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Study Notes

Factors Responsible for the Acceleration of Globalisation

Level:
AS, A-Level, IB
Board:
AQA, Edexcel, OCR, IB, Eduqas, WJEC

Last updated 26 Jul 2017

Some of the key factors that have driven the process of globalisation are summarised below.

Technology and Globalisation

Technology is a key factor responsible for the acceleration of globalisation and global flows. There are two important sets of development to consider:

Transport systems

In the 1800s, steam ships and trains were moving goods and people in large numbers along global trade routes spanning Asia and Africa. By the late 1960s, the arrival of the intercontinental Boeing 747 (Jumbo Jet) had made international air travel less expensive, resulting in increased global flows of tourists. In recent decades, food and merchandise have been transported efficiently across enormous distances using intermodal containers in developments in containerisation. The enormous Chinese shipping vessels of COSCO (Chinese Ocean Shipping Company) can transport 13,000 containers globally per shipment.

Information and communications technologies and systems

The internet originally began life as part of a scheme funded by the US Defence Department during the Cold War in the 1960s. Early computer networks were designed to link together important research machines in different locations. Since then, connectivity between people and place has rocketed. Now, five billion Facebook 'likes' are registered globally every day. Broadband internet has helped deliver this connectivity. Gigantic amounts of data flow across the Earth’s ocean floors through fibre-optic cables owned by national governments or internet TNCs such as Google.

Together, these changes are responsible for the shrinking world effect.  Thanks to technology, distant places feel closer together than ever before and take less time to reach when travelling. This phenomenon is also termed time-space convergence

Other Factors

Trade agreements and trade blocs

For many decades, three international organisations have acted as ‘brokers’ of globalisation through the promotion of free trade policies. The International Money Fund (IMF), World Bank and World Trade Organisation (WTO) have collectively worked towards a ‘free trade consensus’. The ‘Bretton Woods institutions’ (as they are also known) have persuaded many developing countries to embrace free market economics and globalisation and adopt a ‘western model’ of trade.  

National governments have also promoted the growth of trade blocs. To trade freely with neighbours or more distant allies, trade agreements have been drawn up allowing state boundaries to be crossed freely by flows of goods and money. Mexico and the USA are both part of NAFTA (North America Free Trade Association). The EU has evolved over time from being a simple trade bloc into a multi-governmental organisation with its own currency (the Euro) and some shared political legislation. 

Security relationships

The ‘Bretton Woods institutions’ were established after WW II in the hope they would make the world more politically secure by stabilising the world economy, and avoid replicating the shocks of the 1920-30s. 

The United Nations, the EU and NATO also have roots in the post-war era when governments sought to promote world security and lessen chances of future conflict through greater co-operation of similar economies.

Management systems

Large corporations ranging from Lidl to Samsung have built complicated global production networks (GPNs) as part of their global businesses. These consist of extensive outsourcing and business partnership arrangements. Food giant Kraft has 30,000 suppliers providing the ingredients it needs. A TNC manages its GPN in the same way the captain of a team manages the assemblage of players - each with a key role. 

Over time, more national governments have begun to manage their economies in ways which are compatible with globalisation and allow them to integrate better with global systems. In 1978, Deng Xiaoping – the new Chinese leader after Mao - began the radical ‘Open Door’ reforms which allowed China to embrace globalisation while remaining under non-democratic rule. Globalisation began in 1991 for India, when its democratic government introduced sweeping financial reforms.

Financial systems

During the 1980s, financial systems worldwide began to be transformed in line with policies favoured by US President Ronald Reagan and Margaret Thatcher’s UK government. They believed that government intervention in markets impedes economic development. Restrictions were therefore lifted on the way companies and banks operated. The deregulation of the City of London in 1986 removed large amounts of ‘red tape’ and paved the way for London to become the world’s leading global hub for financial services. 

Over time, a global financial system has developed whereby the International Monetary Fund (IMF) channels large loans from rich nations to countries that apply for assistance. In return, the recipients must agree to run free market economies that are open to outside investment. As a result, TNCs are able to enter these countries to establish more easily.

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