How Globalisation Works

  • Those who make decisions to invest and manufacture overseas, and who help to determine consumer tastes and opinions, come mainly from North America, Europe, and East Asia, as well as oil-rich billionaire investors from Russia, Nigeria, and Saudi Arabia.
  • China, India, and South East Asia have become manufacturers for the world. India also provides financial and IT support services for HICs known as High Income Countries.
  • Global brands use much the same advertisements worldwide and dictate where products are made.
  • Outsourcing and relocation processes are fluid and often change. Some industries may move much of their manufacturing to LICs known as Low Income Countries because costs there are even lower than before.
  • Some places in the world, such as the Sahara Desert in Africa, are detached and isolated so therefore have little economic influence.


Pakistan’s Fisherman

  • In 1995, Pakistan joined the World Trade Organisation (WTO).
  • To comply with the WTO’s trade rules, Pakistan opened up its fishing groups to foreign competition.
  • Until then, it had enforced an exclusion zone around its coast, designed so that only Pakistani fishing boats could fish there.
  • However, after joining the WTO, deep-sea trawlers owned by TNCs were allowed to fish in Pakistan’s coastal areas.
  • Huge trawlers from India and elsewhere now take most of the fish, while Pakistan’s own fishing communities are left in poverty.

Global Players

  • After the end of World War II in 1945, the USA and many other war-ravaged and economically weak Western European countries felt threatened by the territorial advances being made by communism.
  • By 1949, the Soviet Union, China, and many European countries were all communist states, with Vietnam and Korea showing strong gains.
  • The USA and Western Europe believed that the best way to combat the spread and influence of communism was economic development.
  • The USA saw the job of rebuilding Europe as the priority with subsequent aid programmes designed to stimulate economic growth in South East Asia.
  • To achieve the desired economic development, three global organisations were established to promote it, as well as to restore and maintain international financial stability after the end of World War II.

The World Bank

  • The World Bank was formed to finance economic development.
  • It uses bank deposits placed by the world’s wealthiest countries to provide loans for development in countries that agree to certain conditions concerning repayment and economic growth.
  • It also focuses on natural disasters and humanitarian emergencies. The positives impact of the World Bank is that it provides loans to help developing countries and the loans have conditions set to them based on economic growth and repayment to get them more involved in the decisions made.
  • However, the negative impacts are that money is used as a control mechanism to benefit the already developed nations rather than the developing nations and plans may have to be cancelled to repay loans.

International Monetary Fund (IMF)

  • The IMF lends money for development purposes. However, its primary role is to maintain international financial stability.
  • In return for loans, it tries to force countries to privatise of sell off government assets to increase the size of the private sector and generate wealth.
  • The IMF also exists to stabilise currencies, and therefore countries to maintain economic growth.
  • The positive impact of the IMF is that it assists member nations in several different capacities and serves as a council and adviser to countries attempting a new economic policy.
  • However, the negative impacts are that they have been criticised for being too slow or too eager to assist failing national policies and some LICs have been accused of pursuing unsustainable budgets because they believe the world community would come to their rescue.

World Trade Organisation (WTO)

  • Since 1945, governments have been keen to use trade as a way of generating economic growth in the world’s poorer regions.
  • The WTO believes in free trade without subsidies or tariffs. Removing barriers is known as trade liberalisation.
  • The WTO advocates for trade liberalisation and seeks to encourage all trade between countries free of tariffs, quotas or restrictions.
  • By 2016, it had 162-member states. The positive impacts of the WTO are that it encourages the removal of tariffs and quotas to make trade easier between countries and also believe that less economic issues will result in less conflict.
  • However, the WTO has been criticised for widening the global income gap between HICs and LICs and encouraging the privatisation of services for profit.

International Trading Blocs

  • Increasingly, countries are grouping together as members of trading blocs to promote free trade between them.
  • There are now a number of these blocks, most of which are located in particular geographical regions and support trade for their members by removing tariffs between member states and creating barriers for non-member states by placing tariffs on imports.
  • This increases the price of imports and helps to protect their own industries. This approach has been advantageous for many countries and has resulted in rapid economic growth, especially in Asia’s Newly Industrialising Countries (NICs).
  • However, non-members are excluded, which prevents their development. Some blocs even subsidise their producers in order to protect them from the influence of the global market.
  • Countries in Europe are mainly HICs so LICs outside this group will struggle. Very few trade blocs span both rich and poor nations.
  • This means that the poorer countries doing trade with the richer countries will be subjected to tariffs.
  • They are also less likely to earn as much money as richer countries will pay poorer nations off against each other for the cheapest price.