Globalisation
Driving
Forces of Globalisation - Chapter 2
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Explanation
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Notes
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Driving forces of globalisation
1. Driving
force of globalization = What causes people to become more integrated, interconnected
and interdependent across the globe.
2. How and
why is the level of integration, interconnectedness and interdependence
raised?
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Factor 1 = Driving Force 1:
Developments/improvements in telecommunications
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Improvements in telecommunication
technology and networks like the development of internet platforms running in
broadband and wireless satellite technology makes communication between
people across the globe more effortless, convenient, prevalent and regular.
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As a result people in different countries
have become more dependent on each other for information and more intertwined
because of increased levels of friendship and business connection.
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People in different parts of the world can
access information conveniently and efficiently, allowing people, their ideas
and their activities have become interconnected and integrated.
·
Communication platforms through the
internet like email and social media has brought the world closer.
·
People, organizations and nations are now
become more interconnected, integrated and interdependent as people from
different countries exchange ideas and information more frequently using the
internet or their hand-phones à this
means the world has “become closer” and globalization has been furthered.
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Factor 2 = Driving Force 2:
Developments/improvements in transport in terms of:
·
Improvements to transport technology and
transport networks
more effortless and less costly for people to travel and for goods to be transported across the world à technology improvements have raised the ease at which the goods and people can be transported around the world à making the world more interconnected and integrated.
·
Improved
transport networks: Transport
systems are the means by which people, materials and products are transferred
from one place to another. With the increasing mobility of goods and people,
it is important to have an efficient transport network worldwide, which
includes airports, seaports, railways and highways to make it possible for
goods to be moved around easily. International and intra-national transport
networks are better integrated àThe transport is
made more seamless as transnational transport networks are
increasingly interlinked. E.g. railway lines and highways are built next to
ports and airports so that goods and people can be conveniently transported from
point A to B across the globe without any break in transport networks àpeople travel more
regularly and transport goods more frequently à this raises the
connectivity between nations as the world grows more integrated.
·
Globalisation occurs because of improvements in transport technology:
(1) Containerization à goods loaded in
same-size containers are transported efficiently on planes, ships and trucks specially
configured to carry containers across the globe à ships,
planes, trucks and cranes at ports and airports are all configured to the
same specifications foran efficient movement of containers à this smooth
transport of goods raises the level of moving people and goods across the
globe, raising the level of business and personal contact. With increased
ease of shipping large numbers of goods, more trade takes place. This means
more people are buying and selling goods from beyond their borders. Buyers and sellers have become more interdependent through world trade. For example, Samsung can ship its
latest smart phones to its international customers efficiently and
conveniently thanks to containerization à hence globalization
has occurred.
(2) Improvements in transport
equipment allows travel between distant places to be more convenient, and
cheap à Increased
interdependency between tourists and travel businesses is the outcome of
increased mobility. Vessels and planes
carry more people at a lower cost at a faster speed because technology has
made these transport crafts more fuel efficient à hence people travel
more frequently for business and leisure à people from across
the world become more interconnected since the frequency of contact between
people from different countries increases for both business and personal ties
à through
this increased interaction, there is more cross-fertilization of ideas and
hence greater interconnectedness and integration
and inter-linkage.
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Factor 3 = Driving Force 3: Transnational
corporations (TNCs).
What are TNCs? TNCs are large international
companies that obtain their:
1. Business
2. Manpower
3. Resources/
product parts from all over the world, always sourcing for the best quality
at the lowest price.
TNCs make the world more interdependent because of the way it
obtains resources and manpower.
(1) TNCs drive Globalisation
by setting up operations in a number of countries outside their home country.
This is done so as to source for new markets, lower the cost of producing
their goods or to source for components before assembling their products in
another country.
(2) TNCs
will obtain resources/product parts from the nations where it can get the
best quality at the lowest cost à this helps TNCs gain
a higher profit margin. Hence, TNCs source manpower and resources from
different parts of the world à people
are employed from different nations à the
world has become more interdependent
because the various nations that produce the different product parts and offer
the different resources for the TNCs come from across the globe à hence the the TNC
to need to become interconnected
and integrated to supply
the resource or product part on time for assembly into the final product.
(3) For
example, Boeing, a US TNC, obtains the parts for its planes from different
factories around the world. For the plane to be manufactured on time, all the
different suppliers must product the product parts on time every time à these
multinational part producers are interdependent
on one another to fulfil the needs of the TNC which is to build
planes à There
is also increased inter-linkage between all the suppliers à The nations where
the suppliers are from become more dependent on the TNC's business to provide
jobs for its people.
(4) TNCs
draw their manpower internationally à they
hire people from different nations based on their skills, cost and ability to
contribute à this
makes the world more interconnected
since TNC employees across several countries will have to contact one another
regularly since they work together on projects. Hence, we can say that the
nature of TNC operations has led to an increase in international
communication and therefore a more interconnected and interdependent world à globalisation has
increased.
(5) This has led to economies
becoming more integrated and interdependent as people and their activities
become more interconnected with TNCs setting up companies in other parts of
the world and linking them to the parent company in another country.
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Which is the main driving force?
The main driving force will be the one that if it ceases to exist, will
slow down the pace of globalization considerably. This will be the factor of
improvements in telecommunications technology. Both improvements in transport
technology and TNCs may still driving globalization but without improvements
in technology of communication, the intensity and depth of connectivity and
interdependency across the globe will slow down as the inter-linkage between
people and organizations across the globe is done most effortlessly and
frequently through increased
communications technology.
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Issue
2: The impact of globalization
Homework:
“The most significant impact of globalization is the social
consequence.” How far do you agree? Explain your answer.
The consequences of globalisation are more positive than
negative. How far would you agree? Explain.
NB: The impact of globalisation has BOTH negative and
positive outcomes. In other words, it has both elements of good as well as bad
impact on the world. This cuts across the different aspects of the consequences
be it economic, social or environmental.
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Point
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Activity/Explanation
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Key
words
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Economic
Impact: Improvement in Standard of living ( + )
What
does an improvement in the standard of living mean?
Ans: People in a country have a better quality of life e.g. Better housing, healthcare, wages and cleaner surroundings with access to clean water and electricity. |
Improvement
in Standard of living
(1)
Globalization creates increased free trade between nations à more nations sign free-trade agreements (FTAs)
à increases the amount of trade à there is no import tax on goods being
exported to countries within the FTA à Hence there is an
increased demand for such goods as they are cheaper à more are exported à more revenue and profits earned by
companiesà workers get more income
à standard of living increases.
(2)
TNCs set up
operations
worldwide à in nations where
TNCs operate à citizens work have
jobs at these TNCs à locals earn higher
salaries à TNCs pay better wages
to educated and skilled workers à local companies
that supply parts or service to TNCs also get more business à increased
standard of living.
(3)
The proof of rising incomes due to globalisation is
from the example of Singapore tha has benefitted from globalization as
Singapore is open to free trade and the presence of foreign investors such as
TNCs à this has led to a rise in the Average HH
income of Singapore from $4940 in 2000 to $5400 in 2005
(4)
With rising salaries (1) and (2) à government
collects more tax from companies and citizens à more money to improve education,
healthcare, infrastructure and recreational facilities like sports centre and
parks à standards of living improves.
(5)
Wider array
of goods and services to choose from as globalization encourages
international trade and therefore more goods and services from one part of
the world can be experienced by everyone worldwide àgreater variety = improved lifestyle
choices = better quality of life.
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Read your textbook and pick out the key words.
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Economic
Impact:
Increased competition among nations ( - / + ) |
Negative
economic impact of globalisation: Increased competition among nations which
creates WINNERS and LOSERS.
(1)
Nations compete to attract TNCs that
create jobs à
BUT TNCs are mobile & seek out the lowest cost of
production e.g. manpower and raw materials at the best quality à in the race to attract
TNCs, nations build better infrastructure and attract talented people to stay
àhence
nations that can provide for TNCs the best possible infrastructure, best
quality factors of production at the lowest cost to support operations will attract
the TNC to stay and the nation continues to enjoy good jobs and quality of
life.
(2)
BUT as nations compete for the TNCs’
presence, the nation not picked by the TNCs or where the TNCs decide the leave
à jobs
are either not created or lost à unemployment rises à no income à national standard of
living.
(3)
Example of competition due to ease of
movement of people and businesses à Tanjong Pagar port losing
Maersk Sealand to Johor’s Tanjung Pelepas port as the Johor port offered
cheaper rates and is more flexible in its operations. This shows how intense
the competition is for TNC business is and how easy it is for a TNC to change
its business location à thereby
affecting the employment levels.
(4) Poor nations/LDCs cannot
attract TNCs because they have no resources to improve their infrastructure and train their
workers à
unable to develop highly skilled for TNCs à few workers earn high
salaries à either
TNCs do not set up any operations there or TNCs may only set up only
low-value operations that pay low wages à this means these poor nations continue to remain
poor while the other nations that can attract higher-end TNC investments will
prosper.
Positive
economic impact of globalisation : Increased competition among nations:
(1)
Governments will spend more to improve
public works and amenities such as infrastructure
to support TNCs’ operations e.g. Better roads and railway system à citizens will also
benefit from such improvements as they can also use the improved infrastructure.
E.g. The Chinese city of Dalian has developed its infrastructure and
financial institutions to facilitate TNC business in manufacturing à more public and private
amenities like parks and entertainment facilities are also built to attract
the TNCs and this means a better standard of living for the people living in
Dalian.
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Read your textbook and pick out the key words.
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Intense competition
Cheaper raw materials and factors of production
Lower cost of production
Offer incentives
Leads to further growth
Increase in productivity
Loss of jobs
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Economic
Impact:
Competition for talent globally ( -/+)
What
does Talent refer to?
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Free
movement of talent
(-) Brain Drain = people who are skilled and talented are more mobile with the ease or travel and communication in a globalised world. (1) With globalization, people move around freely, regularly, conveniently and cheaply. It is easier to hire people to work anywhere in the world since job interviews can be done across different nations with improved telecommunications. Hence, there are MORE job offerings for individuals (+) but companies and their homeland staff easily.(-)
(2) Hence, talented
people can leave a nation to work elsewhere and will no longer contribute to
the nation’s success à nations can lose
their most educated and skilled workers after spending public money educating
them à
the total number of talented people in a nation falls as the skilled workers
can easily leave to work elsewhere in the world in jobs which offer higher
pay.
(+) Positive impact = wider choice of jobs for individual and wider choice of candidates for the job for companies. Companies have a larger pool of talented and skilled workers to choose from and skilled workers have more job opportunities. Nations that can attract talent will attracts TNCs. Hence, the free movement of talent because of globalization is good for nations which need talent and is able to attract them. |
Read your textbook and pick out the key words.
Skilled and talented individuals have more jobs
opportunities in a globalised world.
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Economic
Impact:
Widening income gap (-)
What
is a widening Income Gap?
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Widening
income gap (-)
(1) Globalisation in the form of free-trade and free movement of TNCs causes the rich-poor gap to widen(Skilled vs. unskilled workers). The world’s developed nations and developing nations both try to attract TNC to set up high-value operations in their respective countries à those nations that are unable to attract TNCs investments or only low-level operations of TNCs will not be able to provide for more jobs for their people or only low-wage jobs à there will be income disparity between nations àThus developed nations and developing nations who can attract these quality TNC investments will have a higher standard of living than those nations that cannot.
(2)Within each nation, globalisation benefits the
educated and skilled as they can get jobs easily from anywhere in the
world. However, the lowly skilled lose
their jobs easily because TNCs are constantly shifting their operations
around the world and they cannot get re-employed as easily. Hence there will
be an income divide between those who can benefit from globalization because
they are better skilled and educated and the lesser educated who cannot benefit
and are left in a poverty mcycle with an widening income gap.
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Rich-poor gap
Poverty
Rapid economic growth
TNCs draw people and resources away from poor areas.
Better opportunities for developed nations.
Widening income gap.
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Social
Impact:
Increased
awareness of foreign culture ( + )
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Increased
appreciation of foreign cultures and societies (+)
(1)
Through globalization that spreads
ideas through improved telecommunications and transport à more people from
different parts of the world are interacting more frequently à people are more aware of
other nations’ languages, culture and traditions à this occurs because of
increased international travel and also because of increased internet use and
social media platforms like Facebook and Twitter and internet sites like YouTube.
(2)
People throughout the world are able
to communicate and learn about other cultures à people across the world
become more appreciative and respectful of each other’s cultures. For
example, people can make new international friends through Facebook and learn
about their cultures through the internet sites like YouTube.
(3)
Ease of travel also raises the level
of interaction between people of different cultures and they learn about one
another’s culture.
(4)
This deeper understanding of another
culture leads to greater international stability as globalization creates a
network of worldwide friendships and understanding that breaks cultural
barriers and misunderstandings that improves the prospect of world peace by
lowering suspicion between one culture and another.
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Read your textbook and pick out the key words.
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Social
Impact:
Loss of local culture ( - ) |
Displacement/loss
of local culture (-)
(1)
Globalization allows for homogenous
international ideas and culture to be transmitted easily through improved
telecommunications and travel.
(2)
Local culture is displaced by homogenous
international trends in fashion, food and entertainment.
(2)
As people across the globe get
exposure to more international trends and brands, their taste and exposure to
indigenous culture declines. For example, through YouTube, more people listen
to music from the United States or Korea and do not pay as much attention to
local traditional music which can be totally forgotten by an entire
generation that grows up being familiar with only global pop culture and
international trends but less so with traditional indigenous culture à eventually locals lose
interest in their local culture à lost forever.
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Homogenous
Culture
Replacement of local culture
Spread of pop culture
Pop culture becoming more popular.
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Environmental
impact:
Environmental
degradation (-) : Destruction
Deforestation
Global
warming
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Globalization has brought about environmental degradation. (-)
(a) Greenhouse gas production à due to rise in demand for energy à Global warming and rise in sea levels.
(1)
Globalization has led to more
greenhouse gases being produced, sea levels will rise due to global warming
and floods will occur as the polar ice-caps melt. There is an increase in
demand for energy and increased burning of fossil fuels that pollute the air
and raise world’s temperature. Why is this happening?
a) There is
increased demand for goods internationally due to more free trade à amount of goods being
transported around the world by ships and planes has risen à more fossil fuel is
needed à
more greenhouse gases from the burning of fossil fuels is produced à these toxic gases pollute
the environment and lead to global warming.
b) With more
free trade, more production of goods is required and hence more fossil fuel
is burnt to keep factories producing such goods à more greenhouse gases
created. e.g. The international
demand for products like beef increases as free trade has allowed for
consumers to source for quality beef internationally à more forests are cleared
for cattle ranches à
forests cannot be replaced easily and the biodiversity is lost forever + More
farm animals being reared will raise the amount of methane, a greenhouse gas,
being produced. E.g. In Brazil, 58.7 million hectares of forest have been
cleared for cattle ranching à
rapid deforestation àloss
of the natural habitat of plants and animals which cannot be replaced.
c) With improvements in transportation and
telecommunications, people also travel and communicate freely and this raises
the amount of fossil fuel needed to power the world’s transport and
telecommunications networks.
d) With more demand for goods, more energy is
needed and China built the 3 Gorges Dam to generate electricity à but this led to flooding
and permanent destruction of the natural habitat for animals like the Chinese
Tiger, Giant Panda and Siberian Crane which are already endangered species.
(2)
With the increased production of
greenhouse gases, world temperatures rise and melt the ice-caps leading to
natural disasters like floods which wreck devastation destroying homes and
killing people.
(b)
Deforestation
(1) Global demand for goods has gone up due to globalisation and free-trade, so more factories, farms, mines, cities and infrastructure are built, forests are cleared due to these economic activities. [ The world’s forest help to absorb greenhouse gases à since there are fewer trees à more global warming.]
(2) Sometimes forests are cleared by uncontrolled
burning à
haze is created. For example, in the 1997, Indonesian farmers cleared the
land using slash and burn to plant cash crops and this led to a haze
blanketing the region which affected tourism, air travel and people’s health.
[Hurts the quality of life]
(3) World temperatures are expected to rise by an
average of 1 to 2 degrees in the next decade and this will melt the ice-caps
and cause sea levels to rise and flooding will become more common. Hence the
environmental impact of globalisation is serious.
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Cut down rainforests
Deforestation
Global warming
Economic activities
Forestry
Mining
Cattle ranching
Generate greenhouse gases
Soil erosion
Extinction of flora and fauna
Haze
Loss of tourists
Plant cash crops
Develop factories and transport infrastructure
Achieve high levels of economic development
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Environmental
impact: Improved
Environmental management (+)
Wind, Solar, Geothermal
Alternative in infancy
Sustainable and renewable sources of energy
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Negative
impact on the environment is a blessing in disguise (+)
1) Globalization has increased awareness of
environmental degradation as high levels of natural habitat destruction has
alarmed governments which are now:
a. Investing in developing “clean” or sustainable and
renewable energy sources like wind, solar and geothermal power à less dependency on fossil
fuels which will run out and pollute. Search for sustainable development =
economic growth + effort to preserve environment for future generations to
enjoy high standards of living and a liveable environment. With more R & D,
technology that produces clean energy is now able to produce more energy more
economically.
b. Increase international conservation efforts for
world’s forests.
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Increased awareness on environmental issues
Preserve the environment while sustaining growth
Alternative energy sources
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Summary of the Impact of Globalisation
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Economic
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Social
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Environmental
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Good
Effects
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Improvement in Standard of Living
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Competition Among Nations (Investment &
Market)
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Good
Effects
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Increased Awareness of Foreign Culture
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Good
Effects
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Environmental Management
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Bad Effects
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Competition
Among Nations (Talent)
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Widening Income Gap between the Rich and the
Poor
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Bad
Effects
- Loss
of Local Culture
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Bad
Effects
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Global Warming
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Deforestation and Related Problems
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Theme: Sustaining economic development
in a globalised world
Issue 3: What are Singapore’s
strategies to maximize opportunities and overcome challenges in a globalised
world?
Activity
Use a Mind
Map to map out how each of the items a. to e. as to how Singapore can
maximize its opportunities in a globalised world. Read each part with
understanding, then extract key words and place them into the Mind Map. See if
you can remember the points and then recreate an essay to answer a question on
this topic.
Key Question:
- The following are approaches to maximize opportunities and overcome challenges in a globalised world for Singapore.
- Diversifying the economy [ Invest in different sectors à some sectors do badly à others are still doing well à still employment à not all jobs are lost à economy not completely stagnant ] [ Note: Diversification is important because in a globalized world, Singapore is highly dependent on exports to other countries and so if we invest in more industries, less likely that all industries will be affected in a global recession]
[We diversify into
high-tech industries(Pharmaceuticals/bio-technology and nano-technology ) and
high-end services ( Healthcare, financial services , legal)
è More
difficult for other nations to enter these industries to compete with Singapore
à
Singapore can do well more easily à ensures Singapore’s economic
survival.
- Nurturing growth of Small and Medium Enterprises
- Venturing Abroad
- Expanding Markey reach through economic cooperation
- Managing resources efficiently
Which is the
most effective method to ensure Singapore’s
survival? Explain
How do you tell if your strategy
maximizes opportunities and overcomes challenges?
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First
of all, the strategies have to come together and solve some the following
problems faced by Singapore:
o
Economic
slowdown in other countries
o
Disease
outbreak e.g. SARS, bird flu
o
Rise
of China and India
as competitors
o
Transnational
terrorism
o
Ageing
population
o
Maturing
domestic economy
Defining the key terms
Maximize opportunities = take advantage of the
interconnectedness and interdependency between countries and ensure that even
with the ease of movement of talent and products and services à Singapore’s products and services and
people can be in greater demand than that of the other nations which are
competing with us.
Effective ways for Singapore to
maximize opportunities and minimise the threat of a globalised world.
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Factor
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Explanation and examples
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Diversifying
the economy
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Diversifying
the economy
(Why
will this lead Singapore
thriving?)
à Allows for Singapore to spread risk in different industries.
à If one industry does poorly can still depend on other
industries for growth à Many
engines for growth.
(How
does Singapore
diversify its economy?)
à Singapore
can compete in a globalised world as few nations can produce what such
products and services
à Less competition = more sales = more profits
à For example à genetic
engineering and high technology manufacturing like wafer fabrication +
high-end services like financial services and education
à Focus on areas which require skilled and educated labour
which Singapore
can supply à
Not many other nations can copy us easily
à We have a competitive advantage and so Singapore can
survive despite the competition from other nations due to globalization. (This
is the minimisation of threats)
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Nurturing
growth of Small and Medium Enterprises
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Nurturing
growth of Small and Medium Enterprises
à SMEs are important providers of jobs
à SMEs support TNC operations in Singapore effectively.
à Take advantage of the presence of TNCs in a globalised
world to serve TNC needs and make profits
à TNCs will find Singapore attractive since SMEs
can support the TNCs with services and
products it needs
à TNCs will see it as an attractive regional manufacturing
and services hub.
à SMEs may not be able to compete with overseas TNCs
à To ensure that SMEs survive and contribute to our economy
even with increased competition from overseas products and services because
of globalization à
government schemes created to help SMEs such as through loan schemes and
training for SME workers to upgrade their skills à SMEs can better compete with foreign companies for
markets in a globalised world
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Venturing
Abroad
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Venturing
Abroad
à Also Singapore
has limited land and labour
à look beyond Singapore for resources and
markets à
Take advantage of interconnectedness
of the world to achieve further growth
à Singapore
companies regionalize
à Get access to cheaper land, lower labour cost and closer
to overseas markets
à Lower cost of production = more competitively priced
product by Singapore
firms = more profits
à In a globalised world where there is ease of
communication and travel, Singapore can take advantage of this to work with
other countries like China, India and Indonesia to gain access to these
nations’ cheaper land and labour.
à In return Singapore
provides expertise and capital for joint projects = Singapore
makes a cut of the profits from such projects.
à Such investments add Singtel’s long-term growth
à Reach more customers
à Closer to overseas customers
à Cheaper to produce products if local firms are closer
overseas customers – lower logistics cost
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Expanding
Market reach through economic cooperation
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Expanding
Market reach through economic cooperation
(How
can globalization be maximized in this aspect?)
à Singapore
works with other nations to help it reach new markets to sell its products
and services more effectively
à Need to establish trade ties with other countries to
enable local companies to sell their goods to larger markets à increase profits for Singapore companies
(How
is this done?)
à Take advantage of this by signing Free Trade Agreements
with other nations
à Trade without taxes = stimulates free trade
à Create Special Economic zones (SEZs) between Singapore and
other nations
à Allows Singaporeans companies to invest in countries in
the SEZs – lower taxes and easier for Singapore companies to set up
businesses there
à Singapore
companies can make more profits and leverage on cheaper resources like land
à Singapore
companies can move its business operations overseas and produce goods at a
lower cost.
à Increases profit margins = better pay for workers and
better share prices for local companies = Singapore economy will thrive
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Managing resources efficiently helps Singapore
use its limited resources for economic growth. = Managing people and talent + managing our environment
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Managing people and talent
(a) Developing local talent
à
This helps more locals start and succeed in business so that there will be
more local companies which can hire Singaporeans à enough jobs and local companies will base their HQ
operations.
à
Skills are upgraded
à
Singaporeans will always be able to fit into a job
à
Jobs requirements keep changing as technology changes
à
Continuous learning ensures skills sets of workers can match changing job
requirements and remain employable and contribute to Singapore’s
growth and economy.
(b)
Attracting foreign talent
à
If TNCs can hire talented foreigners in Singapore, the TNCs will remain
in Singapore
and provide Singaporeans jobs à Hence, need to attract foreign talent to remain
competitive and to help keep companies and businesses in Singapore
à
In this way Singapore
will thrive economically in a globalised world.
2.
Managing our environment
(a)
Plan use of limited land resources
(b)
Cooperation with regional and international organizations
(c)Public
education
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