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4.5 - Factors that have Enabled Globalisation

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The Role of Technology

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Teacher
Teacher

Let's start by talking about the role of technology in globalisation. Can anyone give me an example of how technology has influenced global trade?

Student 1
Student 1

The internet allows for instant communication and transactions!

Teacher
Teacher

Exactly! The internet enables real-time communication and the transfer of data. It allows businesses to operate across borders easily. Additionally, consider transportation technology.

Student 2
Student 2

Container shipping has made transporting goods cheaper and faster.

Teacher
Teacher

Great point! This reduction in transportation costs means that MNCs can shift production to countries with lower costs, significantly impacting how global markets operate. Remember this acronym: **TIT - Technology, International trade, Transport** for the key elements of technology's impact.

Student 3
Student 3

Why do companies prefer locations with cheaper production?

Teacher
Teacher

Companies are looking to maximise profits, Student_3. Lower production costs result in higher profit margins. Let's summarize: the key role of technology includes faster communication, reduced shipping costs, and increased efficiency. Any questions?

Trade Liberalization

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Teacher
Teacher

Now, let's move on to trade liberalization. What did the Indian government do around the 1990s regarding trade policies?

Student 1
Student 1

India started liberalising its trade, removing many trade barriers.

Teacher
Teacher

Correct! Liberalisation allowed foreign companies to invest more easily in India. What effects do you think this had on local industries?

Student 2
Student 2

Local businesses had to compete with these foreign companies.

Teacher
Teacher

Absolutely! This competition can lead to improved products but can also be challenging for smaller producers. Think of the mnemonic **IMPACT - Increased Market Competition And Trade** to recall the effects of liberalisation.

Student 3
Student 3

So, did this benefit consumers?

Teacher
Teacher

Yes! Consumers gained access to a wider variety of products at potentially lower prices. To wrap up, liberalisation fosters competition which can enhance consumer choice but challenge local manufacturers.

Influence of International Organizations

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Teacher
Teacher

Let's discuss international organizations like the WTO. How do they influence global trade?

Student 2
Student 2

They set rules for trade that countries must follow.

Teacher
Teacher

Correct! The WTO promotes free trade, but does it have a uniform effect on all countries?

Student 4
Student 4

No, developed countries may keep barriers while pushing for free trade in developing countries.

Teacher
Teacher

That's a keen observation! This dynamic can create unequal power balances. Remember the acronym **POWER - Politics Of World Economic Rules** to help recall the influence of organizations like the WTO.

Student 3
Student 3

So, are developing countries at a disadvantage?

Teacher
Teacher

Yes, they often are, as rules may favor developed nations. In summary, international organizations play a crucial role in shaping the rules that govern trade, impacting how countries engage in globalisation.

Introduction & Overview

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Quick Overview

Globalisation has rapidly increased due to technology, liberalization of trade, and international pressures, significantly impacting MNCs and local economies.

Standard

The section explores the factors enabling globalisation, such as advances in technology, policy changes promoting trade, and the pressures exerted by international organizations like the WTO. It highlights how these factors contribute to the global spread of production and the interaction between multinational corporations (MNCs) and local economies, particularly in the context of India's economy.

Detailed

Detailed Summary

Globalisation is a process that integrates economies, cultures, and societies across the world, driven primarily by advances in technology, liberalization of trade and investment policies, and pressures from international organizations, such as the World Trade Organization (WTO). Over the past thirty years, multinational corporations (MNCs) have played a significant role in this process by relocating production to regions where costs are lower, often in developing countries like India.

Key Factors Enabling Globalisation:

  1. Technological Improvements: Innovations in transportation and communication technologies, such as container shipping and the internet, have drastically reduced costs and improved efficiency in the movement of goods and services globally.
  2. Liberalization of Trade and Investment Policies: Countries, especially developing ones, have increasingly removed barriers to foreign trade and investment to attract MNCs, which encourages competition and improves product variety and quality in local markets. Understanding India's pre-liberalization era provides context for its rapid economic shifts post-1991.
  3. Influence of International Organizations: Bodies like the WTO promote policies that facilitate free trade, impacting domestic policies in various countries.

These elements have led to heightened interdependence, where production and services are often linked across countries. MNCs take advantage of this interconnectivity to optimize production processes, creating both opportunities and challenges for local industries.

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Audio Book

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Role of Technology

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Rapid improvement in technology has been one major factor that has stimulated the globalisation process. For instance, the past fifty years have seen several improvements in transportation technology. This has made much faster delivery of goods across long distances possible at lower costs.

Detailed Explanation

Technology plays a crucial role in globalisation by enabling faster and more efficient transportation of goods. Over the last fifty years, improvements in transportation technology, such as shipping containers and air freight, have allowed companies to deliver their products to different countries quickly and economically. This means that businesses can reach new markets, and consumers have access to a wider variety of goods.

Examples & Analogies

Imagine a local bakery selling its goods only within the town limits. If the bakery invests in a delivery service with temperature-controlled vehicles, it can sell its fresh bread and pastries to nearby towns, attracting more customers. Similarly, advancements like ships and planes allow large companies to distribute products globally.

Impact of Information Technology

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Even more remarkable have been the developments in information and communication technology. In recent times, technology in the areas of telecommunications, computers, Internet has been changing rapidly. Telecommunication facilities (telegraph, telephone including mobile phones, fax) are used to contact one another around the world, to access information instantly, and to communicate from remote areas.

Detailed Explanation

Information and communication technology (ICT) has made it possible for people and businesses to interact with one another across the globe as if they were next door. This technology covers a wide range of tools, including the internet, smartphones, and email. It facilitates instant communication and information sharing, which are vital for making business decisions and improving productivity.

Examples & Analogies

Think about a student sending a project to their teacher using email. The teacher can review and provide feedback in minutes, regardless of where they are located. This instant communication mirrors how businesses operate globally; they need quick exchange of information to respond to market demands.

Liberalisation of Trade Policies

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Starting around 1991, some far-reaching changes in policy were made in India. The government decided that the time had come for Indian producers to compete with producers around the globe. It felt that competition would improve the performance of producers within the country since they would have to improve their quality. This decision was supported by powerful international organisations.

Detailed Explanation

Liberalisation refers to the process of removing trade barriers and restrictions so that foreign goods can enter the market more easily. In India, starting in 1991, the government recognized that protecting domestic industries from international competition was hindering their growth. Therefore, they began allowing imports without heavy restrictions, which compelled local companies to improve quality and efficiency to stay competitive.

Examples & Analogies

Imagine a sports team that always plays against weak opponents. They may never improve their game. But if they start playing tougher teams, they’ll have to practice harder and become better players. Similarly, the Indian government believed that competition from foreign firms would help local businesses grow stronger.

Role of Multinational Corporations (MNCs)

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MNCs are playing a major role in the globalisation process. More and more goods and services, investments and technology are moving between countries. MNCs are looking for locations around the world that are cheap for their production.

Detailed Explanation

Multinational corporations are major players in the globalisation process because they establish production facilities across multiple countries. They look for countries where labor and production costs are lower, allowing them to manufacture goods more cheaply. This not only leads to greater profits for MNCs, but also increases the flow of goods and services between nations.

Examples & Analogies

Consider a clothing brand that sources fabric from Italy, produces garments in Bangladesh due to lower labor costs, and then sells those garments in Europe and America. By doing this, the brand maximizes profits while providing jobs and economic activity across different countries.

International Trade Organisations

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WTO establishes rules regarding international trade and sees that these rules are obeyed. About 160 countries of the world are currently members of the WTO.

Detailed Explanation

The World Trade Organization (WTO) is an international body that regulates and facilitates trade between countries by creating guidelines and rules that members agree to follow. By ensuring that countries adhere to these rules, the WTO seeks to create a more equitable trading system and reduce trade barriers globally.

Examples & Analogies

Think of the WTO like a referee in a sports game; the referee ensures that players follow the rules to keep the game fair for both sides. Similarly, the WTO aims to maintain fairness in international trade practices, benefiting all participating countries.

Definitions & Key Concepts

Learn essential terms and foundational ideas that form the basis of the topic.

Key Concepts

  • Globalisation: The increasing interconnectedness among countries driven by trade and investment.

  • Multinational Corporations: Major players in globalisation, facilitating the movement of goods and services across borders.

  • Liberalisation: The process of removing trade restrictions to foster economic growth and foreign investment.

  • WTO's Role: Influencing global trade policies and practices, especially for developing countries.

Examples & Real-Life Applications

See how the concepts apply in real-world scenarios to understand their practical implications.

Examples

  • Ford Motors establishing a manufacturing plant in India to take advantage of lower production costs while exporting cars globally.

  • The rise of local Indian companies benefitting from the influx of foreign investment and competition post-1991 liberalisation.

Memory Aids

Use mnemonics, acronyms, or visual cues to help remember key information more easily.

🎵 Rhymes Time

  • Global trade is fast and wide, technology's the trusted guide.

📖 Fascinating Stories

  • Once a firm wanted to spread its wings, technology helped, and business sings! They found new markets across the sea, liberalisation made it easy as can be!

🧠 Other Memory Gems

  • To remember key factors: TLI - Technology, Liberalisation, International Organizations.

🎯 Super Acronyms

WTO stands for **World Trade Organization**, a body to regulate trade.

Flash Cards

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Glossary of Terms

Review the Definitions for terms.

  • Term: Globalisation

    Definition:

    The process of increasing interconnectedness among countries, particularly in terms of trade, investment, and culture.

  • Term: Multinational Corporations (MNCs)

    Definition:

    Companies that operate in multiple countries, controlling production facilities or offices abroad.

  • Term: Liberalisation

    Definition:

    The removal of restrictions and barriers to free trade to promote economic exchange.

  • Term: WTO (World Trade Organization)

    Definition:

    An international body that regulates trade rules and agreements among nations to facilitate free trade.

  • Term: Foreign Investment

    Definition:

    Investment made by a person or entity in one country in a business or assets located in another country.