Transcript Lesson 3x

Starter: Describe the change in transport
and communications costs from 1930 to
1) The factors driving
2000.
globalisation
Key Enquiry Question 1:
What are the causes of globalisation and
why has it accelerated in recent decades?
Lesson 3
LO: To be able to assess how political and economic
factors have contributed to globalisation’s acceleration.
Key terms:
Foreign Direct Investment
BRICS group
Concept Checker:
 3.2a. International political and economic
organisations (P: role of World Trade Organization
(WTO), International Monetary Fund (IMF), World
Bank) have contributed to globalisation through the
promotion of free trade policies and foreign direct
investment (FDI).
Key Terms to improve your minds!
Tariff: A tax imposed on imports.
Subsidy: financial assistance to a business by government to make it competitive
or prevent collapse.
Quota: a limit on the quantity of a good a country allows into the country.
Protectionism: policies to protect businesses and workers in a country by
restricting /regulating trade with foreign nations.
Free- market economy: A market economy based on supply and demand with
little or no government control.
Free-trade: a policy where a government does not interfere with imports or
exports by applying tariffs, subsidies or quotas.
Privatisation: transferring ownership of a public service/agency/property into
private ownership run for profit
Neoliberalism: a political philosophy of free markets, free trade, privatisation
and increasing the role of business in society (while decreasing the influence of
government). It is thought that by making trade easier, there will be more of it,
meaning wealth and reduction of poverty.
Imports of raw
materials and
commodities can
threaten a nation’s
own industries
How could global flows be
viewed as threats?
Information can
provide citizens with
knowledge that their
government finds
threatening
Migrants can bring
cultural change and
religious diversity;
not everyone
welcomes this
1) The International Monetary Fund
International organisations grew in power and influence throughout the 20th
century.
The most important is the IMF. Based in Washington (and largely controlled by
the USA) it channels loans from the richest nations to the poorest that apply for
help.
In return, the governments receiving loans must agree to run free-market
economies that are open to outside investment.
This means that TNCs can enter the country more easily, further promoting
globalisation.
The IMF also ensures that the country can afford to pay back the loan. Often,
they must undergo Structural Adjustment Programmes (SAPs)
SAPs
Strict conditions imposed on countries receiving
loans from the IMF and World Bank. Receiving
governments may be required to make cuts to
healthcare, education, sanitation and housing. This
is to reduce the role of government in a country,
and open it up to private investment. It also cuts
government spending so they can repay loans.
Example
In Tanzania, water to shanty
towns in the capital city
were cut off when the
country privatised its water
services as a condition on
$143 million of debt relief.
2) The World Bank
Its role is to finance the development of nations through loans.
It’s official goal is the reduction of poverty by promoting foreign investment and
international trade.
It too requires structural adjustment when granting loans.
3) World Trade Organisation
An organisation that supervises and international trade, promoting free trade and
the ending of protectionism.
So how does free-trade increase globalisation?
Governments take
away barriers that
make trade more
difficult and costly
As an economy has
more TNCs, so they
become
interconnected
and
interdependent on
each other.
As costs are
reduced, TNCs will
see a profit and
want to invest in
nations.
This wealth and
develop will
increase standard
of life and demand
for foreign
products.
TNCs will bring
new ideas,
products, cultures
etc. to a nation
Also the TNC will
generate wealth.
What about the future?
Will the Bretton Woods players maintain their influence in the
future?
• The global financial crisis (GFC) of 2008-2009, which
originated in the US and EU money markets and
undermined the world economy. As a result governments
in developing countries have become more sceptical of the
financial advice that the IMF and World Bank offer.
• Geopolitical changes mean that new alternatives are
emerging to the Bretton Woods institutions.
• The WTO’s continuing lack of success in getting its 159
member countries to reach a global agreement on any
aspect of trade, especially in relation to food, raises
questions about its long term role.
What about FDI?
The Bretton Woods institutions have create a
global legal and economic framework that is
suited to free trade and FDI (foreign direct
investment). But what forms does FDI take?
Mix and match the forms to what they are on
the next slide.
Different types of FDI
Some TNCs build their own new production facilities in ‘offshore’ low
wage economies. For instance, US guitar-maker Fender opened its
Mexican plant at Ensenada in 1987.
Two firms in different countries join forces to create a single entity.
Royal Dutch Shell has headquarters in both the UK and the
Netherlands.
When a TNC launces a takeover of a company in another country. In
2010, the UK’s Cadbury was subjected to a hostile takeover by US food
giant Kraft. The UK has few restrictions on foreign takeovers. In
contrasts, the Committee on Foreign Investment in the USA closely
scrutinizes inbound foreign takeovers.
Some TNCs, such as Starbucks or Amazon, have sometimes channelled
profits through a subsidiary company in a low-tax country such as
Ireland. The Organisation for Economic Cooperation and Development
(OECD) is now attempting to limit this practice.
Key Enquiry Question 1:
What are the causes of globalisation and
why has it accelerated in recent decades?
Lesson 3
LO: To be able to assess how political and economic
factors have contributed to globalisation’s acceleration.
Key terms:
Foreign Direct Investment
BRICS group
Concept Checker:
 3.2a. International political and economic
organisations (P: role of World Trade Organization
(WTO), International Monetary Fund (IMF), World
Bank) have contributed to globalisation through the
promotion of free trade policies and foreign direct
investment (FDI).
HW: Read and summarise