crisis the International Energy Agency (IEA) was established, which helps countries to manage their oil resources and thus decreases the influence of OEPC.
-
Brazil: A policy was designed to replace expensive imported oil and gasoline with locally produced ethanol. The ethanol produced was blended with gasoline although some vehicle engines were designed to use pure ethanol (= import substitution).
→ The influence of OPEC in energy policies has been widespread and long-lasting. The 1973 'oil shock' caught national economies by
surprise and new policies were implemented, ultimately making countries more self-sufficient and decreasing OPECs global
significance.
Global lending institutions
The International Monetary Fund (IMF)
The IMF provides financing to member countries experiencing actual,
potential, or prospective balance of payments problems to help them
rebuild their international reserves and restore conditions for strong
economic growth. In 2020 the IMF lend $91 billion to 80 different countries,
including 48 low-income countries.
-
It was established in 1945 after the Second World War and has a total
of 189 member countries.
-
The IMF is funded by a quota system where each country pays based
on the size of its economy and its political importance in world trade
and finance → the US has the largest quota.
-
The headquarters are located in Washington DC.
-
The IMF has a yearly lending capacity of $1 trillion.
​
The IMF has a total of five different types of lending agreements:
-
Stand-by arrangement: Short- to medium-term assistance for countries with short-term balance of payments difficulties.
-
Extended fund facility: Long-term assistance to support members’ long-term payments difficulties.
-
Flexible credit line: Flexible funds, to address all balance of payments needs, potential or actual.
-
Rapid credit facility: Provide rapid financing to meet urgent balance of payments needs.
-
Catastrophe containment and relief trust: Debt relief for the poorest and most vulnerable countries hit by catastrophic natural disasters or public health disasters.
→ The IMF has provided emergency financing and has massively stepped up such financing to help member countries address the immediate impact of the COVID-19 pandemic.
​
The IMF has two types of loans:
-
Loans provided at non-concessional interest rates, which have to be paid back fully within a certain timeframe.
-
Loans provided to low-income countries on concessional terms. A concessional loan is a loan made on more favourable terms, with a lower interest rate.
The New Development Bank
The New Development Bank was established in 2015 by the BRICS countries that include, Brazil, Russia, India, China and South Africa. In
2021 Bangladesh and the UAE joined the NDB. The NDB aims to mobilise resources for development projects in BRICS, emerging economies and developing countries. Moreover, the NDB cooperates with international organisations and other financial entities, to provide assistance for projects.
-
It was formerly known as the BRICS Development Bank, named after its founding countries: Brazil, Russia, India, China and South Africa.
-
It has its headquarters located in Shanghai, China.
-
In 2021 a total of $25 million were spent on development projects.
-
It focusses on funding infrastructure projects in LICs and promotes sustainable development. It invests into specific projects, which include: Wind and solar power projects Brazil, as well as the construction of a hydroelectricity power plant in Russia.
→ Although all NDB member countries hold the same shares and have equal voting rights, China still holds most of the power since it has the largest economy and makes the most contributions to the bank
World Bank
The World Bank is the largest public development institution in the world, by lending around $60 billion a year to developing countries.
Its aim is to end extreme poverty, increase shared prosperity and promote sustainable development. One of its big goals is to decrease the percentage of people living on less than $1.90 a day to no more than 3% by 2030.
-
It was founded in 1945 and has over 189 member countries.
-
Its headquarters are located in Washington DC.
-
The World Bank supports over 12,000 development projects on a global scale, by providing low-interest loans.
​
The World Bank Group comprises of five different institutions that share the
commitment to provide financing, policy advice and technical assistance to
governments of developing countries. These five institutions are:
-
International Bank for Reconstruction and Development (IBRD).
-
International Development Association (IDA).
-
International Finance Cooperation (IFC).
-
Multilateral Investment Guarantee Association (MIGA).​
-
International Centre for Settlement of Investment Disputes (ICSIP).
→ The IBRD assists middle-income and creditworthy poorer countries.
→ The IDA focuses on the world’s poorest countries.
→ The IFC, MIGA and the ICSIP focus on strengthening the private
sector in developing countries.
4.2 - Global networks and flows
How different places become interconnected by global interactions
Global trade flows
World trade is the exchange of goods and services between different countries and parts of the world. People might trade raw materials, they might trade manufactured goods, or they might trade services.
Since the late 1980s international trade has grown and expanded greatly.
This is due to countries having a 'comparative advantage'. A comparative
advantage is the ability of a country or company to carry out a particular
economic activity more efficiently than another country or company. It is
what decides the dominant industry in a particular city or region, for
example China is known for its textile industry and Germany is known for
its automobile production.
-
The value of global trade reached a record level of $28.5 trillion in
2021, which is an increase of 25% on 2020.
→ This number is expected to decrease in 2022, due to Covid-19
trading restrictions and slowed economic output.
​
-
The global value chain describes the process of value being added to
a product at each stage or link in the manufacturing chain.
-
A supply chain is the network between a company and suppliers,
representing steps to extract, produce and distribute a product to the
customers.
The global trade in RAW MATERIALS
Raw materials are the basic materials from which a product is made. The
United Nations Environment Programme (UNEP) recognises four types of
raw materials:
-
Biomass : Crops, timber and animal biomass
-
Metallic mineral ores: Bauxite
-
Non-metallic mineral: Salt, clay, diamonds and sand
-
Fossil fuels: Coal, oil, and natural gas
​
Raw material prices have risen significantly in recent years, as demand has
increased around the world.
-
Largest raw material importer: USA, by importing refined and crude
petroleum.
-
Largest raw material exporter: China, by exporting aluminum, coal,
copper and iron ore. China has natural resources estimated to be worth
over $23 trillion and has the largest rare earth mineral reserves in the
whole world
​
The global trade in raw materials is an ever-changing system and trade flow. The country of origin of a certain raw material may change, due to depletion of natural reserves, climate change causing crop failure and fossil fuels being finite sources of energy. In turn, importing countries will change their importing strategy and the types of raw materials they import. This is due to technological advances (greenhouse farming and GMO crops) and countries become more reliable on renewable energy sources. Therefore, there will be a shift in global supply and demand of raw materials.
​
​
The global trade in MANUFACTURED GOODS
Manufactured goods are products that have been made from a raw material and the application of labour. Among the most important manufacturing industries are those that produce aircraft, automobiles, chemicals, clothing, computers, consumer electronics, electrical equipment, furniture, heavy machinery, refined petroleum products, ships, steel, tools and dies.
​
In the 2000s North America and Europe were the main exporters of manufactured goods. However, during the past decade there has been a shift and now most manufactured goods come from China, South Korea and Japan. Large and fast-growing African economies, including Nigeria, South Africa, Egypt and Kenya are increasingly viewed as important markets by manufacturing companies. China has been the largest exporter of goods in the world since 2009. Official estimates suggest the country's total exports amounted to $2.641 trillion in 2019.
→ There has been a shift in manufacturing of goods from world's core regions (North America and Europe) to the world's periphery regions (Asia, South America and Africa).
​
​
The global trade in SERVICES
Trade in services records the value of services exchanged between
residents and non-residents of an economy. This indicator is measured
in million USD and percentage of GDP for exports, imports and net
trade. Services include transport, travel and tourism, communications
services, construction services, insurance and financial services,
computer and information services, business services and government
services not included in the list above. Trade in services drives the
exchange of ideas, know-how and technology, although it is often
restricted by barriers such as domestic regulations.
-
The US, the UK and Germany are the top three service exporters.
-
Growth has been most rapid in Asian countries (China and India).
​
The largest variety of different services and foreign TNCs are usually
concentrated in large cities. Sometimes this is the capital cit of a
country, sometimes this is another major city within the country.
Sectors of an economy
-
The Primary sector: The primary sector of an economy extracts or harvests products from the earth such as raw materials and basic foods (agriculture, mining, forestry, grazing, hunting and gathering, fishing, and quarrying).
-
The Secondary sector: Produces finished goods from the raw materials extracted by the primary economy. All manufacturing, processing, and construction jobs lie within this sector.
-
The Tertiary sector: The tertiary sector of an economy is also known as the service industry. This sector sells the goods produced by the secondary sector and provides commercial services to both the general population and to businesses in all five economic sectors. Examples of such include: Media, tourism, insurance, banking, health care and law.
-
The Quaternary sector: Includes government, culture, libraries, scientific research, education, and information technology. These intellectual services and activities are what drive innovative technological advancement and research, which can have a huge impact on short- and long-term economic growth. Roughly 4.1% of US workers are employed in the quaternary sector.
-
The Quinary sector: Includes the highest levels of decision-making in a society or economy. This sector includes top executives or officials in such fields as government, science, universities, non-profits, health care, culture, and the media. It may also include police and fire departments, which are public services as opposed to for-profit enterprises.
→ Sectors do not determine wealth - the informal economy belongs to tertiary sector, but its workers are still considered poor.
International aid and its effectiveness
International aid (or development aid) refers to financial resources given to poor developing countries. It can take the form of a gift, grant, or loan. Currently, $153 billion is given in foreign aid to developing countries annually.
Generally speaking, there are nine different types of aid:
-
Long-term development aid: A continuous aid programme which is designed to alleviate long-term systematic issues and improve the standard of living. This includes trying to reduce poverty and provide education to young people.
-
Short-term aid: Provides immediate support during or after a disaster such as famine or a tsunami. It includes food, medicines and shelter.
-
Top-down aid: Large scale aid is called top-down aid as it is usually given to the government of a developing country. The government will coordinate the spending of money and it does not involve locals.
-
Bottom-up aid: Non-governmental organisations (NGOs) who direct aid towards sustainable development. This is to target the poorest communities using appropriate technology and involving the local people (small scale).
-
Bilateral aid: Bilateral aid is assistance given by a government directly to the government of another country
-
Multilateral aid: Multilateral aid is assistance provided by governments to international organisations like the United Nations, World Bank, and International Monetary Fund (IMF).
-
Tied aid: The receiving country accepts aid with the expectation that the money is spent in the lending country
-
Voluntary aid: A charitable donation that does not require any repayment. This aid is commonly given to countries that are facing a humanitarian crisis.
-
Project aid: When the money given to a country can only be used to finance a specific project.
​
​
​
​
​
​
​
​
​
​
​
→ However, when looking at the the countries that contributed the most foreign aid as a portion of their Gross National Income (GNI), the top three aid contributors are: Sweden (1.04%), Luxembourg (0.98%) and Norway (0.94%). The USA only rank 22nd (0.17%).
​
Giving international aid to countries in need is also a political tool, used by many countries to boost their own economy:
-
Japan giving aid to India: India is the top recipient of foreign aid, with the majority of funds coming from Japan. The growth of the Japan-India relations is viewed as a counter to China’s expanding economic and political influence across the Asian continent.
-
The EU giving aid to Turkey: The EU struck a deal with Turkey to reroute any migrant arriving in Europe via the Aegean Sea back to Turkey. In turn the EU contributed nearly $2.6 billion to Turkey in 2017.
​
​
​​
​
​
​
​
Taking a closer look at the international aid received by Ukraine:
The war between Russia and Ukraine started on the 20th of February.
The Russian aggression against Ukraine has provoked serious
humanitarian challenges. Millions of people do not have access to basic
services, including water, electricity and heating, while food supplies are
running low.
-
After four months of war, more than 15.7 million people require
humanitarian assistance.
-
Millions of people have no access to basic needs.
​
After four months since the start of the war, Ukraine has received funds
and commitments for more than $100 billion. The US has accounted for
Loans
Loans are commonly given to poorer countries, in need of financial assistance. A loan is money borrowed from an individual, government
or organisation that needs to be repaid with interest over a specified period of time. Since loans are paid back over time, only a very
small financial burden is placed on the borrowing country.
​
In general, there are two different type of loans:
-
Concessional loans: Are loans that have to paid back fully within a certain timeframe.
2. Non-concessional loans: Are loans that are made on more favourable terms, with a lower interest rate.
​
​When looking at statistics from the IMF, the recipient country with the highest
amount of outstanding loans is Argentina.
-
Argentina: The IMF gave loans to support the failing peso, encourage
foreign investment and address the country's social and infrastructure gaps.
​
When countries are unable to pay back the loans to the lending
organisation/country, they are in sovereign debt default. Usually such default
causes economic growth to slow down or reverse. The national currency could
lose value against the US dollar, spurring inflation in countries heavily reliant
on imports.
The country in default would likely need to negotiate a debt restructuring with
multinational lenders (like the IMF and the World Bank), before it could take on
loans again.
Debt relief
Many LICs owe money to other countries or organisations. Often the repayments and interest are so expensive that indebted countries have no money left to spend on development projects. Debt relief is when debts are either partially reduced or fully paid.
​
Due to many LICs seeking debt relief, the IMF and World Bank have launched the Heavily Indebted Poor Country Initiative (HIPC) in 1996. The IMF and World Bank, established the HIPC initiative with the aim of ensuring that no poor country faces a debt burden it cannot manage. About 44% of the funding comes from the IMF and other multilateral institutions, and the remaining amount comes from bilateral creditors.
To become eligible for complete debt relief through the HIPC, a
country must complete two stages:
-
Decision point: The country must face an unsustainable debt
burden. It needs to established a track record of policies through IMF
and World Bank supported programs and have developed a Poverty
Reduction Strategy Paper (PRSP).
2. Completion point: The country needs to establish a further track record
of good performance under programs supported by loans from the IMF
and the World Bank. Also the PRSP must be implemented for at least
one year.
Once a country has met these criteria, it can reach its completion point, which allows it to receive the full debt relief committed at the decision point.
→ Of the 39 countries eligible for HIPC Initiative assistance, 37 are receiving full debt relief from the IMF and other creditors after reaching their completion points.
International remittances from economic migrants
An economic migrant is an individual who moves to another country to improve their standard of living. Economic migrants may send home a proportion of the income earned while working abroad, to support their families. This financial flow across borders is known as an international remittance, which is transferred from host to home countries by 'remittance corridors' . There are two types of remittance flows:
-
Remittance inflows: The money received by a country from remittances.
-
Remittance outflows: The money lost by a country from remittances.
Usually, remittance flows are from HICs to MICs/LICs. In 2021 the total flow of remittances was estimated to be around $600 billion, which is a a 7.3% increase over 2020.
​
​
​
​
​
​
​
​
​
​
​
​
​
​
​
-
The countries that have the most remittance outflows are USA, Saudi Arabia and China.
-
The countries receiving the most remittance inflows are India, China and Mexico.
-
The most significant remittance corridor is USA to Mexico. The transfer of money from the USA to Mexico is the single largest remittance corridor in the world, and roughly 1.6 million households rely on payments from family members in the USA as their most important source of income.
​
→ The war in Ukraine has triggered a large-scale humanitarian migration, with people seeking refuge in adjacent European countries. It it to be expected that vast amounts of money will be sent back to Ukraine from these countries. Remittances to Ukraine are expected to rise by over 20% in 2022.
Sending remittance has many upsides for the migrants, as it allows for an increase in spending on essential goods and services, investing into healthcare and education. However, with many economic migrants seeking work in Europe or in the US, downward harmonisation may occur. Downward harmonisation is caused by an over-abundance of workers, causing a downward pressure of wages and other conditions.
Illegal flows
Illegal flows refer to the movement and distribution of illegal goods and offering illegal services. These flows include people, narcotics, counterfeit property, stolen goods, endangered wildlife, money and medicine. Hundreds of billions of dollars of dirty money flow through the world every year, distorting local economies, corrupting institutions and fuelling conflict.
→ However, the real size of these flows can only be estimated crudely and the actual magnitude of such flows is estimated to be far greater.
​
Narcotics and drugs
Drug and narcotic trafficking is a global illicit trade involving the cultivation, manufacture, distribution and sale of substances which are subject to drug prohibition laws. More than 275 million people use drugs and since the outbreak of the Covid-19 pandemic, it is estimated that the global drug usage has increased by around 15%. Cannabis, opioids, amphetamines, ecstasy and cocaine are the most commonly used drugs.
​
-
Cannabis remains the world's most used
drug, by having more than 200 million
users (this represents 4% of the global
population).
-
Cannabis is mainly used by young men
aged between 17 and 24.
-
Nowadays, drugs are sold over dark-net
marketplaces to the consumers. Cannabis
remained by far the most popular drug sold
on the dark-net, accounting for 48% of all
drugs sold (in value terms) on the
monitored marketplaces in 2021.
-
The illegal flows of drugs and drug trading
is worth more than $300 billion and
accounts for 1.% of the world’s total GDP.
​
→ The most significant global flows of cocaine are from Mexico, Ecuador & Columbia to the USA.
→ The most significant global flows of opiates are from Afghanistan along the Balkan route to Europe and from Mexico & Columbia to the USA.
​
​
Counterfeit products and pirated goods
Counterfeit products and pirated goods are fakes or unauthorised replicas of the real product. Counterfeit products are often produced with the intent to take advantage of the superior value of the imitated product. Trade in counterfeit and pirated goods has risen steadily in the last few years.
​
-
The goods making up the biggest share of seizures in dollar
terms were footwear, clothing, leather goods, electrical
equipment, watches, medical equipment, perfumes, toys,
jewellery and pharmaceuticals.
-
In 2019 an approximated $1.7 trillion worth of counterfeit goods
were sold.
-
China is currently the number one producer of counterfeit goods
globally and makes up for over 80% of the counterfeit production
globally.
-
India is the largest producer of medicine and medical equipment
counterfeits specifically.
​
→ The USA, France and Italy are affected most by counterfeit goods. Large TNCs such as Nike and Adidas experience a loss in sales, less revenue and decreased customer numbers.
​
​
Human trafficking
Human trafficking is the recruitment, transportation, transfer, harbouring or receipt of people through force, fraud or deception, with the aim of exploiting them for profit. Human trafficking is also known as "modern day slavery" and each year, an estimated 600,000 to 800,000 men, women and children are trafficked across international borders.
-
The target group for human trafficking are females, with the intention of exploiting them sexually.
-
Most trans-regional victims are trafficked into affluent areas such as Europe, North America and the Middle East. Most of the trafficking victims are from East Asia, South Asia, South America and Sub-Saharan Africa.
-
The Middle East has the highest share of inbound trafficked people from other regions.
​
​
Foreign direct investment (FDI)
Foreign direct investment (FDI) is a measure of foreign ownership of productive assets such as factories, mines and land. FDI happens when an individual or business take a stake or interest in a company by an investor located outside its borders. Examples of this include a Japanese automobile manufacturer building an assembly plant in Mexico and an Italian software company opening a sales office in Kenya to reach the Kenyan market with their services.
​
There are two types of FDI flows:
1. Outward FDI flows: The money flowing outward (out of a
country) from the direct investor to internationally located direct
investment enterprises.
2. Inward FDI flows: The money flowing inward (into a country),
after a foreign direct investor invested into this country.
​
The United States took the leadership position as the largest
recipient of FDI in 2021, which was mainly driven by higher direct
investments from Japan and Germany (= inward FDI). ​Furthermore,
by expanding USA's foreign investments through TNCs such as
McDonalds and Nike has also led to greater FDI flows (= outward
FDI).
​
→ The Covid-19 pandemic has caused FDI flows to slow down and to be put on hold. FDI decreased most in China, as it was the first
country to suffer from the Covid-19 outbreak. Overall the global FDI dropped by 35% in 2020. However, FDI flows surged by 88% in 2021, surpassing the pre-pandemic levels by 37%.
TNCs and the expansion of global networks
Trans-National corporations (TNCs) or multinational corporations
(MNCs) are companies that operate in more than one country. Nike,
McDonalds and Apple are all examples of TNCs. TNCs tend to have
offices and headquarters located in a country with low taxation on
businesses, or the country of origin. Manufacturing plants may often
be located in regions with cheap labor as well as predictable legal
systems conducive to long-term stability. They are considered the
world's biggest economic institutions.
-
In 1970, there were 7,000 TNCs, while today there are 63,000
parent companies operating with about 690,000 subsidiaries.
-
TNCs employ over 70 million people worldwide.
-
The largest TNCs according to their revenue in 2021 are
Walmart, State Grid and Amazon.
​
There are different investment strategies to expand TNCs:
1. Offshoring: When a company moves part of its own production process such as factories and offices to a new country in order to
reduce labour or other cost. By offshoring, TNCs can also locate manufacturing and office services closer to the markets they will be serving, in order to avoid import taxes.
→ Japanese car companies like Nissan have built factories in the EU to serve European markets directly and benefit from their knowledge and expertise.
2. Joint Ventures: This involves two companies forming a partnership to hand business in a particular country but without actually
merging to become a single entity.
→ In China, the Chinese truck manufacturer has a joint venture with the German truck manufacturer Daimler. This allows expertise and knowledge to be spread from Germany to China and vice versa.
3. Acquisitions: When international corporate mergers take place and two firms join forces to create a single entity.
→ The fashion company Coach has acquired the purse manufacturing company Kate Spade in 2017.
4. Glocalisation: When a TNC designs a product in order to meet the taste and preferences of the local population. It involves adapting a 'global' product to take account of geographical variations in people's taste, religion and interests.
→ McDonald designed a McRice burger which is being sold in Asia, to meet the taste preferences in Asian countries.
5. Outsourcing: When a company transfers its functions to a foreign firm to perform services or create goods that were traditionally
performed in-house by the company's own employees and staff. Often outsourcing is undertaken by companies as a cost-cutting
measure.
→ Apple outsources the majority of its production to Foxconn which assembles many of its products such as the iPhone.
Outsourcing done by TNCs
Outsourcing involves a company transferring its functions to a foreign firm to perform services or create goods that were traditionally
performed in-house by the company's own employees and staff. TNCs often use outsourcing as a cost-cutting strategy, to maximise profits and production efficiency by keeping the company running 24/7. There are a total of three different mechanisms and strategies of outsourcing:
-
Nearshoring: Refers to the outsourcing partner being located in a neighbouring country which is a short distance away.
-
Onshoring: Means that the outsourcing partner is located in the same country or region.
-
Offshoring: Indicates that the outsourcing partner is located in another country with a different time zone.
Examples of outsourcing include:
-
Google outsources to vendors for two main reasons: It allows them access to global talent that they do not have in house, and it covers their needs during US employees parental/illness/vacation leaves. Google relies on outsourcing operations in Southeast Asia, including
India and China.
-
Apple is considered the largest outsourcing TNC worldwide. It has major outsourcing productions in China, India and Taiwan, which involve the assembly and manufacturing of iPhones.
-
The US chain-store Walmart has recently started to outsource manufacturing industries in China. Chinese manufacturers have taken over the assembly and production of certain products. These products now read 'made in China' on their label.
​
→ Whilst outsourcing has many benefits for all parties involved, there are potential downsides to it. Outsourcing can lead to hazardous and unhealthy working conditions in the company where functions have been offshored to. Also, the parent company may loose control when transferring too many of its operations to other countries and companies.
CASE STUDY: APPLE AND AIRBUS AS TRANSNATIONAL COOPERATIONS
TWO CONTRASTING EXAMPLES OF TNCS AND THEIR GLOBAL STRATEGIES AND SUPPLY CHAINS
A supply chain refers to the network between a company and its suppliers, representing steps to produce and distribute a product to customers. Both Apple and Airbus are a type of Global Production Network (GPN). A GPN is a chain of connected suppliers of parts and materials that contribute to the manufacturing of consumer goods.
APPLE
Large scale strategies and supply chains
Europe, Asia, Oceania, North and South America
​
A US based transnational technology corporation founded by Steve Jobs and Steve Wozniak in 1976.​​
​
→ They want to create a mix of standardised consumer
products that appeal to a global mass market.
​Supply Chain:
-
Designed in Cupertino (California, USA)
-
Raw materials, such as coltan, cobalt and precious ores, originate from Peru and Chile are exported to China, India and Taiwan (Taiwanese companies such as Foxconn and Pegatron) for assembly.
-
The processed materials then are exported to South Korean and Japan, to add in rechargeable batteries.
-
They are then re-exported to China.
-
France, Switzerland and Italy ship microelectronics and gyroscopes to China.
-
Final assembly takes place in China and then the finished products travel via air to the consumer markets around the world. These freight companies include: Cargolux, Air China Cargo and China Southern Cargo.
-
Products are then sold through online stores and retail sales.
-
Old phones and other devices are commonly recycled or dumped at e-waste sites in China, Pakistan and Ghana.
AIRBUS
Small scale strategies and supply chains
Europe
​
A multinational company based in Europe, with ownership shared by aviation manufacturers in France, Germany, Spain, Italy and the UK. They are one of the world’s major manufacturers of jet airliners.
​
→ They want to create highly skilled employment
opportunities in Europe and want to create a viable airliner export industry with profitable markets all over the world.
Supply Chain:
-
Germany, France, Spain, Italy and the UK supply components which are then transported via vessels, containerships, belugas and trucks to the sites of assembly.
-
Final assembly takes place in Germany (Hamburg) and France (Toulouse).
-
Once assembled, the finished planes can be picked up by pilots at the assembly sites, which fly the aircraft to their home base in the country of operation.
-
Planes have an average life of 30 years, depending on the level of maintenance they receive. There are several ways to dispose of an old plane: Cannibalisation and recycling involve the re-using of parts, such as the engines and seats. There also are desert storage sites, known as aircraft graveyards.
What controls the length and complexity of a supply chain?
-
Apple has a more complex supply chain than Airbus. Apple
requires raw materials from countries all over the world in
order to produce its products.​ Having such a long supply chain
has its benefits for Apple, since outsourcing can be used in
developing countries as a cheap method to produce and
assemble products.
-
Airbus however can manufacture its parts locally within Europe,
as all the aircraft components are made from easily attainable
materials. This makes the supply chain of Airbus more
sustainable, than Apple's supply chain.
​
→ Other countries that play minor roles in Apple's supply chain are: Australia, Brazil, Thailand, Vietnam, Israel, the Czech Republic, Malaysia, Indonesia, Philippines, Austria, Mexico, Norway and Singapore.
4.3 - Human and physical influences on global interactions
How political, technological and physical processes influence global interactions
MGOs and trading blocs - EU and NAFTA
Multi-Governmental Organisations (MGOs) are organisations or countries that come together to form a single entity mostly for trading purposes. MGOs allow state boundaries to be crossed freely in order to facilitate the free movement of goods, services, finance and ideas. These trading arrangements can also be referred to as trading blocs. Trade blocs are agreements which are made up of a group of countries which join together to promote trade.
​
Ways by which MGOS can promote global interactions:
-
Allowing free trade between member countries.
-
Some of the MGOs use a common currency, which allows the
free flow of goods and services.
-
Allowing the free movement of people (no visa required),
creating a common market.
-
MGOs sometimes have common policies that facilitate global
interactions.
-
Membership to MGOs facilities global interactions through
free movement of capital between member countries.
-
It also allows for the transfer of knowledge and facilities
free labour flows.
​
​
North American Free Trade Association (NAFTA)
​NAFTA was established in 1994, including the USA, Canada and Mexico. Its aim was to eliminate trade barriers, increase investment opportunities and to increase the cooperation between the three North American countries. The agreement reduced or eliminated tariffs on imports and exports between the three participating countries, creating a huge free-trade zone.
​
-
With only 7% of the world’s population, Canada, the USA & Mexico together generate 28% of the world’s GDP.
-
The NAFTA region produces goods and services valued at more than $20 trillion every year.
-
Trade among Canada, the USA & Mexico is estimated at $125 million per hour.
-
Canada buys almost 60% of its worldwide imports from its two NAFTA partners.
-
Main goods traded among the member countries include: Crude oil, machinery parts, gold, vehicles, fresh produce, livestock and processed foods.
​
→ However, in 2020 Donald Trump successfully substituted the NAFTA with the USMCA agreement. This new agreement builds on the
NAFTA, but has freer markets, fairer trade, and promises more robust economic growth.
​
European Union (EU)
The EU is one of the largest and most successful trading blocs, especially by being the world’s largest single market. It was established in 1950, including 27 EU countries. The initial aim of the EU was to create a single common market for goods, services, capital and labour by eliminating all barriers to trade.
​
-
Members of the European Union have agreed to introduce a single currency, the Euro (€).
-
Europe is the world's largest exporter of manufactured goods and services, and is itself the biggest export market for around 80 countries. Together, the European Union's members account for 16% of world imports and exports.
-
The EU actively engages with countries or regional groupings to negotiate trade agreements. These agreements grant mutually-beneficial access to the markets of both the EU and the countries concerned.
​​
→ With the UK leaving the EU in 2020 (BREXIT), the EU lost its second largest economy. Britain claims that the EU membership hast cost them far more financially than they have gained. The US is the EU's main trading partner, followed by the UK and Switzerland.
Free trade zones (FTZs) and tariffs
As previously mentioned trade blocs are agreements which are made up of a group of countries which join together to promote trade. Trade blocs aim to reduce import and export tariffs.
→ A tariff is a tax imposed by a government on goods and services imported from other countries that serves to increase the price and make imports less desirable, or at least less competitive, versus domestic goods and services.
There are a range of different types of trading blocs and agreements. The main three are listed below: ​
1. Preferential trading zones: This is the simplest form of a trade bloc. Under the preferential trade area, member countries agree to lower tariffs for certain products. They provide preferential access to specific products but do not eliminate tariffs altogether.
2. Free trade zones: This free trade area involves removing restrictions on trading between members. Thus, goods and services flow freely between them. Non-member countries still have to pay tariffs when importing or exporting goods.
→ Non-member countries who want to export to member countries use a method called 'trade deflection'. They will export to member countries that set low tariffs. After entering the destination country, they can ship it to other member countries at no cost.
3. Customs union: A customs union is a more advanced stage than a free trade area. Its main objective is to overcome the trade deflection problem inherent in the free trade area agreement. Customs union members agree to joint tariffs when they trade with non-members. Hence, there is no opportunity for non-member countries to take benefits from the tariff differences.
Economic migration controls and rules
Economic migration is the movement of people from one country to another, in order to benefit from greater economic opportunities in the receiving country. In recent years there has been a shift in international migration patterns. The following trends have been identified:
-
Migration has become more global, in the sense that more countries are affected at the same time. This means that there is a greater diversity of origin and host countries.
-
Migration is accelerating and greater volumes of people migrate to a variety of countries all over the world.
-
Migration is becoming more diversified and differentiated, which means that there is a more diversified pool of migrants that become permanent settlers in a country. This may include skilled labour, unskilled labour, students and refugees.
-
Migration is increasing among women. Whilst women were predominantly trafficked illegally over borders, nowadays a large percentage of women migrate as economic migrants seeking work.
​
Economic migrant inflow into the USA:
In 2021, a total of 26,500 foreign-born individuals were employed in the US workforce. They were competing for jobs against the native-born US workforce, which has 130,000 people.
-
Generally speaking, native-born individuals take
jobs that require higher levels of eduction and are
paid high. Usually, these jobs are located in the
tertiary and quaternary job sector.
-
In contrast, non-native born individuals take jobs
which require no/very little education. ​These
individuals either are temporary labour migrants
(eg: seasonal agricultural workers), or long-term,
low-skilled migrants (eg: “Gastarbeiter”).
→ However some migrants are very skilled and are
recruited for their expertise by foreign companies.
They usually transfer within a TNC. These business
migrants occupy jobs alongside native-born
individuals in the tertiary and quaternary job sector.
International economic migration has increased significantly in recent decades for the following reasons:
-
Due to modern communications and the mass media, potential migrants from all over the world have a much greater awareness of income differences between countries and the great differences in lifestyle that exist globally.
-
Developments in transport have reduced the friction of distance and thus allowed many potential migrants to become actual migrants.
-
On a regional scale, in Europe the EU allows the free movement of labour between member states.
→ Who migrates: The largest flows are from MICs to HICs, for example from Mexico to the USA.
​
However, due to these large shifts in migration patterns, many countries have to adapt their policies accordingly. They must increase their hostility towards such migrants
​
Ways in which the government is controlling economic migration - proactive immigration policies:
Proactive immigration policies are aimed at encouraging skilled migrants to fill specific gaps in the workforce, especially in areas such as information technology, medicine and bioengineering.
-
This is most common practiced in Australia, New Zealand, Canada and the USA. Candidates for migration are selected on a points basis. Points are awarded for characteristics, abilities and skills, such as: Age, language ability, educational attainment and work experience.
-
Other ways to limit migration include: Certain visa requirements for immigrants entering the desired country, army patrols at the border and physical restraints such as the Mexican wall.
Shrinking world concept - time and space convergence
Reducing the friction of distance on the volume of human interactions. The friction of distance describes the inhibiting effect of distance on the volume of human interactions of all forms including the movement of goods and information.
​
The improvements in transport technology
enabled a gradual time and space convergence
within the global transport system. While in
absolute terms, distances remain the same, in
relative terms (such as time-wise), distances are
getting shorter.
​
However, global space/time convergence is
not spatially uniform, implying that some regions
benefited more than others. For instance,
space/time convergence in Western Europe and
North America, and over the North Atlantic, has
taken place at a faster rate than other regions of
the world, such a Latin America or Africa.
Changing global data flows and global internet traffic
The internet is an electronic interconnected communications network that was launched in 1960. A total of 5.03 billion people around the world use the internet today, which is equivalent to 63% of the world’s total population. This number is expected to rise to 90% by 2024.
-
Europe and North America have the highest capacity of internet related infrastructure. In contrast, Africa has the least internet-related infrastructure and consequently the least amount of users.
-
The bandwidth and the frequency of global data flows between Europe and North America is the greatest.
-
The total volume data flows has increased 45 times between 2005 and 2015.
This increase in volume of data flows is due to:
-
A higher percentage of the population has access to the internet and is in possession of mobile devices.
-
Increasing globalisation has allowed for fibre optic cables being installed worldwide.
-
Increase in the use of social media. For context, social media users are currently growing at a rate of more than 7 new users every single second.
-
Due to the Covid19 pandemic the majority of the world shifted to remote work and therefore internet traffic has increased substantially.
-
Online shopping and the number of online transactions made has increased.
-
About 12% of the global goods trade is carried out through international e-commerce companies such as Amazon.
-
Digitisation of products such as music and 3D printing, which makes them easily available on a global level.
→ Countries such as China, North Korea, Turkey, Iran and Eritrea censor or control data flows as a matter of policy.
Transport developments over time, contributing to a “shrinking world”
Over the years transport has reduced in price and has increased in scale and speed. These developments have led to an acceleration in globalisation, helping to create an international division of labour. As a result, there has been a time-space convergence that in effect means that places are spatially more closely connected. The 19th Century saw the development of the railway, telegraph and steam ship, whereas the 20th Century saw the development of the jet aircraft and containerisation.
​
​
Containerisation
Malcolm McLean was a transport entrepreneur who developed the modern intermodal shipping container. Containerisation describes a system of transportation that uses standard-dimensions intermodal containers to carry goods across the world. In the 1960s, containerisation accounted for less than 20% of the worlds GDP - now it is around 50%, which is due to:
-
Goods are now transported in large and standardised vessels, which protect the good from bad weather and theft. The loading and unloading of vessels is now done quicker and is more efficient in terms of effort.
-
Giant gantry cranes weighing 1000 tonnes reduce docking costs and travel times, by directly loading and unloading containers at the ship docks.
-
Warehouses are needed to a lesser extent, since goods are protected from theft by the container.
-
The establishment of the Suez Canal and Panama Canal also significantly reduced shipping distances and time.
​
​
Aviation and air transport
Aviation entails the movement of passengers and cargo by aircraft. The first commercial flight was in 1914 from St. Petersburg and since then aviation has become a very popular way of transporting people and cargo. Over 30,000 planes fly daily to destinations located all over the world. The following reasons have made aviation such a well-used mode of transport:
-
Planes have been equipped with jet engines, which makes them travel faster at a speed of 700-800km/h.
-
Planes have also been improved in the number of passengers that can be carried. By having a higher carrying capacity, the cost of travel was significantly reduced.
-
Planes now have a greater range without the need for stop-overs and refuelling, as their engines are more energy and fuel efficient.
​
​
Road and rail transport
Rail transport is a means of transferring passengers and goods on wheeled vehicles running on rails, which are located on tracks. In contrast to road transport, where vehicles run on a prepared flat surface and transport goods and services - this can include cars, buses and trucks.
-
Nowadays most cars today can travel at 200km/h and high speed trains can travel up to 400km/h.
-
The development of rapid transit systems has also reduced travelling times substantially. Rapid transit (RT), refers to a form of high-speed urban passenger transportation such as a subway or elevated railroad system. The Shanghai Metro is the world's largest rapid transit by ridership and system length, whereas the London Underground is the world's oldest underground system. By 2020, China aims to have 7000 km of rapid transit line and the time taken to get from Beijing to Shanghai has decreased in the past 50 years from 35h to 4h.
​
Development of ICT
“ICT” is short for information and communication technology and refers to the combination of manufacturing and service industries that capture, transmit and display data and information electronically
-
The first transatlantic telegraph cables were installed in August 1858 from the coast of Ireland to Newfoundland. It allowed messages to be transmitted within 16 hours by sending them through the 3200 kilometres long cable. Compared to packet steamships, which could take 10 days to cross the Atlantic, this was a lot more time efficient. However, in September the cable failed, due to a too high a voltage from the American end, which compromised its insulation
-
In January 1983 the internet was officially made available to the public and individuals can access it through computers and phones. This invention has greatly increased the speed with which people communicate with one another and the rate at which information is shared.
-
Contrasting to the attempts in 1858 to install transatlantic cables, over 380 modern and updated underwater fibre optic cables have been installed since then. They connect almost every continent to the internet (transatlantic communication) and are spanning a length of over 1.2 million kilometres.
-
Other online communication technologies which ave helped to interconnect the world and reduce communication and travel times are: The GPS (global positioning system), e-banking, and social media platforms (including Twitter, Snapchat, YouTube and Facebook).
Patterns and trends in the communication infrastructure and use
Communication infrastructure refers to the physical backbone of the communications system on which various broadcasting, telecommunications and internet-based services are operated. It is estimated, that the overall ICT spending will increase by at least 5% annually due to continued expansion in new technologies.
-
The fastest way to transmit information over long distances is with fibre optics, which are long, thin strands of glass that carry information as pulses of light.
​
The ICT Development Index
The ICT Development Index (IDI) is a composite index that was
published by the International telecommunication union in 2017.
It combines 11 indicators into a composite score and is used to
monitor and compare developments in information and
communication technology (ICT) between countries and over time.
It measures the level of information and communications
technology development of countries.
-
The index ranges from 0 to 10, where 10 is the highest
level of digital development and 0 the lowest level of digital
development.
→ Nevertheless, not everybody has access to the internet.
This includes poor people, the elderly, individuals with certain
disabilities and those living in areas with no service.
The Global Connectedness Index (GCI)
The DHL Global Connectedness Index (GCI) tracks the depth and breadth of international trade, capital, information, and people flows.
It ranks countries according to their interconnectivity on a scale from 0 to 100%. A country with an exceptional infrastructure and digital
connectivity will rank closer to 100%, whilst a country with very little interconnectivity will rank close to 0%.
​
-
In 2021, the Netherlands ranked first on the global connectedness
index and Europe claims the top spot as the world’s most globalised
region, with 8 of the 10 most globally connected countries located
there.
-
Burundi on the other hand was ranked the last country on the
global connectedness index.
​
→ The Covid-19 pandemic had some impact on global
connectedness, by restricting trade and labour flows. Nonetheless
the pandemic is unlikely to send the world’s overall level of
connectedness below where it stood during the 2008 - 2009 global
financial crisis. Trade and capital flows have already started to
recover and international data flows surged during the spreading
pandemic as in-person contact went into the online world, boosting
international internet traffic, phone calls and e-commerce.
Natural resource availability
The availability of natural resources plays a significant role in world trade. Each country and world region has certain natural resources available within their territory. Natural resources are materials or forms of energy that exist in the environment and which are utilised by humans to meet societal needs and wants and to generate wealth.​ Many HICs have developed due to their export of raw materials. MICs and LICs rich in raw materials (such as Brazil and South Africa) have been trying to follow a similar path, by using the wealth gained from exporting their raw materials to diversify and produce a more stable economy.
Classification of natural resources:
-
Biotic (living), such as plants and animals.
-
Abiotic (non-living), such as minerals, ores and
sources of energy.
​
Availability has two fundamental components:
-
Spatial availability, refers to where a resource may
be found and in what quality or in what quantity
it is available.
-
Temporal availability, refers to when and for how
long a resource is available.
→ Both spatial and temporal availability are
determined to a large extent by the physical
environment and climate.
​
Countries, such as the USA, Russia, China and Australia have vast natural resource reserves. As a result, they are important trading partners to
many other countries. In addition, since these countries are exporters of diverse and multiple natural resources, they are less vulnerable to climate extremes, disease and currency fluctuations. Countries with a single resource product are more vulnerable to disasters and inconsistencies.
The potentially limiting effect of geographic isolation
The physical environment plays a key role in determining the level of interconnectivity of a county. Being interconnected is a key aspect when considering the levels of globalisation of a country. Geographical isolation describes the physical separation of members of a population, or a country from the rest of the world. The following aspects fuel globalisation and global interconnectivity:
-
Countries rich in resources such as gold, diamond and oil attract TNCs and foreign direct investment, which increases their level of international competitiveness and consequently fuels globalisation. The DE BEERS Group is a TNC located in Botswana and is responsible for exporting around 50% of Botswana's diamonds to foreign buyers.
-
Countries with large populations tend to have increased globalisation such as China, Indonesia and India.
-
Also coastal countries usually have higher levels of global interactions, due to foreign ships docking at their harbours. The largest port in the wold is the Yangshan Deep Water Port in Shanghai, which serves more than 280 shipping routes.
-
Countries located on flat and fertile land usually have a big agricultural output and good infrastructure, fuelling globalisation. The USA has them most arable land and is a key exporter of agricultural products, including soybeans, corn and beef. Netherland is considered the flattest country on earth and is ranked third on the CMS infrastructure index.
​
Potential limiting effects of geographic isolation, including examples:
-
Land-locked countries tend to have lover levels of globalisation than coastal countries. The lack of access to the sea is a major hindrance to development. Kazakhstan is the world's largest landlocked country and only ranks 63rd on the GCI, which is a low ranking when considering its size and population density.
-
Countries with mountainous areas can also suffer from lower levels of globalisation, due inaccessibility and inability to construct infrastructure. The Himalayas (a mountain range located in Nepal, India, China and Bhutan) are rather isolated from the rest of the world. Due to its difficult terrain and topography, it is very difficult to construct roads and settlements there. This greatly limits globalisation and individuals living in the Himalayas are isolated from the rest of the world.
-
Island nations which are remote and isolated such as St Helena and Guam are also excluded from interaction.
-
Physical constraints on a supply route, such as pinch points (narrow channels) can potentially hinder trade and thus globalisation. In March 2021, the Suez Canal was blocked for six days after the grounding of the Ever Given, a container ship. This has caused transport to come to a complete halt and it has substantially impacted trading.
​
Countries which are geographically isolated but still participate in global interactions, exceptions and anomalies:
-
Hawaii and Iceland are geographically isolated, however both are greatly globalised by being popular tourism destinations.
-
Switzerland is landlocked, however it still plays a big role in international trade, by having access to the inland Port of Basel. This connects Switzerland with the River Rhine, which is the only maritime gateway that provides Switzerland access to the North sea.
-
In comparison, Kyrgyzstan has large gold reserves but only plays a very small role internationally. By having an inadequate infrastructure and high crime rates, Kyrgyzstan is an unpopular country for foreign investors.