Human Geography – The Globalisation of Economic Activity Uneven Development in the Global Economy

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  Globalisation
  
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    Characteristics
    
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    Processes
    
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    Impact on the world economy
    
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  Uneven global distribution of activities
  

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  NIDL
  
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    Causes of the emergence of a new NIDL
    
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    Impact of the emergence of NIDL on the global economic activities
    
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    Impact of new technologies on work
    

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  Job specialisation, multi-skilled production, changes in production and labour
  

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  Impact of global economic change
  
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    Rise in new service sectors: tertiary, quaternary and quinary
    
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    Locational trends in producer and consumer services
    
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    Internationalisation of service firms
    
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    Rise of SMEs
    
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    Privatisation / Deregulation of public services
    

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  Characteristics of TNCs
  
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  Spatial organisation of TNC’s activities
  
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  Linkages with host economy
  

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  FDI and influence on national and regional economies
  

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  Case study of TNC
  

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  Role of state in economic development and its impact on national economies
  
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  Supranational bodies and their impact on national and regional economies
  

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  Trading blocs / regional blocs
  
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  International institutions
  

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  Increasing interconnectedness & interdependency of people, cultures, economics and politics at all spatial scales.
  
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  More functionally integrated and independent. The compression of the world.
  

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  Economic: Flow of capital and goods: production and investments by TNCs, etc., the changing structure of firms
  
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  Social: Movement of people: migration, tourism, demographic changes, multicultural states.
  
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  Cultural: Diffusion of information and cultures: InfoTech like internet, cultural forms (movies, brands), cultural homogenisation
  
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  Political: Rise of international organisations: UN, IMF, ASEAN, EU etc. Supranational organisations, trade blocs, FTAs
  

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  Improvements in transport – air freights, shipping.
  
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  Improvements in communication – Internet, phones, email
  
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  The search for new, unsaturated markets by economic agents like firms
  
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  Need to find the most efficient methods of production – comparative advantages
  

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  Shrinkage of distance – a ‘Shrinking World’
  
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  Spatial division of the global economy
  
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  Spatial interdependence – the global supply chain
  
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  Increased mobility and flexibility – increased flow of funds, capital
  
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  Accentuation of regional disparities
  
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  Convergence and divergence of economic activities
  

It is the process of merging between domestic economies, businesses and societies. The phrase relates to economic activity that indicates that globalization involves the participation of companies and corporations actively contributing to the integration of international businesses. The features of the globalization of economic activity include an international development of trade, production, investments and flow of workforce.

International trade relates to the exchange of capital and goods in the global market. It is an essential component of the globalization of economic activity as business acts on an international level mainly to ensure benefiting from participation in the global trade system. Imports and exports are the aspects of international trade – countries and corporations producing more than they can consume focus on exporting goods to countries which demand production. For example, a report by the European Central Bank indicates that through the satisfaction of foreign demand, countries like China and India have massively expanded their economies. These destinations are now a major focus for businesses looking to buy goods and import them in countries that require production, such as the U.S. and the E.U.

International production in the global economy – or exported production – is when businesses start producing their goods in countries with cheaper labour and more relaxed tax systems. This allows big companies to produce more and pay less for the labour and the country housing their production facilities and activities. For example, the German car industry giants, as indicated by Turkish economist Lale Duruiz, have already exported their production in Turkey, benefiting from the economic treaty of the country with the E.U. for free movement of goods. Thus, the German producers pay no import fees when delivering their production in Europe and save up from labour costs and taxation.

Investing on an international level allows companies and financial organizations to participate in projects in different areas in the world depending on profitability and market situation. For example, where financial organizations from the developed world seek to expand their influence on an international level, they would offer to invest in the developing economies to either have a share in the production or to receive a fixed interest upon the investment they have made. This has happened in the relationships between United Arab Emirates and the United States as described by the U.A.E - U.S. Business Council. When first started investing in the developing Arab Union in the late 1990s, the U.S. input $540 million in investments. Seven years later, the U.S. investments had already grown by 724 percent, thus turning the Emirates into one of the most successful destinations American financial institutions have ever participated in. This increase in the investment value has contributed to the development of stronger ties between the countries and stable trade relations between businesses from both sides.

The globalization of economic activity includes the integration of people willing to work in foreign economies. The most advanced example of such integration is the European Union – every citizen of the Union is allowed to participate and exercise a profession in all the member states of the organization through a freedom of movement legislation.

Traditionally known as the North-South divide which is shown by the Brandt Line, it splits the countries of the world into two sides, with DCs in the “North” and LDCs in the “South”. N and S are merely categories and are not defined geographically. More recently, it has been termed the development continuum gap. (Blue is N, Red is S)

Development in this case is mostly defined as economic development. It refers to advancements in technology, a transition from an economy based largely on agriculture to one based on industry and an improvement in living standards. Other factors that are included in the conceptualization of what a developed country is include life expectancy and the levels of education, poverty and employment in that country. It is essentially measured by the HDI, which includes GDP/capita, education (adult literacy rate and primary, secondary and tertiary education) and life expectancy at birth.

NIEs are countries whose economies have not yet reached First World status but have, in a macroeconomic sense, outpaced their developing counterparts. Another characterization of NIEs is that of nations undergoing rapid economic growth (usually export-oriented). Incipient or ongoing industrialization is an important indicator of a NIE. In many NIEs, social upheaval can occur as primarily rural, or agricultural, populations migrate to the cities, where the growth of manufacturing concerns and factories can draw many thousands of labourers.

NIEs usually share some other common features, including:

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  Increased social freedoms and civil rights.
  
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  Strong political leaders.
  
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  A switch from agricultural to industrial economies, especially in the manufacturing sector.
  
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  An increasingly open-market economy, allowing free trade with other nations in the world.
  
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  Large national corporations operating in several continents.
  
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  Strong capital investment from foreign countries.
  
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  Political leadership in their area of influence.
  
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  Lowered poverty rates.
  

NIEs usually benefit from comparatively low labour costs, which translate into lower input prices for suppliers. As a result, it is often easier for producers in NIEs to outperform and outproduce factories in developed countries, where the cost of living is higher, and labour unions and other organizations have more political sway. This comparative advantage is often criticized by advocates of the fair trade movement.

Current NIEs include: South Africa, Mexico, Brazil, China, Malaysia, India, Thailand, Philippines, and Turkey.

A look at NIEs – Taiwan and South Korea and the impacts of globalisation

Taiwan and Korea built their economies into developmental machines through mobilizing available domestic resources to pursue economic growth, led by the states through allocating resources to growth sectors and creating comparative advantages. They also played the role of safeguard to absorb both internal and external shocks and control risks from global and domestic environments.

However, problems will emerge once the state is no longer strong enough to prevent the economy from external risks.  Globalization erodes state strength and undermines state control.  Foreign factors can easily impact domestic economics through freer flows of capital and goods. Regulation of economic transactions across the globe needs to depend on super-national organizations, such as IMF and WTO.

Globalization also brings two possible dangers.  On the finance side, barriers to capital flows are tremendously lowered as a result of deregulation of financial markets and improvement in technology transactions.  Highly mobile capital is able to travel all over the world to look for best return, strengthening the interconnection between national financial markets and increases volatility of national currency. This kind of capital flows is especially fatal to the countries with seriously flawed or malfunctioning financial system.

On the production side, globalization brings different costs and benefits to the actors positioned in different places of the global division of labor. MNCs, usually head-quartered in industrialized countries, dominate technology, capital resources, and distribution channels of the global markets, setting their production facilities in multiple countries to efficiently exploit and coordinate different endowments and then minimize production and transaction costs. MNCs are the most possible candidates who can fully exploit the advantages brought by freer flows of capital, goods, and personnel due to their capability in engaging global management.