Superpowers have a significant influence over the global economic system (Edexcel A-Level Geography): Revision Notes

Superpowers have a significant influence over the global economic system

Since the Cold War the world has been dominated by free-market capitalism

Free-market capitalism has become increasingly dominant as alternative economic systems have weakened, eg:

• The collapse of socialist economies in the USSR and Eastern Europe

• China's movement away from socialist economy towards state capitalism

• Reform in communist Cuba, allowing limited private ownership of businesses Free market capitalism and free trade have been promoted by many IGOs, strengthening its grip on the world economy.

• Free trade → The exchange of goods and services free of import/export taxes and tariffs or quotas (forms of protectionism) on trade volume

• IGOs → Regional or global organisations whose members are nation states. Uphold treaties and international law, as well as allowing co-operation on issues such as trade, economic policy, human rights conservations & military operations

Global Organisations & Capitalism

• World Bank → Makes development loans to developing countries, but w/in a free market model (promotes exports, trade, industrialisation and private businesses) benefitting the large developed world TNCs
  • World bank loan money but with conditions: No corruption.
  • Example: WB Conditions use ex-companies ⇒ British/German (Biwater) - Tanzania, (Dar es Salaam) - Made water shortages worse, water shortage prices went up
  • IMF → Promotes economic stability & security - assists countries in reforming their economies (eg. open access to developing economies for TNCs
  • WEF → A Swiss non-profit that promotes globalisation & free trade
  • WTO → IGO that regulates free Aims to open trade and reduce protectionism

IGOs and Superpower Influence

• Promote free trade capitalism
• Free trade - seen as best way to achieve global growth
  • Countries should not protect their own products from foreign competition but should open their economies to get the most competitive price on the international market for what they sell and want to buy

Global TNCs & Their Role

• World's largest TNCs from superpowers & emerging powers

• Publicly traded TNCs → Shares are held by numerous shareholders around the world

• State-owned TNCs → Majority or wholly owned by government Often large but not well known as the brands are not globally 69/100 of the richest entities on the plant are corporations, not governments → Global justice (NGO) Dominance of TNCs in the local economy has been caused by a number of factors:

• Economies of scale allow them to outcompete smaller countries (& often taken them over)

• Large bank balances and ability to borrow money to invest allows them to take advantage of globalisation by investing in new technology

• Move towards free-market capitalism & free trade has opened up new markets ∴ they can expand

Cultural Impact of TNCs

• Bring influence to the country they originate from
• A TNCs cultural impact on global consumers can be measured using the concept of brand value
  • Brand value → The value of a brand measured using metrics such as market share, customer opinion of the brand and brand loyalty
• Dominance of USA has led to Westernisation, some common characteristics:
  • A culture of consumerism
  • A culture of capitalism and the importance of attaining wealth
  • English being the dominant language
  • A culture that 'cherry picks' and adapts selective parts of other world cultures and absorbs them
• TNCs can sometimes adapt their products (eg. foods) to cater for the local cultures
• Important source of this cultural influence is through the media

Innovation and Patents

• TNCs often responsible for the invention of new technology and the development of new products and brands

Innovation

• Intellectual property law protects these new developments in the form of:

  • Patents (technology)
  • Copyright (music)
  • Trademarks (logos)

• Any company wishing to use one of the above has to pay a royalty or licence fee to the developer

  • Domination of global royalties reflects the fact that:
  • Existing superpowers and developed countries are paid for inventions and artistics works created decades ago
  • Education levels are higher in already developed countries, as are skill levels
  • Westernisation and cultural globalisation tend to spread US and European music, film, TV and brands