Sovereignty: The state of being independent and being able to make your own decisions.
Globalisation has meant that many political borders are now much more porous, with goods, ideas, money and people able to travel much more freely between locations. The increased movement can bring both positive and negative impacts. Below is a table of some of these impacts.
HOW AND WHY
ADVANTAGES
DISADVANTAGES
GOODS
Air freight
Growth of TNCs including offshoring
Growth of global brands
Greater advertising
Containerisation and air freight
Greater choice (although local brands may be lost)
Possible cheaper products (economies of scale)
Year round choice for seasonal and perishable products e.g. food
More reliable availability
Growth of monopolies or near monopolies e.g. Microsoft
Small businesses close
Homogenisation
Cultural dilution
Loss of seasonality
Dependence on TNCs and their services
CAPITAL
(MONEY)
Global banks e.g. HSBC
Internet and telephone banking
Credit cards and services like Paypal
ATMs
Range of products e.g. loans, mortgages and overdrafts
Trade in stocks, bonds, etc.
Online shopping e.g. Amazon
Ease of travel e.g. travellers cheques and ATMs
Transfers between accounts and countries
Global credit crunch
Limited access for poor (more micro-loans offered no by banks like Grameen)
Credit card fraud
Overspending and debt
Collapse of pension funds
Collapse of financial institutions e.g. Glitnir and Landsbanki in Iceland
LABOUR
Greater passport ownership
Visa relaxation
Cheap flights
TNCs (global division of labour - footloose workers)
Global business language - English?
Remittances sent back to friends and family
Reduced unemployment as people move to jobs
Sharing of ideas and skills (division of labour)
Possible "Brain Gain' for receiving countries
Production of cheaper products because of cheaper labour
Spread of job skills and knowledge
Reliance on foreign labour
Racial tension between ethnic groups e.g. Poles in the UK
Economic leakage as earning are sent home
Possible 'Brain Drain" for losing countries
Lack of skills and training amongst home workers
IDEAS
Internet
Media organisations e.g. CNN, BBC and Al Jazeera
TNCs
Diplomacy (Embassies and Consulates)
Global organisations e.g. World Bank, IMF
Economic migrants
Military e.g. occupation of Iraq by US and its allies
Shared technology e.g. nuclear and renewable energy
Improved human rights through campaigning of governments and NGOs
Improved freedom of press and speech
Cultural imperialism - ideas imposed rather than voluntarily adopted
Loss of sovereignty
Ideologies might not always been suitable
Prescribed policies like SAPs can sometimes cause problems.
Many people blame globalisation and the associated development of TNCs and international organisations (including trading blocs) on reduced national sovereignty. Below is a list of some of the World's major trading blocs and a summary of the impacts that the EU has had on Europe (positive and negative).
EU: European Union (27 members in Europe - see below)
NAFTA: North American Free Trade Agreement (Mexico, US and Canada)
ASEAN: Association of South East Asian Nations (10 member states in SE Asia)
GCC: Gulf Cooperation Council (6 Gulf countries - UAE, Qatar, Bahrain, Oman, Kuwait and Saudi Arabia)
MERCOSUR: Mercado Comum do Sol (Southern Common Market) - 4 members in South America (Brazil, Argentina, Uruguay and Paraguay)
CARICOM: Caribbean Community and Common Market (15 Caribbean nations)
APEC: Asia-Pacific Economic Cooperation (21 Pacific rim countries)
The European Union (EU)
The EU started life with six members (Belgium, The Netherlands, Luxembourg, France, Italy and West Germany) in 1957 when they signed the Treaty of Rome to create the European Economic Community (EEC). In 1973 the community (now the EC) extended to include Denmark, the United Kingdom and Ireland. In 1981 Greece joined and in 1986 Spain and Portugal joined. In 1993 the Maastricht Treaty created the European Union (EU) and in 1995 Austria, Finland and Sweden joined. In 2004 the EU saw its largest increase in size when Cyprus, Malta, Slovenia, Slovakia, Hungary, Latvia, Lithuania, Estonia, Poland and the Czech Republic all joined. In 2007 Romania and Bulgaria joined making 27 countries in the EU. Croatia is due to be the next country to join in 2013. Other countries like Serbia, Macedonia and Montenegro are official candidates, while Turkey and Iceland are negotiating their status.
The EU started off life with the aim of improving economic cooperation. However, it has now developed into a much bigger and more developed economic and political union. The single market, which allows the free movement of most goods, services, money and people to move freely between countries is still at the centre of the EU, but the EU now also looks at development, aid, resources, equality, democracy, transport, the environment, working regulations, etc. Membership of the EU means that some decision making is handed to the EU and its seven main institutions (there are other more specialised institutions); the European Parliament, the Council of the EU, the European Council and the European Commission, the European Central Bank, the European Court of Auditors and the Court of Justice of the EU. Decision making is sometimes known as competence in the EU - this means responsibility and autonomy.
In 2007 (coming into force in 2009) all EU members signed the Treaty of Lisbon. The treaty updates the Maastricht and forms a constitutional framework for the operating of the EU. Amongst other things the treaty created a new foreign minister, redistributed voting power, removed the veto on many policies and created a new European Council President. The treaty was unpopular amongst many euroskeptics who said that it handed too much power to the EU. The treaty had to be ratified by each member state (either a vote in parliament or a national referendum). Some countries like the UK and Ireland asked for opt outs in order to pass the treaty. The UK and Ireland asked for opt outs on asylum, visas and immigration.
Below is a list of some of the ways that EU member states lose sovereignty:
Exclusive Competence: The Union has exclusive competence to make directives and conclude international agreements.
Shared Competence: Member States cannot exercise competence in areas where the Union has done so.
Supporting Competence: The Union can carry out actions to support, coordinate or supplement Member States.
Monetary policy for members of the Eurozone e.g. interest rates
Members must follow a common fisheries policy to preserve marine biodiversity
Members must follow a common customs union
Competition rules must be followed with the internal market (reduced protectionism)
Agriculture policy
Consumer protection and rights
Energy e.g. renewable targets
Transport
Security and justice
Workplace safety
Environment
Tourism
Education
Culture
Sport
Industry
Public health
Disaster prevention
Eurozone: These are the countries that share the common currency in the EU, the Euro. There are currently 17 members of the Eurozone. Apart from the UK and Denmark the other countries are obliged to join once they have met certain economic criteria.
Euroskeptic: Someone who is against the EU and European integration. Euroskeptics are normally concerned about the loss of national sovereignty.
UKIP: This is the UK Independence Party. It is a political party in the UK that believes the UK should leave the EU so that it can make all of its decisions independently.
Member citizens can travel freely between other members to go on holiday (saves space in your passport too!)
The above should increase tourism revenue for all member countries
Member citizens can choose to work freely in other countries
Within the Eurozone it is not necessary for currency conversions, easing trade and tourism
Undeveloped areas of the EU can receive support and assistance from the EU
Reduced risk of internal conflict and stronger military bloc to defend external borders
Bailouts for poorer countries e.g. Greece from stronger members e.g. Germany
Subsidies from the common agricultural policy (CAP) for farmers
Voice in the G20 for smaller members of the EU
Countries in the Eurozone lose control over their monetary policy e.g. interest rates
Free movement of members may lead to influxes of workers leading to racial tension e.g. Poles in the UK
Economic problems in one country e.g. Greece, Ireland and Portugal can cause Europe wide recessions and the need for bailouts
Enforced fishing quotas which may harm fishing industry e.g. Spain and UK
Imposition of working regulations e.g. working week
Imposition of metric measurements e.g. The UK being forced to use kilograms instead of pounds
Growth of independence and nationalist parties e.g. UKIP and BNP in the UK
Brain drain from poorer eastern European countries
Cost of supporting weaker nations
Transnational Corporations (TNCs)
TNCs: Transnational corporations are companies that operate in more than one country. TNCs will normally locate their headquarters in their home country, for example Toyota has its headquarters in Japan. Headquarters are normally located in the TNCs country of origin because this is where the company was first established, where most of the profits will return to and where most of top management team is from. Most TNCs will also have R&D (see definition above) facilities which they will locate in developed country where there is a skilled workforce and a high level of technology. However, TNCs will often chose to offshore there manufacturing plants to LEDCs where productions costs are lower (cheaper labour, cheaper land, etc.)
Research and Development (R&D): Scientific facilities that investigate, design and produce new or updated products. For example Google and Microsoft are constantly researching and developing new pieces of software. TNCs are constantly carrying out R&D because they want to make their products better and attract new customers.
FDI: Foreign direct investment is money spent by a foreign company in a country. FDI might be the building of a new factory, new road or educating a workforce. Countries can try an attract FDI in a number of ways including:
Offering free or cheap land
Relaxing planning controls on new buildings
Improving transport links e.g. roads, rail lines, airports, ports
Helper with worker recruitment
Help with worker training
Access to new market place
Guaranteed water and electricity supply
Improved communications i.e. phone and internet
Grants and/or cheap loans
Reduced tax rates or no tax
Free trade areas / export processing zones / enterprise zones
Visas for foreign workers
Access to raw materials
Relaxed workplace regulations
Relaxed environmental regulations
Help with worker housing and related services
Deindustrialisation: When factories and industry starts to close down in a country. The UK has gone through deindustrialisation because production costs became too much and many companies chose to move overseas.
Monopoly: Sufficient control over a market place/product that makes manipulation of prices/supply/etc. possible.
ADVANTAGES OF TNCs IN LEDCs
DISADVANTAGES OF TNCs IN LEDCs
Creates jobs for local people
Locals with jobs then spend money in their local economy at local businesses and therefore there is a positive multiplier effect as extra money gets added to the local economy.
TNCs will pay local and government taxes and therefore increase the government budget.
Jobs at a TNC will be in the formal economy, so hopefully better regulated in terms of safety, pay, etc.
Improves workers skill and education level
They introduce new technology into the country
Infrastructure like roads and ports are often upgraded and benefit the whole economy
Diversifies the economy, might move away from the reliance on one industry like farming or tourism
The country receives prestige for attracting TNCs and investment into the country.
Many of the best paid managerial jobs go to foreigners
Local workers often do manual jobs which are poorly paid and often workers suffer exploitation (long shifts, no breaks, etc.)
There will be some economic leakage as profits from TNCs go back to their home country
Increasingly manufacturing processes are becoming more mechanised so less workers are needed in factories. Many top jobs may go to workers from abroad
One of the attractions of LEDCs is cheap labour, but as a country develops labour costs increase and TNCs may move to cheaper locations.
Products produced by TNCs maybe too expensive for locals to buy. TNCs may also use local raw materials. Products may not even be intended for local market place.
Electricity and water supplies maybe diverted away from local population
The increased demand created by TNCs may cause local inflation. Land may also become privatised and unavailable to locals.
If the government is building new roads or a port for a TNC it probably means that they can't spend as much money on education or healthcare. New roads, ports, etc. may increase congestion on roads.
TNC decision makers are often foreign so policies of TNCs may not always benefit local people.
Increased dependency on foreign companies. Local domestic companies may close.
TNCs are often criticised for having too much power. Below is a list of 25 of the world's biggest TNCs, based on their market value (share price). Nearly half of the companies are headquarted in the US, but China already has four and this figure will only increase in the future as the Chinese economy continues its rapid growth. The TNCs are have a turnover more than many LEDCs. For example ExxonMobil employs about 84,000 people, has a turnover of about $383 billion and a profit of about $30 billion (this is nearly twice El Salvador's total GDP). They are criticised because they employ so many people and earn so much money that they hold power over countries who fear losing the investment of TNCs. Because they can afford the best technology, the most skilled workers, the best lawyers they can also draw up very favourable contracts which may exploit poorer countries.
Loss of sovereignty
Sovereignty: The state of being independent and being able to make your own decisions.
Globalisation has meant that many political borders are now much more porous, with goods, ideas, money and people able to travel much more freely between locations. The increased movement can bring both positive and negative impacts. Below is a table of some of these impacts.
HOW AND WHY
ADVANTAGES
DISADVANTAGES
GOODS
CAPITAL
(MONEY)
LABOUR
IDEAS
Many people blame globalisation and the associated development of TNCs and international organisations (including trading blocs) on reduced national sovereignty. Below is a list of some of the World's major trading blocs and a summary of the impacts that the EU has had on Europe (positive and negative).
EU: European Union (27 members in Europe - see below)
NAFTA: North American Free Trade Agreement (Mexico, US and Canada)
ASEAN: Association of South East Asian Nations (10 member states in SE Asia)
GCC: Gulf Cooperation Council (6 Gulf countries - UAE, Qatar, Bahrain, Oman, Kuwait and Saudi Arabia)
MERCOSUR: Mercado Comum do Sol (Southern Common Market) - 4 members in South America (Brazil, Argentina, Uruguay and Paraguay)
CARICOM: Caribbean Community and Common Market (15 Caribbean nations)
APEC: Asia-Pacific Economic Cooperation (21 Pacific rim countries)
The European Union (EU)
The EU started life with six members (Belgium, The Netherlands, Luxembourg, France, Italy and West Germany) in 1957 when they signed the Treaty of Rome to create the European Economic Community (EEC). In 1973 the community (now the EC) extended to include Denmark, the United Kingdom and Ireland. In 1981 Greece joined and in 1986 Spain and Portugal joined. In 1993 the Maastricht Treaty created the European Union (EU) and in 1995 Austria, Finland and Sweden joined. In 2004 the EU saw its largest increase in size when Cyprus, Malta, Slovenia, Slovakia, Hungary, Latvia, Lithuania, Estonia, Poland and the Czech Republic all joined. In 2007 Romania and Bulgaria joined making 27 countries in the EU. Croatia is due to be the next country to join in 2013. Other countries like Serbia, Macedonia and Montenegro are official candidates, while Turkey and Iceland are negotiating their status.
The EU started off life with the aim of improving economic cooperation. However, it has now developed into a much bigger and more developed economic and political union. The single market, which allows the free movement of most goods, services, money and people to move freely between countries is still at the centre of the EU, but the EU now also looks at development, aid, resources, equality, democracy, transport, the environment, working regulations, etc. Membership of the EU means that some decision making is handed to the EU and its seven main institutions (there are other more specialised institutions); the European Parliament, the Council of the EU, the European Council and the European Commission, the European Central Bank, the European Court of Auditors and the Court of Justice of the EU. Decision making is sometimes known as competence in the EU - this means responsibility and autonomy.
In 2007 (coming into force in 2009) all EU members signed the Treaty of Lisbon. The treaty updates the Maastricht and forms a constitutional framework for the operating of the EU. Amongst other things the treaty created a new foreign minister, redistributed voting power, removed the veto on many policies and created a new European Council President. The treaty was unpopular amongst many euroskeptics who said that it handed too much power to the EU. The treaty had to be ratified by each member state (either a vote in parliament or a national referendum). Some countries like the UK and Ireland asked for opt outs in order to pass the treaty. The UK and Ireland asked for opt outs on asylum, visas and immigration.
http://europa.eu/
EU Enlargement - The Next Eight - BBC article
EU leaders sign landmark treaty - BBC article
The Lisbon Treaty - Questions and Answers - BBC article
EU summit: Greek second bailout to follow debt swap - BBC article
Euro crisis hangs over latest Brussels EU summit - BBC article
Euroskeptic: Someone who is against the EU and European integration. Euroskeptics are normally concerned about the loss of national sovereignty.
Euroskeptic becomes EU leader - BBC article
UKIP: This is the UK Independence Party. It is a political party in the UK that believes the UK should leave the EU so that it can make all of its decisions independently.
UKIP stance on Europe 'becoming mainstream' - BBC article
ADVANTAGES OF EU MEMBERSHIP
DISADVANTAGES OF EU MEMBERSHIP
Transnational Corporations (TNCs)
TNCs: Transnational corporations are companies that operate in more than one country. TNCs will normally locate their headquarters in their home country, for example Toyota has its headquarters in Japan. Headquarters are normally located in the TNCs country of origin because this is where the company was first established, where most of the profits will return to and where most of top management team is from. Most TNCs will also have R&D (see definition above) facilities which they will locate in developed country where there is a skilled workforce and a high level of technology. However, TNCs will often chose to offshore there manufacturing plants to LEDCs where productions costs are lower (cheaper labour, cheaper land, etc.)
Research and Development (R&D): Scientific facilities that investigate, design and produce new or updated products. For example Google and Microsoft are constantly researching and developing new pieces of software. TNCs are constantly carrying out R&D because they want to make their products better and attract new customers.
FDI: Foreign direct investment is money spent by a foreign company in a country. FDI might be the building of a new factory, new road or educating a workforce. Countries can try an attract FDI in a number of ways including:
Deindustrialisation: When factories and industry starts to close down in a country. The UK has gone through deindustrialisation because production costs became too much and many companies chose to move overseas.
Monopoly: Sufficient control over a market place/product that makes manipulation of prices/supply/etc. possible.
ADVANTAGES OF TNCs IN LEDCs
DISADVANTAGES OF TNCs IN LEDCs