urban geog global is at ion

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l: Globolisolion

specimen 'A' Level Questions1. Discuss ihe chorocteristics ond processes of globolisoiion.2. Discuss whot is meont by the'globqlisqfion of economic octivity'3. Discuss the impqct of globqlisqtion on the world economy.

Def inition of Globolisotion/Whst is 6lobqlisotion?6lobolisotion is ihe process enqblang economic qcfivities fo operoie iniernolionolly,leoding to the ropid increose in ihe shore of economic octivily foking ploce ocrosshotionol boundories.It referc to ihe mojor increoses in worldwide trode qnd exchonges in onincreqsingly open, integtated ond borderless internotionol economy. There hos beenremqrkoble growth in such trode ond exchonges, not only in trodiiionol internoiionoltrode in goods ond services, bul olso in exchonges of currencies, in copilolmovements, in technology tronsfer, in people moving lhrough internotionol trovelond migrotion ond in internolionol flows of informqtion ond ideos.

Definition of 'globolisotion of economic octivity'It meons the greoter glo6ol connectedness of economic qctivities, thnough'tronsnotionol lrode, copifol flows ond migrotion. It is olso lhe worldwide process ofhomogenizing prices, producfs, woges, toles of interesl ond profits. It is o driveloword o globolised economic system domanoled by tronsnoiionol corporole lrodeond finonciol institutions fhol ore not occountoble to dernocrotic processes ornotionol governmenls

/vlust krow concepts:6lobolisqtion'Shrinking world'Technologicol chongeCommunicotions technologyInformotion technolo


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Chqrqcferistics of 6lobolisotionBefore the Firsl World Wor lorge cross-border flows of goods, copitol ond peopletook ploce. Thqi period of integrotion, like the present one, wos driven byreductions in trode barriers ond by shorp folls in fronsport costs, thonks to ihedevelopment of roilwoys ond steomships.fn controst, todoy's globolisotion is being driven by plunging communicotion cosfs,creoling new woys fo orgqnise firrns ot q globol level.6lobolisotion hos f ive chorocteristics;1. Copitol hos become more globclly mobile, so thot inveslments ere mote

foolloose.2. The mqrkef hos become more dereguloted, breoking down governmentql ondpoliticol confrol.3. Powerful tronsnotionol firms ore lhe principol ogents of chonge.4. The noiion-stole or nolionol polificol forces hove been weokened, giving woy totronsno-tionol corporotions.5. Duol trends hove been set in mofionj one trend -ioword more homogeneous globolcondilions os o resuh of widespreod compelition, ond the other lowqrdenhanced differences os locqlities strive to mointoin their idenlities.

Processes of Globolisotion (the foctors thqi hove contributed toolobolisotion)6lobolisotion is the resulf of o numbet of intereloted processes including:1. The growfh ond relotive importonce of foreign direct invesiment ond

trqnsnqtionol corporolions;2. The internoiionolisotion of finonciol mqrketsj3. The coniinuing development of conmunicotion ond tronsporl fechnologyj4. Deregulotion ond liberolisqtion5. chonging slructure of firms1. The growth of fg?eign direct investnent ond the rise of tronsnotionolcorpordtions (TNcs)The lorgesi source of externol funds to developing counfraes is not developmeniossistonce - whether biloterol, muliiloterol, loons, gronts, officiol or other. It is


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Ioreign ditecl investment (FDI). FDI represents on enormous supply of finonciolresources, technology ond jobs ond is ol greot potenfiql benefit to emetgingeconomies. FDf comes from the privqte sector, from lorge componies willing toinvest qnywhere. These componies, colled "trqns-notionol componies" (TNC5), oreimportont bui occideniol porticiponts in the developnent process.In 2OO2, lhe most recent yeor for which full doio ore ovoiloble, FDf mqdelhroughout the world toiolled sorne U5$651billion. While most FDf goes todeveloped countries; for developing countries it is by for the lorgest source ofexlernol finonce.A trqnsnotionol corporotion (TNc) is simply o lorge business orgonisqfion whichoperotes qnd hos ownership of ossets in more thon one country. A TNC couldlherelore operote in just two countries. Sometimes the term tronsnotionolcorporotion is used interchongeobly with multinqtionol corporqiion (MNC) but thelotter reolly inplies thot ihe orgonisotion is operoting in nore thon two couniries.TNCS ore responsible for o lorge petcentage of tofol world employment, producfionond trode ond sre lherefore the mojor coniribuior to Foreign Direct Investmeni(FDI) - plonts, equipment ond property, which is owned by businesses outside iheirhome country.Eecouse o{ TNC octivity, produci design, engineeting, production, morkeling ondsoles (os well os ossocioted fincncing ond olher business services) hove becomemore globolly dispersed, yet increosingly coordinoled ond integrcted.2. The iniernotionolisotion of finqnciql morkets (finonciol deregulotion)fn lhe pasl...In ihe 1960s, bonks ond lhe finonciql seclots wete highly reguloied by notionolgovernmenis to ovoid finqnciol crises. Notionol finonciol mqrkets were highlyregulofed by meons of price controls ond product restrictions ond were highlysegmenled by octivily e.g. bonks engoged in certoin finonciol services, securitieshouses in others. Neiiher wos ollowed fo perforrn the funciions of the other.Foreign firns were prohibited from entering ncfionol morkets.Governmenls hqvebeen especiolly wory of o foo-reody expqnsion of ihe branches of foreign 6onks ondinsuronce componies.

The requlolory wolls hove been crumbling - even collopsing oltogether in sone coses.The ropid growth of the Eurodollqr morket outside nolionol regulqtory conirol wos


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(ii)

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cerJoinly one of the mqlor stimuli iowords on in-ternotionol finonciol Systen.Growthof this mqrkef pui pressure on internotionolisoJion of finonce, leading lo gteotetderegulotion ond even more pervosive internotionolisotion. Ii wos rcinforced 6y lheqdvoncements in telecommunicotions ond infornotion technologies, discussedeqrlier, which mode possible the internotionolisotion of finonciol ironsoclions.Deregulotion hos been oimed qt primqrily three oreos:-o) The opening of new geogrophicol morketsb) The provision of new finonciol productsc) Chonges in the woy in which prices of finonciol services qre se.t.Exa nples of de regulafion'Msjor deregulotion hos occurred in oll the mojor economiesl(i) A series of chonges in the U5 hqs both eosed the entry of foreign bonks inloihe domesiic morket ond ollowed fqcilitoted the exponsion of US bonksoverseos

In the UK the 'Big Bong' of OcJober 1986 removed the borriers whichpreviously existed between bonks ond securities houses ond ollowed the entryof foraign firms into the slock Exchonge.In Fronce the 'Little Bang' of 1987 groduolly opened up the French SlockExchonge to ouisiders ond to foreign ond donestic bonks.

3. Advoncemenis in lechnologyThe processes of economic alobolisolion hqve one fundqmeniol reguirement: thedevelopnent of tronsportotion ond communicolions technologies ihot overcome thefrictions of spoce qnd iime. Technologicol odvonces hqve significontly lowered thecosts of ironsportqtion qnd communicotion ond dromolicolly lowered the costs ofdoto processing ond informoJion storoge ond ?elrieval. fhe lolter stems fromdevelopments over ihe lost lew decodes in elecfronics, especiolly ihe microchip ondconputer revolutions. Electronic moil, the Iniernei, cnd the World Wide Web arcsome of the monifeslotions of this new technology.

i. Commqnicotions lechnologyCommunicoiions qre the meons whereby informotion is trqnsmitted from ploce loploce in fhe form of ideos, insfructions, imdges efc. fi wos not long before thetelegroph industry went infernotionol, leoding to on unprecedented level of virtuollyinstonfoneous contnunicotion ocro55 greqt dastonces.


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Two innovotions hove been especiolly significont in the development of the globoleconomyi solellite conmunicotions ond opiicol fibres technoloqies.Satellile lechnology nevolutionolised globol comrnunicotions from the mid-1960swhen the Eorly Bird or Intelsot I sotellite wqs lqunched. It mode possible of theneor-instontoneous teception of informolion qlmost qs soon os the informotion isproduced. fi ollows simuhoneous telephone conversotions ond felevisuol tronsfers,fociliioting the coordinolion of cqpitol occunulotion in diverse locotions qround iheworldOptical fibre fechnology, first developed in the 1970s in the UsA, hos o hugecorrying copocity ond is oble io ironsmil informotion ot very high speeds with highsignol strength. The geogrophicol spreod of opticol fibres hos increosed to includeEurope, Jopon, Middle Eqsi, fndio ond Soulheost Asio. The copocity of oceoniccobles hqs gteatly incteosed such thol informotion con be ironsmitted ot o rote of60006bps befween U5-Europe. Since 7993, coble sysiems hove overloken sqfellitesystems in lhe ironsmission of voice froffic qcross the Ailoniic.

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The improved lechnoloqy hos olso meont thot lhe trqnsfer of informoiion becomesmore cost-effacient.The Infemet (its role in globalisafion)The pioneeting thinker obout the medic, Morsholl Mcluhqn, coined the term 'iheglobol villoge' in the 1960s lo express his belief thot eleclrcnic communicoiionwould unite ihe world- The odvent of the Internet The odvent of ihe intetnel overthe post 10 yeors hos porolleled lhe emergence of globolisotion os o concepf.


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Alihough the Internet is tronsmilted olong troditionol fibre ond sotellitetechnology, innovotions in cyberspoce such qs Skype ond web-com hove modecornmunicotions ocro55 for removed territories even mote economicql. Within fhespoce of just o few yeors, these developnents in the communicotions medio hovebeen joined 6y on even more revolutionory technalogy thol provides the potentialfot inferaclive communicotions on o globol basis. The groph below (ftntng thespread of technologies) shows, odvcncement in communicotions technologiesoccurred ot such on unprecedenled tole thot it only took 4 yeors from iheInternet's first estoblishment to reoch 50 million users.

Timing the Spread of Technologies

Gr.lph by Benjamin Holt, Jul) 1999Soufte: E0nomirt

Mony wilhjn developing coLrntries see the infernet os on opporlunity -lo gorn occessio knowledge ond services from oround the world in o woy ihoi would hove beenunimqgindble previously. Internel k,osks, mostly focilitoting emoil with overseosrelotives, for exomple, ore springing up in nony ports of Africo.The inlernet moy olso focilitote opporlunities for economic development inindusiries such os tourism.The internet ond technologies such os tnobile telephony ollow develoPing counlriesto leqpfrog steps in their development of infroslruclure. A poor lond line telephone

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systern in the Philippines, for exomple, is being rqpidly bypossed by mobile phoneswilh internet occess.6lobolazqtion hos drosticolly improved occess of technologicol lolecomers ioodvonced technologies ond, lo fhe exient thot technologicol upgroding is imPortonifor developmenl, ii provides o unique opporiunity for low-income countries to roiseper copifo income. Reseorch shows thoi imProved qccess to technology imports isimprovinq the demond for skilled lobor in mony low-income countries.

ii. TronsportotionlechnologyTronsporiolion systems refer to the meqns whereby tongible entiiies e.9. humonbeings, goods ate ttonsferted from ploce io ploce. Molor breckihroughs in'tronsporf otion sysf ems include:-. Steam engine. Use of iron ond steel for tronsportotion vessels. Link of overlond ond oceonic tronsportotion (e.9. fhe cutting of the conolsol 5uez ond Ponomo)r Roilwoy ond sfeomship. commerciol let oircrofi. Contoinerisoiion (on innovotion thot simplified tronsshipnent of fteighlfrom one mode of tronsportotion io onother, increosed ihe security ofshipmenls, and greotly reduced ihe cost ond tine involved in movingfreighl over long dislonces)

These innovotions lronslofe into cosi sovings. The nel effect is thot the worldseems to become o smoller ploce becouse ihe seporotion beiween Ploces, meqsure intime, becomes smollet.Ihe effect is known os fime-spoce compression.4. Spreod of LiberolisoiionThe introduction of liberolisotion policies qcross the developing world ushered inlhe forces of qlobolisction. Liberolisotion tefets to o decreose in (usuolly) theintervention of the state/govetnmenf in poriiculor oreqs of sociol or economicpolicy.

i. EconomicliberolisotionEconomic liberqlisotion is o term used to tefer fo o comprehensive progrom ofeconomic policies desiqned to dereguloie notionol economies. Economic liberolisqfionmorks o move owoy from high levels of government involvemenl ond regulotion ofthe econorny, consideroble stqte ownership of infrosiructure ond troding oclivilies,ond high toriff profection of internolly monufoctured goods through impori


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substiiuiion iowords low levels of governmeni involvement in, ond regulotion of theeconomy.Strqtegies to liberolise economies hove included: reducing the fiscql deficit,broodening of the tox bose, deflotion policies, lobour morket dereguloiion,increasing efliciency in the econorny ond corporotisoiion, then selling off ofgovernmen-t ossets. Economic liberqlisotion is o meons to bring oboui globol morkelsos it breoks down institutionol borriers to free trode.

Trqde LiberolisotionThe moin instiiuiions, which hove been leoding ihe process towqrds trodeliberolisotion, ore the Inlernotionol Monetory Fund (Ir[F) ond lhe World Bonk oswell os the World Trode Orgonizotion (WTO). The fMF ond World Bonk ore seenmoinly os lending instilulions. The WTO is however the rnoin orgonizotiono\etseeing the process of trode liberolizotion, erodicoting trode borriers ond slopcompef i iive irode policies.The rotionole behind trode liberqlizqtion suggests thoi the eliminqfion of borriers'fo frode, the dismonfling of ptoteclive regimes ond the removol of governmentcontrol over lhe morkef will fuel competition. This competition, it is orgued, will inturn generqte efficiency ond productivity os firns try to ensure their survivql inthe morket place. Thetefore componies or sectors thot foil in this competiiiveenvironmenf ore soid to do so becquse they ore bosicolly inefficient ond weok.

5. Chonging structure of firmsA fifth reoson for globolisoiion hos been chonges in insfitutions, whereorgonisolions hove o wider reoch, due in porf, to iechnologicol chonges ond to themore wide-ronging horizons of their monqgers, who hove been empowered byodvqnces in comnunicotions. Thus, corporqiions thot hod been mqinly focused on olocol morket hqve extended lheir rcnge in ierms of morkets ond productionfocilities to o nqtionol, multinolionol ond internqtionol or even globol reoch. Thesechonges in industriql sfructure hove led to increoses in the power, profits ondproductivity of those firms thot con choose omong mony notions for their sourcesof moteriols, producfion focilities ond morkets, quickly qdjusting io chonging morketcondifions. Viriuolly every mojor notionol or internotionol entetptise hos such ostructure or relies on subsidiories or strqiegic ollionces lo obtoin o comporobledegree of influence and flexibility.


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ImDqcf of Globolisotion on the World Economv1. Growth of foreign direct investmenlOne mojor impoct is lhe growih ol loreign direct investmeni (FDI) ot o Prodigiousrqte, one ihot is much greqter thon ihe growth in world irode. Such investmeniploys o key role in fechnology tronsfer, in industriol resfructuring, ond in iheformoiion of globol enterprises, oll of which hove mojor impocls oi the notionollevel2. Increosing competition between countriesGlobqlizotion hos led to growing competilion on o globol bosis. While sorneindividuols ond orgonisotions feor competilion, there qre mony beneficiol effects olcompetiiion lhol cqn increose production or efficiency. Competifion ond thewidening of morkets cqn leod to speciolizqtion ond the division of lqbour, qsdiscussed by Adom Smith ond oiher eorly economists writing on the 5enefits of ornorkei sysiem. Speciolizqtion ond the division of lobour, with their irnplicotions forincreoses in production, now exist not just in o nqtion but on o worldwide bosis.

3. 'Shrinkoge of dislonce'Conodion qcodemic Morsholl McLuhqn used ihe term'globol villoge' to describe thebreokdown of spotiol borriers qround the world. McLuhon orgued lhof thesimilorities between plqces were greoler lhon lhe dilferences between them, ondthof much of the world hod been cought up in the sone economic, sociol ond culfurolprocesses. He suggested thot economic octivities operoted ot o globol scole ondthot ofher scoles wete 'ecoming less importont.Technologicol chonges in tronsport, communicolion ond closer integrotion ofproducls qnd finonciol morkets ocross the world hove occeletoled this process ofglobol shrinkoge. Alihough lhe world hos indeed shrunk in relotive letms, we needlo be owore ihot such shrinkoge hos been ond continues to be highly uneven.4. spotiol division of lhe globol economyAt o crude level of onqlysis, ii is possible 1o diff ercntiote between two groups:(i) The highly skilled, highly poid decision-moking, teseorch ond monogeriol

occupotions. Ai o globol scole, these occupotions ore locqfed in MEDcs. At onqfionol level, ihese ore concentroted in the econornic core tegions of lhecountry.


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(ii) The unskilled poorly poid ossembly occupotions. Assenbly produclion islocoied in LEDCs thot offer low lqbour cosis. At o notionol level lheseoccupotions ore locoted in lhe cheop peripherol Ports.

5. Increosed mobility qnd flexibiliiyThe drive for ony compony or orgonisotion io compete on o more "globol"internoiionol morket, hos led io increosed mobility of monPower, of professionolcompe.fences ond resources (like mobilify of finonciol resources). Geogrophicolmobiliiy is the mosi obvious focet. However, it is importont olso noi to forgel otherdimensions of mobility: professionol or iob mobilify, trons-disciplinory mobility,iechnologicol mobiliiy etc. rn o.iher words, mobility con be linked with rneniolflexibilaty ond ihus, with innovqtion.

6. Spotiol interdependenceEvents ond process in one coun-try impoct on thot els ewhere in the world, hence,ollowing for shoring of ideos, iechnology ond innovotions.

7. Accentuotion of regionol disporiliesDcs ond NICS hsve \enefiled from globol irode ond hove becone more powerfulond weolthy. yet, inveslment is selective. This meons ihoi LDC5 ond mony AfriconLEDC' teceive very liftle benefits from globol investmeni becouse they hove less tooffer poteniiol investors.Globolisoiion olso reinforces uneven development within couniries - investment isofien concentroted in urbcn oreos (core regions). This leods to inqeose in rurql iourbon migrotion with oll the problerns of ropid urbon growth, ond ot the some tirnereinforces the lock of invesimenl ;n rurol oreos (PeriPhery regions).

urban geog global is at ion

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