Tag: Globalisation

Globalisation – Key Concepts and Definitions

Selected definitions of key terms for A-level sociology students studying globalisation and global development.

Americanisation

Where American culture and values erodes traditional local cultures gradually replacing them. A term associated with global pessimism, it isn’t usually regarded as something positive!

Communism

An economic system in which the means of production are owned in common and wealth distributed according to need.

Cosmopolitanism

where people or societies are tolerant of other people’s or societies’ ways of life and values; this is one of the positive consequences of globalisation as people increasingly come into contact with other ways of life and make an effort to enter into dialogue with diverse cultures and find ways to ‘live together’. Related concepts include reflexivity and detraditionalisation. The opposite of cosmopolitanism is fundamentalism.

Cultural Globalisation

The movement of ideas, attitudes, meanings, values and cultural products across national borders.

Cultural Hybridity

The emergence of a new cultural form out of two or more existing ones, leaving both forms changed without erasing the old.

Deregulation

Removing restrictions on businesses, for example reducing health and safety regulations.

De-traditionalisation

Where people have increasing choice about whether to stick to traditional ways of life; traditions become less stable as people increasingly question their traditional beliefs about religion, marriage, and gender roles and so on.

Economic Globalisation

The global expansion of international capitalism, free markets and the increase in international trade.

Fatalism

(Fatalistic Response to Globalisation) – the view that the world is powerless to resist globalisation.

Global Commodity Chains

Where networks of production, distribution and consumption of goods and services becomes increasingly stretched across the globe. The making of the physical products tends to be done in poorer countries, whereas the branding and marketing, tend to be done in the richer countries.

Global Risk Consciousness

where people in different countries are increasingly aware of and affected by international threats such as terrorism, nuclear war and global warming. There are two elements to risk consciousness (it pulls in two directions) – one is that we are more fearful and wish to ‘retreat’ from such problems and the other is that we are increasingly brought together in our attempts to overcome such threats.

Globalisation

The increasing interconnectedness and inter-dependency of the world’s nations and their people into a single global, economic, political and global system.

Glocalisation

Where people in developing countries select aspects of western culture and adapt them to their particular needs – associated with Transformationalism and critical of the pessimist theory that globalisation results in Americanisation.

Golden Straightjacket

Thomas Friedman’s term for the neoliberal policies countries must adopt if they are to experience economic growth and prosperity.

Ha-Joon Chang

Global pessimist who believes neoliberal policies primarily benefits wealthy countries and harm developing countries; referred to the WTO, World Bank and IMF as the ‘unholy trinity’.

Homogenisation

Things becoming increasingly the same; in global terms, the erosion of local cultures and the emergence of one global mono-culture.

Hybridised Global Identities

Where identities are increasingly a result of picking and mixing from different cultural traditions around the globe; implies more individual freedom to choose identity and greater diversity; associated with transformationalist theories of globalisation.

Hyper-Globalism

The belief that globalisation is happening and that local cultures are being eroded primarily because of the expansion of international capitalism and the emergence of a homogenous global culture; believe that globalisation is a positive process characterised by economic growth, increasing prosperity and the spread of democracy.

Imperialism

Where one dominant country takes over and controls another country or countries.

Jeremy Seabrook

A pessimist globalist who believes that globalisation is a ‘declaration of war’ upon local cultures as the expansion of western culture around the world destroys local cultures and reduces cultural diversity.

Mcdonalidisation

A form of rationalisation through which the principles of efficiency and predictability come to dominate more and more spheres of social life.

McWorld

Refers specifically to the spread of McDonalds’ restaurants throughout the world; and more generally to the process of Mcdonaldisation which underpins this – i.e. the increasing standardisation of corporate products and the emergence of a global, Americanised monoculture.

Neoliberalism

A set of right wing economic policies which reduce the power of governments and give more freedom to private enterprise – the three main neoliberal policies are deregulation, privatisation and lowering taxation.

Political Globalisation

The process where the sovereignty of nation states is reduced due to the increasing power of International Institutions, such as the United Nations.

Post Industrial Economy

An economy in which the service sector generates more wealth than the manufacturing of physical products. In such an economy more people will be employed in sectors such as leisure, education, business/ finance, and creative industries rather than in manufacturing.

Postmodernity

A globalised society with the following characteristics: a technologically advanced, mainly post-industrial service sector economy, high levels of consumption, lots of individual freedom to shape identities through consumption, and correspondingly high levels of cultural diversity; media-saturation and hyperreality; high levels of insecurity and uncertainty.

Privatisation

The transfer of publicly (state) owned enterprises to private sector companies.

Social Movements

Groups of people and/ or organisations who aim to help oppressed groups overcome oppression or change society in some way, believed to be beneficial. Global social movements involve co-operation of people across national borders, and their aims may sometimes clash with those of some national governments.

Thomas Freidman

An optimist globalist who believes that the world wide adoption of neoliberal policies by governments have resulted in economic globalisation, more trade between nations and increasing prosperity for all.

Time-Space Compression

Where the world ‘feels smaller’ as we are able to communicate with people in faraway places more instantaneously.

Transformationalism

A theory which holds that globalisation is a complex process involving a number of different two-way exchanges between global institutions and local cultures; it can be reversed and controlled.

United Nations

An international organization formed in 1945 to increase political and economic cooperation among member countries. The organization works on economic and social development programs, improving human rights and reducing global conflicts (source: Investovepida).

Weightless Economy

Refers to information based/ electronic products such as computer software, films and music, and information and financial services rather than actual tangible, physical goods such as food, clothing or cars. Such products can be produced, bought and sold much more rapidly than traditional, physical products, and thus trade in them is much more rapid, hence the term ‘weightless economy’.

Test yourself

Signposting and Related Posts 

Globalisation is one of the most important key concepts within the A-level sociology specification (AQA), and is specified explicitly as a topic which students must be able to understand, explain and evaluate.

It is especially fundamental to the second year Global Development module but students also need to be able to apply the concept to all other areas of sociology – such as education, the family and crime.

NB most students do not study the Global Development module (Beliefs in Society is a much more popular choice), but it is only within Global Development that you are going to look at the concept in real depth, which is why I advise sociology teachers to offer this option over Beliefs.

For the Global Development option related posts include:

Factors Contributing to Globalisation (Giddens)

What is Cultural Globalisation?

What is Economic Globalisation?

What is Political Globalisation?

What is Economic Globalisation?

Economic Globalisation involves the global expansion of international capitalism, free markets and the increase in international trade, a process which has accelerated since the 1950s.

Nearly every country on earth now imports and exports more from and to other countries than it did immediately after World War Two, and even ex-communist countries are now part of the global capitalist economy.

Britain for example imports around 60% of its food, with only 40% of the food supply being grown in Britain, and if you take a look around any class room, or any living room, and you will probably find that the majority of products were imported from somewhere else.

This post focuses on four key aspects of economic globalisation: global supply chains, the growth of Transnational Corporations, and the increasing importance of the post modern, weightless economy.

This post has been written primarily for students studying the Global Development option for A-level sociology.

The emergence of global Commodity chains

Manufacturing is increasingly globalised as there are more worldwide networks extending from the raw material to the final consumer. The least profitable aspects of production – actually making physical products, tend to be done in poorer, peripheral countries, whereas the more profitable aspects, related to branding and marketing, tend to be done in the richer, developed, core countries.

The role of Transnational Corporations (TNCs) is particularly important

TNC logos

TNCs are companies that produce goods in more than one country, and they are oriented to global markets and global products, many are household names such as McDonald’s, Coca Cola and Nike. The biggest TNCs have annual revenues which are greater than the economic output of middle-income countries. Apple, for example, generates more income than Finland does every year, and many oil companies such as Shell and Exxon-Mobile generate revenue several times that of the poorer countries they extract from.

The global economy is Post Industrial

The global economy is increasingly ‘weightless’ (Quah 1999) – products are much more likely to be information based/ electronic, such as computer software, films and music or information services rather than actual tangible, physical goods such as food, clothing or cars.

The Call Centre is a common ‘post industrial’ work setting, taking over from the ‘factory’ in industrial society. The call centre is ‘instantaneously global – connecting workers immediately to clients, via IT.

The electronic economy underpins globalisation

Banks, corporations, fund managers and individuals are able to shift huge funds across boarders instantaneously at the click of a mouse. Transfers of vast amounts of capital can trigger economic crises.

global electronic economy

Related Posts

–

Factors Contributing to Globalisation

An introduction to the concept of globalisation looking at cultural, economic, political and technological aspects.

There are four main Factors contributing to Globalisation:

  • information technology
  • economic factors
  • cultural factors
  • political changes.

‘Globalisation refers to the fact that we all increasingly live in one world, so that individuals, groups and nations become ever more interdependent.’ (Giddens, Sociology, 2009)

Globalisation in this sense has been occurring over a very long period of human history, but the sheer pace and intensity of it has increased in the last 40 years or so.

Globalisation

The rise of information and communications technology

  • The move from telephonic communication to cable and satellite digital communication have resulted in increasing information flows
  • Time-space compression – people in faraway places feel closer together as they can communicate instantaneously.
  • Individuals and families are more directly plugged into news from the outside world – some of the most gripping events of the past decade have unfolded in real time in front of a global audience.
  • Some individuals identify being more ‘cosmopolitanism’ as a result and increasingly identify with a global audience; others perceive increasing globalisation as a threat to their ways of life and retreat into Fundamentalism and/ or Nationalism as a defensive response.

Cultural Factors

  • The emergence of global sporting events such as The Olympics , Formula 1 and Football all bring people together across boarders.
  • Music, film, and celebrity culture more generally often draw audiences from several different countries.
  • Global consumption patterns have become increasingly similar in recent decades, with the rise of shopping malls and online shopping.
  • International migration is a key aspect of cultural globalisation – the more people move around the globe, the more global connections there tend to be.
  • There is an emerging global risk consciousness – the sense that we are all at threat from global problems such as the Environmental Crisis, Terrorism and more recently Coronavirus, and that we all need to work together (even if that means staying apart?) to combat such problems.

Manchester United Football club are a good example of how global football is – despite being based in one of the largest cities in England, fewer than half the players are from England, the rest being from a diverse array of countries in Europe, Africa and Latin America, and the UK only ranks 10th on Facebook for the number of Man United fans – there are more fans in Egypt and Indonesia than there are in the UK, for example! (source.)

Economic factors

  • The global economy is Post Industrial – as a result it is increasingly ‘weightless’ (Quah 1999) – products are much more likely to be information based/ electronic, such as computer software, films and music or information services rather than actual tangible, physical goods such as food, clothing or cars.
  • The role of Transnational Corporations (TNCs) is particularly important. These are companies that produce goods in more than one country, and they are oriented to global markets and global products.
  • Global Commodity chains – manufacturing is increasingly globalised as there are more worldwide networks extending from the raw material to the final consumer. The least profitable aspects of production – actually making physical products, tend to be done in poorer, peripheral countries, whereas the more profitable aspects, related to branding and marketing, tend to be done in the richer, developed, core countries.
  • Production is much more flexible than in the past – companies are much more likely to hire people on short term contracts and move around the globe seeking cheaper labour costs, as a response to increased global economic competition.
  • The electronic economy underpins globalisation – Banks, corporations, fund managers and individuals are able to shift huge funds across boarders instantaneously at the click of a mouse. Transfers of vast amounts of capital can trigger economic crises.

Political changes

  • The collapse of Communism in the 1990s meant the end of the divided ‘cold war’ world, and now these ex-communist countries are themselves democracies and integrated into the global economy.
  • The growth of international and regional mechanisms of government such as the United Nations and European Union – governments of Nation States are increasingly restricted by international directives and laws stemming from these international bodies.
  • International Non-Governmental organisations such as OXFAM or Greenpeace, operate in dozens of countries, and members tend to have an international outlook.
Signposting and Related Posts 

This post has been written primarily for A-level sociology students studying the Global Development module, and is intended as part of an introduction to the concept of Globalisation.

What is Cultural Globalisation?

What is Economic Globalisation?

What is Political Globalisation?

Globalisation Key Concepts – Test Yourself Quizlet!

Sources

The above account of factors contributing to globalisation is taken from Giddens’ Sociology, edition 6, 2009.

(It seems like quite a useful framework, which I’ll add to when I get a chance!)

How Does Globalisation Impact Family Life?

Globalisation is a key concept within A-level sociology, and students may be asked to consider how it affects family life.

One possible question which may come up on the families and households exam paper is:

Outline and Explain two ways in which globalisation may impact family life in the UK (10)

A good strategy to answer this question is to pick two different aspects of globalisation and discuss how these influence different aspects of family life. For more specific advice on how to answer these see ‘10 mark questions‘.

For example I would choose economic globalisation and migration as my two aspects of globalisation. Then I would discuss how these lead to a variety of changes to family life.

It is generally good advice to avoid overlap between your two points.

This post is written as a summary answer to the above exam question. For a more in-depth look at this topic see: Globalisation and Family Life.

Two ways in which globalisation may impact family life

One aspect of globalization is increased immigration to the UK. This has affected family life in the following ways:

  • There are more ethnically diverse families as British born people form relationships and families with people originally from other countries.
  • This means there are more families stretched across borders. This could mean more travel abroad to maintain family connections, for those who can afford it.
  • There are more people sending money to other countries if their partners have not come to Britain with them.
  • Immigrants have higher birth rates so this has positively affected the dependency ratio.
  • One downside of the above may mean increased pressure on public services.
  • Increased immigration doesn’t necessarily mean increased integration. Migrant families may remain relatively isolated in their own communities.
  • For very wealthy families, some have taken advantage of cheap migrant labour to employ cleaners and child carers.
  • In extreme cases this is related to an increase in modern slavery, hidden in the domestic sphere.

Another aspect of globalisation is a more globalised economy.

  • In general this has resulted in economic growth in the UK. This is correlated with lower birth rates and a smaller family size.
  • Recently increased amounts of university students from abroad means fewer places for British children. Some choose not to go to university, which could increase the number of households with young adults.
  • There has been a shift in manufacturing abroad. This means a decline in traditional male jobs, more equality between men and women in relationships (link to topic 5)
  • There are more financial crises (‘credit crunch’) – more divorce/ family instability (link to topic 2).

Signposting

This material is mainly relevant to the families and households module.

For more information on exam advice for the AQA’s A-level sociology please see my page on essays and exams.

To return to the homepage – revisesociology.com

Using material from item A, analyse two ways in which globalisation may have changed pupils’ experience of education(10)

More competition from abroad and more multiculturalism

A suggested model answer to this 10 mark analyse question, a possible question for the AQA’s education with theory and method’s A level paper (paper 7192/1) 

  • Hooks
  • What you need to apply the hooks to

Item A

Globalisation, or the increasing interconnectedness of countries across the globe, creates both challenges and opportunities for the United Kingdom. For example, economic globalisation has resulted in both more opportunities abroad and more competition for jobs for these jobs; and increasing migration has resulted in greater multiculturalism in the UK.

Education has had to adapt to globalization, and as a result, pupils today experience education very differently to previous generations.

Suggested Answer

Economic globalisation means increased competition from abroad (point 1)

This means British students today are expected to spend longer in education (as evidence by the increasing of the school leaving age. So one change in the experience of education is that students stay in school for longer.

Development  – globalisation has meant that most of the unskilled factory jobs have now moved abroad, and increasingly British workers need to be better educated in order to get jobs at all, thus the expansion of higher education means that more students ‘experience’ higher education and are better qualified than their parents.

Further development – however, ironically, poorer UK students are put off by the fees universities now charge, meaning that the globalisation of HE is possibly resulting in more class inequality.

Further development  – increased competition also means more pressure to succeed, schools are now ranked by PISA league tables, which means even more ‘teaching the test’ and ‘narrowing of the curriculum’, which is a final way the experience of education has changed.

Increased immigration has led to more multiculturalism (point 2)

and British schools have long had multicultural education in response to this, which also changes pupils’ experiences of education.

Development 1 – For example, religious education has long taught about other religions, and increasingly schools and colleges have events such as ‘black history month’ raising awareness of diversity.

Further Development – schools have also introduced compensatory education to help recent immigrants from Eastern Europe, such as extra support for pupils who don’t have English as a first language.

Further development – however, some policies may be seen as potentially divisive, for example, the prevent agenda in schools seems to target Muslim pupils through ‘categorical suspicion’.

Further development – There is also doubt that these inclusive policies are working, many people, especially in working class areas, object to the extra resources being spent on minority groups, and given the fact that it is the white working classes who have the lowest achievement, they might have a point.

Signposting

This answer should get you 10 out 10, or full marks.

For more advice and examples of question and answers please see my Exams, Essays and Short Answer Questions Page.

For an overview of the Education Module please see my Education Page.

Please click here to return to the homepage – ReviseSociology.com

Global Gender Inequalities – A Statistical Overview

Gender inequality is an extremely important aspect of development. Even if we put aside the significant social justice issues associated with the historical power differences between men and women, when you have half the population that are disempowered with less access to education, employment and healthcare, that alone is enough to drastically skew the social development statistics downwards!

Hence there is an argument that promoting gender equality should be the primary development goal, simply because it’s the easiest way to have a positive knock on effect in every other area of social life.

Global Gender Inequalities in 2020

The United Nations notes that

The commitment to achieving gender equality remains unfulfilled:

  • In 2019, one in five young women aged 20 to 24 was married in childhood (down from one in four in 2004). In Sub-Saharan Africa, one in three young women was still married in childhood.
  • In 2020, almost 25% of MPs in national parliaments were women (up slightly from 22.3 per cent in 2015). Women hold 36 per cent of elected seats in local parliaments.
  • In 2019, 28 per cent of managerial positions in the world were occupied by women (up from 25 per cent in 2000).
  • Women are still less likely to work than men. They make up half of the world’s working-age population but only 39 per cent of the world’s workers.
  • Only 55% of married or in-union women aged 15 to 49 made their own decisions regarding sexual and reproductive health and rights.
  • In 2019, 73 per cent of the laws and regulations needed to guarantee full and equal access to sexual and reproductive health and rights were in place (based on data from 75 countries).
  • At least 200 million girls and women have been subjected to female genital mutilation (data from 31 countries where the practice is concentrated). The harmful practice is becoming less common, but progress is not fast enough to meet the global target of its elimination by 2030.

The coronavirus pandemic is hitting women and girls harder than men:

  • Globally, women make up three quarters of medical doctors and nursing personnel.
  • Women already spend three times as many hours as men on unpaid care work at home. The closure of school and day-care centres has put an extra burden on women to provide home-learning for their children.
  • Reports from several countries suggest that domestic violence against women and children is also rising during the global lockdown.

Statistics on Global Gender Inequality

The World Economic Forum produces the Global Gender Gap Report, which in 2020 noted that none of us will see global gender equality in our life time as it will take almost 100 years to achieve global gender equality at current rates of progress!

It measures gender inequality by using 14 indicators in 4 categories:

  • Economic Participation and Opportunity
  • Educational attainment
  • Health and Survival
  • Political Empowerment

It reports similar global stats to the United Nations, but is more useful for finding out the country rankings by gender inequality. If you download the report and scroll to the back, you can even look at each individual country’s score card for each indicator.

Another ‘gender equality world ranking’ system is The Women Peace and Security Index. This is a bit more niche/ focused than the WEF report and measures gender inequality in countries by using 11 indicators in 3 categories:

  • Inclusion
  • Security
  • Justice

The world country rankings for both the above two monitoring tools are similar:

2019-2020Global Gender Gap ReportWomen Peace and Security Index
Top five countries for gender equalityIceland
Norway
Finland
Sweden
Nicaragua		Norway
Switzerland
Finland
Denmark
Iceland
Bottom five countries for gender equalityDRC
Syria
Pakistan
Iraq
Yemen		South Sudan
Pakistan
Syria
Afghanistan
Yemen

The countries with the highest ‘Peace and Security Scores’ for Women.

Discussion Questions

Explore the rankings above. (1) Are you surprised by any of the results. (2) Do you think any of these indicators are more valid/ important than others as measurements of gender equality?

Sources

The United Nations – Progress towards SDG Five – improving gender equality.

The World Economic Forums The Global Gender Gap Report

The Women Peace and Security Index – findings summarised by National Geographic

Related Posts

SignPostin

NB the material below is from 2017 and is pending an update, which will be forthcoming! (You know the score, not enough time to update everything as often as you’d like!)

Gender Inequalities in Employment

For every dollar earned by men, women earn 70-90 cents.

Women are less likely to work than men – Globally in 2015 about three quarters of men and half of women participate in the labour force. Women’s labour force participation rates are the lowest in Northern Africa, Western Asia and Southern Asia (at 30 per cent or lower).

When women are employed, they are typically paid less and have less financial and social security than men. Women are more likely than men to be in vulnerable jobs — characterized by inadequate earnings, low productivity and substandard working conditions — especially in Western Asia and Northern Africa. In Western Asia, Southern Asia and Northern Africa, women hold less than 10 per cent of top-level positions.

When all work – paid and unpaid – is considered, women work longer hours than men. Women in developing countries spend 7 hours and 9 minutes per day on paid and unpaid work, while men spend 6 hours and 16 minutes per day. In developed countries, women spend 6 hours 45 minutes per day on paid and unpaid work while men spend 6 hours and 12 minutes per day.

Gender Inequalities in Education

The past two decades have witnessed remarkable progress in participation in education. Enrollment of children in primary education is at present nearly universal. The gender gap has narrowed, and in some regions girls tend to perform better in school than boys and progress in a more timely manner.

However, the following gender disparities in education remain:

  • 31 million of an estimated 58 million children of primary school age are girls (more than 50% girls)
  • 87 per cent of young women compared to 92 per cent of young men have basic reading and writing skills. However, at older age, the gender gap in literacy shows marked disparities against women, two thirds of the world’s illiterate adults are women.
  • The proportion of women graduating in the fields of science (1 in 14, compared to 1 in 9 men graduates) and engineering (1 in 20, compared to 1 in 5 men graduates) remain low in poor and rich countries alike. Women are more likely to graduate in the fields related to education (1 in 6, compared to 1 in 10 men graduates), health and welfare (1 in 7, compared to 1 in 15 men graduates), and humanities and the arts (1 in 9, compared to 1 in 13 men graduates).
  • There is unequal access to universities especially in sub-Saharan Africa and Southern Asia. In these regions, only 67 and 76 girls per 100 boys, respectively, are enrolled in tertiary education. Completion rates also tend to be lower among women than men. Poverty is the main cause of unequal access to education, particularly for girls of secondary-school age.

Gender Inequalities in Health

Women in developing countries suffer from….

  • Poor Maternal Health (support during pregnancy) – As we saw in the topic on health and education, maternity services are often very underfunded, leading to hundreds of thousands of unnecessary female deaths as a result of pregnancy and child birth every year.
  • Lack of reproductive rights – Women also lack reproductive rights. They often do not have the power to decide whether to have children, when to have them and how many they should have. They are often prevented from making rational decisions about contraception and abortion. Men often make all of these decisions and women are strongly encouraged to see their status as being bound up with being a mother.

Gender Inequalities in the Experience of Overt Violence

Around the world, women are more likely to be…

  • Victims of Violence and Rape – Globally 1/3 women have experience domestic violence, only 53 countries have laws against marital rape.
  • Missing: More than 100 million women are missing from the world’s population – a result of discrimination against women and girls, including female infanticide.
  • At risk from FGM – An estimated 3 million girls are estimated to be at risk of female genital mutilation/cutting each year.
  • Girls are more likely to be forced into marriage: More than 60 million girls worldwide are forced into marriage before the age of 18. Almost half of women aged 20 to 24 in Southern Asia and two fifths in sub-Saharan Africa were married before age 18. The reason this matters is because in sub‐Saharan Africa, only 46 per cent of married women earned any cash labour income in the past 12 months, compared to 75 per cent of married men

Gender Inequalities in Politics

  • Between 1995 and 2014, the share of women in parliament, on a global level, increased from 11 per cent to 22 per cent — a gain of 73 per cent, but far short of gender parity.

Sources

Most of the above information is taken from the sources below…

The World’s Women: Trends and Statistics (United Nations)

The Global Gender Gap Report (Video link) (Rankings)

WomanKind

What are Transnational Corporations?

We’ve probably all heard of companies such as Walmart, Amazon, Apple, and Shell, and these are all examples of Transnational Corporations – in fact these four all feature in the top 10 global companies by revenue in 2020. Some of the others you may never have heard of because they don’t have such a public face.

But what are Transnational Corporations?

Introduction – Definition and Scale of TNCs

Transnational Corporations are businesses that operate across international borders, though most of them have their headquarters in the USA, Europe and Japan.

According to the United Nations Conference on Trade and Development there were an estimated 77 000 Transnational Corporations in the world in 2007, that’s the most recent data I could find! That had almost doubled since the late 1990s when there were 37 000.

The key characteristics of TNCs are:

  • They seek competitive advantaged and maximization of profits by constantly searching for the cheapest and most efficient production locations across the world
  • They have geographical flexibility – they can shift resources and operations to any location in the world
  • A substantial part of their workforce is located in the developing world, but often employed indirectly through subsidiaries.
  • TNC assets are distributed worldwide rather than focused in one or two countries – for example, 17 of the top 100 TNCs have 90% of their assets in a different country from their head office.

The Huge Economic Power of TNCs

TNCs are economically very wealthy and thus potentially more powerful than many of the world’s nation states.

According to Oxfam, of the top 100 ‘revenue collectors’ in the world, 70 are corporations and only 30 are countries, or nation states. For example, BP is bigger than Finland, while Chevron is bigger than Ireland, and the combined annual revenue of the 200 largest TNCs exceeded those of the GDP of the 182 nation states containing 80% of the world’s population.

Critics remind us that GDP and annual revenue measure different things, so these figures may not show actual differences in economic power, but this aside, the relative economic power of TNCs has grown in relation to nation states over the last few decades, and today TNCs wield much more economic power than they did in the past.

Fobel et al (1980) note that from the 1970s TNCs set about investing significantly in the developing world because of high labour costs and high levels of industrial conflict in the West, which reduced profits.  The investment was greatly helped by developing countries, which actively sought TNC investment by setting up special areas called Export Processing Zones, or Free-Trade Zones, in which TNCs were encouraged to build factories for export to the West.

Free Trade Zones offered incentives such as infrastructure provided by the government (transport links), few planning controls on building, and low taxation. There are now over 5000 free or export processing zones in the world today which employ over 43 million workers, the majority of which are based in China’s territories.

SignPosting

Transnational Corporations are one of the global organisations students study if they choose the most excellent globalisastion and global development option in their second year of A-level sociology.

Immediately after reading this introductory post, you should read the following two posts which explore the impacts of TNCs in developing countries….

Please click here to return to the homepage – ReviseSociology.com

Sources

Chapman et al (2016) – A Level Sociology Student Book Two [Fourth Edition] Collins.

Arguments for Transnational Corporations in Development

Modernisation theory saw TNCs as playing a positive role in helping societies to develop. Rostow (1971) saw the injection of capital as essential in the pre-conditions for take-off phase of development, and he thought TNC’s were one of the institutions which could help kick start the process of development by investing money, technology, and expertise that the host country did not possess.

It is neoliberals, however, who have historically been the real champions of TNCs as the most efficient institutions to kick-start and carry through development in poor countries. In neoliberal theory, economic success is proof of competence – the fact that TNCs have been making goods efficiently at a profit on a global scale for decades, if not centuries, mean that these are the institutions best placed to kick start economic growth in poor countries.

Neoliberals argue that the governments of developing countries need to pull down all barriers in order to create a ‘business-friendly’ environment in order to encourage inward investment from Transnational Corporations.

In Neoliberal theory, corporations will help a country develop in the long term by providing jobs and training. The money earned will be spent on goods and services at home and abroad creating more money to invest and (limited) tax revenue for further development.

A summary of the supposed benefits TNCs can bring to developing countries

  • TNCs bring in investment in terms of money, resources, technology and expertise, creating jobs often where local companies are unable to do so.
  • TNCs need trained workers and this should raise the aspirations of local people and encourage improvements in education
  • Jobs provide opportunities for women promoting gender equality.
  • Encourage international trade which could increase economic growth, access to overseas markets
  • All of the above means that wealth generated from TNC investment and production should eventually trickle down to the rest of the population.

The Role of the World Trade Organisation in International Development

The World Trade Organisation (WTO) is the body through which governments and businesses (mainly TNCs) negotiate the rules of trade, and settle trade disputes once these rules have been established.

The concept of the WTO first began with the 1947 the General Agreement on Tariffs and Trade (GATT) was signed by the Western powers to govern global trade and to reduce trade barriers between nations. In 1994, the WTO was set up to replace GATT, originally consisting of 126 members; it has since expanded to 164 member states currently.

wto

The WTO now has trade rules in place covering not only goods but also services such as telecommunications, banking and investment, transport, education, health and the environment.

The WTO is committed to the concept of free trade, believing that unlimited competition in the free market results in efficient production, innovation, cheap prices and the fastest possible rates of economic growth. They see government interference in markets as stifling businesses and being harmful to economic growth. WTO trade agreements and trade rules have thus tended to focus on reducing government intervention, such as the reduction of tariffs, subsidies and restrictions on imports.

However, critics argue that the WTO has hidden goals, and that it is really interested in helping rich countries and TNCs maintain their economic dominance. Chang (2010) for example has criticized the World Trade Organisation, arguing that its trade rules are unfair, and biased against developing countries. The WTO pressurizes poor countries to open up their economies immediately to western corporations and banks by abandoning tariffs (taxes) on western imports. However, the developed countries are still allowed to impose quotas on the imports of manufactured goods from poor countries, in order to protect their manufacturing industries.

Along the same lines as Chang above, McKay argues that WTO trade rules have rigged the terms of global trade in favour of the West and consequently the WTO is a rich man’s club dominated by the neo-liberal philosophy of the developed, industrialised nations.

A second major criticism of the WTO is that it is notoriously undemocratic – decision making at the WTO is dominated by a small group of Western members, with representatives of developing countries being outnumbered by the representativeness of wealthier countries and TNCS, even though the majority of the world’s population lives in those poorer countries.  A consequence of this is that the WTO tends to see free-trade as more important than protecting workers rights or the environment.

This brief article from Forbes suggests various reasons why poor countries fail to get decent trade deals out of the WTO:

–They are seriously understaffed–at the extreme, some states have no permanent delegation in Geneva, or just one or two people who must also cover other international agencies in the city.

–Their experience of trade policy issues and multilateral negotiations is limited.

–Individually, and even collectively, few account for a significant share of any element in world trade.

Philippe Legrain (2002), former special advisor to the Director-General of the WTO has acknowledged four main criticisms of the WTO:

  • It does the bidding of TNCs
  • It undermines workers’ rights and environmental protection by encouraging a ‘race to the bottom’ between governments of developing countries competing for jobs and foreign investment.
  • It harms the poor
  • It destroys democracy by imposing its approach on the world secretly and without accountability. He argues that the WTO’s free trade rules have prioritised the interests of TNCs over democratic and human rights.

Further sources of criticisms

Sources 

Chapman et al (2016) – A Level Sociology Student Book Two [Fourth Edition] Collins.

Trends in Global Wealth Inequality and Poverty

Global wealth inequality is increasing, but how can we explain this, is this is a problem, and what could we do to make the world a more equal place?

Trends in Global Wealth Inequality and Poverty

world wealth 2016.png

According to the 2016 Global Wealth Report produced by Credit Suisse, wealth inequality in 2016, measured by the share of the wealthiest 1 percent and wealthiest 10 percent of adults, as compared to the rest of the world’s adult population, continues to rise.

While the bottom half collectively own less than 1 percent of total wealth, the wealthiest top 10 percent own 89 percent of all global assets.

NB – You need to look at the pyramid below carefully, what it shows (to compare the very top and bottom) is as follows:

  • The richest 33 million people (0.7% of the world’s population ) control $116 trillion, or 45.6% of the world’s wealth, or more than $1 million each
  • The poorest 3.5 billion people (73% of the world’s population) control only $6.1 trillion of wealth, or less than $10, 000 in wealth each.

global-wealth-pyramid

NB – Inequality is no longer simply a matter of poor people living in less developed countries and rich people living in more developed countries -there are plenty of millionaires in low and middle income countries – the report notes that ‘today, emerging nations are home to 18 percent of the world’s ultra-high net worth population. China alone accounts for 9 percent of the top decile of global wealth holders, which is well above France, Germany, Italy, and the United Kingdom.’

However, this is hardly cause for celebrations, it simply means that not only is global inequality increasing across the world as a whole, but also within most countries in the world – there are billions of poor people living right alongside those millionaires in low income countries!

The infographic below, taken from the World Economic Forum Website (published 2015), displays global wealth inequality more simply, and it’s also easier to remember:the richest 1% control 50% of the world’s wealth, while the poorest 50% control less than 1%.

global-inequalities

Finally, to turn to trends in inequality over time, the chart below, also taken from the World Economic Forum website, shows how the global share of wealth controlled by the wealthiest 1% has increased from 45% to 50%, while the share of the ‘other 99%’ has decreased from 55% to 50%. (The chart below is derived from Oxfam’s 2016 Report: An Economy for the 1%?)

global-wealth-inequalities

Oxfam further notes that:

  • The wealth of the richest 62 people has risen by 45% in the five years since 2010 – that’s an increase of more than half a trillion dollars ($542bn), to $1.76 trillion.
  • Meanwhile, the wealth of the bottom half fell by just over a trillion dollars in the same period – a drop of 38%.
  • Since the turn of the century, the poorest half of the world’s population has received just 1% of the total increase in global wealth, while half of that increase has gone to the top 1%

Some Potential Problems with Statistics on Global Wealth Inequalities

  • Firstly, there are issues with reliability when tracking global inequality – different nations tally income and wealth in different ways, and some nations barely tally reliable stats at all
  • Secondly, you may have noticed that you get different figures depending on what groups your comparing – things look very different if you compare the top 1% to the rest, rather than comparing the top ten percent to the the bottom ten percent, or the top 50% to the bottom 50%. You might like to think about which is the most ‘valid’ comparison to give you a fair idea of global wealth inequalities (tough question!?)

Why has Wealth Inequality Increased?

What we are asking here, in short form is – how have the rich got so rich, and why have the poor lagged behind? In this section I summarise for changes which are correlated with increasing wealth inequality, all taken from the the Oxfam Report referred to above: Neoliberal economic policy; the global tax haven system, the growth of the financial sector and increasing returns to capital versus labour:

Neoliberal Economic Policy 

Neoliberal Economic and policy changes over the past 30 years – including deregulation, privatization, financial secrecy and globalization – have supercharged the ability of the rich and powerful to to further concentrate their wealth.

For example, companies working in oil, gas and other extractive industries are using their economic power in many different ways to secure their dominant position. They lobby to secure government subsidies – tax breaks – to prevent the emergence of green alternatives. In Brazil and Mexico, indigenous peoples are disproportionately affected by the destruction of their traditional lands when forests are eroded for mining or intensive large-scale farming. When privatized – as happened in Russia after the fall of communism for example – huge fortunes are generated overnight for a small group of individuals.

The Global Network of Tax Havens

A powerful example of an economic system that is rigged to work in the interests of the powerful is the global spider’s web of tax havens and the industry of tax avoidance, which has blossomed over recent decades. The system is maintained by a highly paid, industrious bevy of professionals in the private banking, legal, accounting and investment industries.

U S Companies tax havens.jpg

As taxes go unpaid due to widespread avoidance, this leads to cuts in vital public services and that governments increasingly rely on indirect taxation, like VAT, which falls disproportionately on the poorest people.

This global system of tax avoidance is sucking the life out of welfare states in the rich world. It also denies poor countries the resources they need to tackle poverty, put children in school and prevent their citizens dying from easily curable diseases.

Almost a third (30%) of rich Africans’ wealth – a total of $500bn – is held offshore in tax havens. It is estimated that this costs African countries $14bn a year in lost tax revenues. This is enough money to pay for healthcare that could save the lives of 4 million children and employ enough teachers to get every African child into school.

Tax avoidance is a problem that is rapidly getting worse and has rightly been described by the International Bar Association as an abuse of human rights and by the President of the World Bank as ‘a form of corruption that hurts the poor’.

Increasing Returns to Capital Versus Labour

One of the key trends underlying increasing wealth inequality is the increasing return to capital versus labour. In almost all rich countries and in most developing countries, the share of national income going to workers has been falling. This means workers are capturing less and less of the gains from growth. In contrast, the owners of capital have seen their capital consistently grow (through interest payments, dividends, or retained profits) faster than the rate the economy has been growing.

capital-and-labor

NB This article in The Economist challenges the idea that there are increasing returns to capital versus labour!

The Growth of the Financial Sector

The financial sector has grown most rapidly in recent decades, and a recent study by the OECD10 showed that countries with oversized financial sectors suffer from greater economic instability and higher inequality. Certainly, the public debt crisis caused by the financial crisis, bank bailouts and subsequent austerity policies has hurt the poorest people the most.

NB 1 -if you want more theoretical explanations of increasing inequality – look at Dependency Theory and World Systems Theory – much of this is applicable here. You might also like to look at ‘Why Nations Fail‘. 

NB2 – given that measuring inequality involves measuring relative wealth – that is what percentage share to the richest 10% control compared to other 90%, for example, then we’re necessarily looking at a zero sum game – If the richest 10% go from controlling 40% of the world’s wealth to 60% of the worlds wealth, then the amount of wealth controlled by the other 90% of the population must fall from a 60% share to a 40% share. 

Is Increasing Global Inequality a Problem for Humanity?

Neoliberals argue that increasing inequality isn’t necessarily a bad thing, the important thing is that even though the rich have got richer compared to the poor, the poor have also got richer, just not as rapidly as the rich and the middle.

poverty

However, Oxfam argues that growing economic inequality is bad for us all for the following reasons:

  • It undermines growth and social cohesion and the consequences for the world’s poorest people are particularly severe.
  • Had inequality within countries not grown since 2010, an extra 200 million people would have escaped poverty. That could have risen to 700 million had poor people benefited more than the rich from economic growth.
  • The International Monetary Fund (IMF) recently found that countries with higher income inequality also tend to have larger gaps between women and men in terms of health, education, labour market participation, and representation in institutions like parliaments.
  • The gender pay gap was also found to be higher in more unequal societies. It is worth noting that 53 of the world’s richest 62 people are men.
  • From and ecological point of view, there’s even more injustice: the poorest people live in areas most vulnerable to climate change, the poorest half of the global population are responsible for only around 10% of total global emissions.  The average footprint of the richest 1% globally could be as much as 175 times that of the poorest 10%.

What can we do to make the world a more equal place?

Oxfam notes that inequality is not inevitable. The current system did not come about by accident; it is the result of deliberate policy choices, of our leaders listening to the 1% and their supporters rather than acting in the interests of the majority. It is time to reject this broken economic model.

As a priority, Oxfam is calling on all world leaders to agree a global approach to end the era of tax havens

end-tax-havens

World leaders need to commit to a more effective approach to ending tax havens and harmful tax regimes, including non-preferential regimes. It is time to put an end to the race to the bottom in general corporate taxation. Ultimately, all governments – including developing countries on an equal footing – must agree to create a global tax body that includes all governments with the objective of ensuring that national tax systems do not have negative global implications.

In addition Oxfam is calling on leaders to take action to show they are on the side of the majority through doing the following:

  • Keep the influence of powerful elites in check: for example by reforming the regulatory environment, particularly around transparency in government; separating business from campaign financing; and introducing measures to close revolving doors between big business and government.
  • Share the tax burden fairly to level the playing field: by shifting the tax burden away from labour and consumption and towards wealth, capital and income from these assets; increasing transparency on tax incentives; and introducing national wealth taxes.
  • Pay workers a living wage and close the gap with executive rewards: by increasing minimum wages towards living wages; with transparency on pay ratios; and protecting workers’ rights to unionize and strikes.
  • Use progressive public spending to tackle inequality: by prioritizing policies, practice and spending that increase financing for free public health and education to fight poverty and inequality at a national level. Refrain from implementing unproven and unworkable market reforms to public health and education systems, and expand public sector rather than private sector delivery of essential services.

Selected Sources

Credit Suisse – The World Wealth Report (November 2016)

Oxfam – An Economy for the 1% (Jan 2016)

Inequality on the Rise? (2012)