Edexcel IGCSE Geography

Revision Notes

8.1.1 Rise of the Global Economy

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Causes of Globalisation

  • Globalisation is where the world has or is becoming interconnected through the processes of economics, culture, politics, trade and tourism
  • It also includes environmental globalisation through the impacts of global warming
  • Modern transport and communications have made trade almost instantaneous 
  • Globalisation removes political borders of countries, which makes them more interdependent on each other, with the more powerful countries and businesses affecting decisions in other parts of the world 
  • This has seen a rise in global inequality
  • These improvements and developments in communication and transport have made globalisation what it is today—a shrinking world

Globalisation time-space-compression

Time-space compression

  • Overall, connections around the globe are:
    • Faster: faster speeds for talking, travelling, money exchange, etc
    • Deeper: connecting lives with faraway places
    • Longer: connecting links between places are further apart
  • These connections are considered network flows to places and populations through four significant developments:
    • Appearance of large transnational corporations (TNCs)
    • Growth of regional economics and trading blocs 
    • Development of modern transport networks
    • Advances in IT and communications, particularly the WWW and the internet

reasons-for-globalisation

The Production Chain

  • These developments have led to the global economy
  • Virtually no country in the world hasn't 'networked' in one way or another
  • There are five different network flows:
    • Trade: import and export of raw materials, food goods and services through the reduction of trade barriers
    • Aid: most aid is economic, either through receiving or donating, allowing developing countries to invest in education, health, infrastructure and trade
    • Foreign investment, either directly or indirectly through business opportunities, e.g. Shell oil investing in Niger 
    • Labour is important to the working of the global economy and labour migration fuels this market either with a specialist or cheap labour
    • Information, fast data transfer and communication are vital to the global economy
  • The global production, supply or commodity chain pulls these flows together to produce goods or commodity
  • At each stage of the flow, value is added to the emerging product
  • Despite the miles involved and the number of countries involved, the product is still cheaper to produce in various stages
  • This is known as the Economies of Scale: the cost per item reduces when operated on a large scale
  • Transport improvements through large container ships mean that costs are reduced and moved further quicker
  • Labour costs are cheaper in emerging and developing countries and there are usually reduced legal restrictions

Global Investment

  • Investment is not just monetary (economic), although this is a large part of it
  • Investment can be in people, research or products
  • Foreign investment is when individuals or firms from abroad invest in another country
    • Call centres can be located anywhere, e.g. India
    • Investment is made in the country through building the call centre, paying taxes, etc.
    • Local people are employed and trained
    • Service is provided to the donor country, the UK
  • Moving manufacturing from developed to developing or emerging countries
    • China is the main area for manufacturing goods from around the world
    • Investment are made in China to produce goods
    • Completed goods are shipped back to the original country, e.g. Germany
  • Investment in people, either for cheap labour or for their expertise
    • Specialist surgeons from the USA to Australia
    • Investment in developments that attract cheap labour—the construction of Dubai attracts many Indian migrants
    • Research and development investment - motor car industry to build more fuel-efficient motoring—Elon Musk's Tesla electric cars
  • Investment can come from aid for rebuilding after a disaster. Ukraine will need aid after the war with Russia ends
    • Aid can be funds sent to the government to use as necessary, although this can often lead to corruption and funds not going where they should
    • Aid can be in form of goods and services directed to the affected area - refugee camps or after a natural hazard such as a tropical storm or earthquake

Worked example

Identify the meaning of the term TNC (1)

  A Translocal Corporation
  B Transnational Corporation
  C Transnational Country
  D Transporting National Corporation
  • Answer: 
    • B (1) - as none of the other terms exist.

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Jacque Cartwright

Author: Jacque Cartwright

Jacque graduated from the Open University with a BSc in Environmental Science and Geography before doing her PGCE with the University of St David’s, Swansea. Teaching is her passion and has taught across a wide range of specifications – GCSE/IGCSE and IB but particularly loves teaching the A-level Geography. For the last 5 years Jacque has been teaching online for international schools, and she knows what is needed to pass those pesky geography exams.