Impacts of Globalisation (Edexcel IGCSE Geography)

Benefits & Costs of TNCs to People

Spec point — 4GE1-S3.065

Benefits & costs to people

• Globalisation has generated both benefits and costs for many people but at different levels

• Some people have benefitted more than others, with the poorest people tending to benefit the least or not at all

  • It can be argued that without globalisation the least developed countries and people would be worse off than they are now
  • Globalisation has created job opportunities and income from inward investment from TNCs
  • Though some industries in these countries have struggled due to international competition from TNCs

• Countries such as China, Brazil and India have transformed themselves from developing to emerging economies which has directly benefitted much of their population

• The gender gap within individual countries is generally lower in more globalised countries

• Skilled workers are in demand and benefit from globalisation more than unskilled workers

Local Level

Benefits

• Cheaper products available for people
• Greater choice of goods
• Bigger export market for domestic manufacturers
• Integration of cultures – multiculturalism
• Education and skills are improved
• More freedom of movement
• Spread of technology and innovation
• A higher standard of living
• Availability of housing, sanitation, food and water is better
• Gender equality and gender pay gap closing in developed countries

Costs

• Small local businesses cannot compete with global companies
• Labour drain – skilled workers migrate elsewhere leaving unskilled or no workers behind
• Dependence on single TNC employment
• Worker exploitation/cheap labour
• Closure of TNC leaves high unemployment rates
• Cultural dilution or loss of cultural identity
• Environmental cost of increased production, trade and growth
• Pollution impacts the health of people
• Daily living costs increased

National level

Benefits

• Higher levels of incoming revenue from tourism, exports and imports
• Growth of improved health care, infrastructure, social care and education
• Social mobility is greater – access to higher education and senior leadership roles
• TNC offer apprenticeships and incentives for progression

Costs

• Increased levels of disparity between places – some towns and cities will benefit more from government policies
• Social mobility is limited to urban areas; people in rural areas need to migrate
• TNCs control a large labour force and can 'blacklist' workers, effectively preventing people from working elsewhere
• Industrial growth impacts the environment – burning fossil fuels adds to global warming and pollution
• Growth of urban squatter settlements

International level

Benefits

• Skilled workers are in demand and can move relatively easily between countries
• Higher levels of income and quality of life
• Access to wide levels of skills and research
• International trade routes and foreign investment improve opportunities

Costs

• Movement of people, transport ownership and loss of biodiversity increases globally
• The impact is greater on developing countries, particularly remote rural areas, increasing the development gap
• Decisions made elsewhere do not consider local or national identities
• The movement of skilled workers and researchers leaves an imbalance in developing and emerging countries, reducing the potential for further development unless they pay higher wages, leading to higher global costs

Benefits & Costs of TNCs to Countries

Spec point — 4GE1-S3.065

Benefits & costs to countries

• Transnational Corporations (TNCs) are key in globalisation

• They link raw materials with manufacturers, research and development opportunities and products with global markets

• Global marketing establishes TNCs as 'the brand' to have

• However, TNCs answer to shareholders and need to maximise their profits

  • This can negatively impact worker pay and conditions
  • To reduce costs worker pay may be minimal and conditions poor

• TNCs, therefore, can impact countries positively or negatively

Benefits

• TNCs bring foreign direct investment (FDI)

  • Inward investment in host countries increases the level of development

• The host country's infrastructure is improved by TNC or for TNC – access, communications, energy supplies, etc.

• They often introduce new technology and training

  • This can improve workers’ skills and productivity

• TNCs provide employment for local people

  • This reduces unemployment and increases incomes
  • Higher incomes can improve living standards and boost the local economy

• Foreign currency is earned through exports

• TNCs have a multiplier effect meaning their location in a place encourages other industries to grow around them

Costs

• TNCs pay low wages, expect long hours and are generally exploitive, particularly of female workers

  • TNC jobs are often boring, and repetitive and don't develop skills – effectively trapping their workers in the company

• TNCs are powerful and are not loyal to a host country's government

  • Investment can disappear as quickly as it came
  • TNCs can leave a country if global or local economies change or somewhere else becomes more profitable

Profit leakage

• Profits are often sent back to the TNC’s home country
• Profits 'leak' out of the host country either to open up new business elsewhere or are paid in bonuses and dividends to shareholders
• This means less money is reinvested locally
• Long-term benefits to the host country may be limited

Environmental damage

• TNCs often ignore the environmental and social costs of their investment
• TNCs may cause air, water or land pollution
• Environmental regulations may be weaker in LICs This can harm ecosystems and affect people’s health

Case Study This is just one example of a case study. You are advised to use the one you studied in class

Nike

• Nike is a global sportswear TNC based in the USA

• Many of its shoes and clothing are manufactured in Vietnam

• Vietnam is attractive due to:

  • Lower labour costs
  • Large workforce
  • Good access to global markets

Vietnam

Cost

• Exploitation of workers

  • Some workers are paid low wages by global standards
  • Workers have limited power to negotiate pay
  • Child labour

• Poor working conditions

  • Reports have highlighted long hours and poor working conditions

• Most profits are sent back to Nike’s headquarters in the USA

  • Only a small proportion stays in Vietnam
  • This limits the long-term economic benefits for the host country

Benefit

• Nike factories employ hundreds of thousands of Vietnamese workers
• This reduces unemployment and provides a regular income
• Wages are often higher than in traditional farming and local firms
• Workers receive training in manufacturing and quality control
• The status of the brand encourages other TNCs to invest
• Nike brings foreign direct investment (FDI) into Vietnam
• Vietnam benefits from improved industrial skills and productivity

USA

Cost

• Indirect loss of jobs as manufacturing is outsourced
• The balance of profit to cost isn't passed onto the customer
• Company image damaged due to outsourcing

Benefit

• Bigger profits made as manufacturing costs are lower
• High-level skills in design and R&D in demand

Exam Hint

• Make sure you know your case study of the global operation of a TNC in one developing country
• You need to be able to identify the costs and benefits to the host country as well as to the TNC's own country of origin
• Remember to keep it simple and use facts and figures to keep it 'real' and not a generic case study