Chapter 7 Review Questions Answer Key

1. Multinational corporations (MNCs) are companies that invest across national borders and/or establish branch plants or other operations in more than one country. Some argue that MNCs pose a significant challenge to the nation-state’s sovereignty. For example, an MNC’s decision to relocate production in (or out of) a country has significant impacts on that country’s economic and social well-being. The competitive pursuit of foreign direct investment (FDI) may push governments to adopt certain policies that they (or their citizens) otherwise would not wish to enact. Thus, the autonomy of countries becomes compromised by the power enjoyed by external (usually private) forces. [p. 119]

2. Even the most ardent promoters of globalization will admit that African countries are facing a tough challenge. Exclusion from the benefits of globalization for the poorest countries, defined by the UN as the “least de­veloped countries” (LDCs), remains a dreadful real­ity. Currently, many African countries appear to be trapped in a vicious cycle of interlocking handicaps, including poverty, illiteracy, civil strife, environmental pressures, poor governance, and inflexible economies largely dependent on a single commodity. For exam­ple, income from African exports declined from $255 billion in 2014 to $190 billion in 2016. Sub-Saharan Africa remains far behind. This bleak picture, however, needs to be nu­anced. In the past decade, African social global in­dicators have been improving, in great part because of the good economic performance of a small group of countries. In countries rich in oil and other nat­ural resources, such as Angola and Nigeria, high growth rates have been registered. More critical views, however, suggest that economic growth has not led to major social im­provements and, moreover, remains fragile, linked principally to the scramble for African natural re­sources by developed-country investors from the US, the European Union, and China. In addition, Africa’s recent surge in growth was driven by commodity ex­ports that did not induce much structural change. Instead, they merely reinforced Africa’s narrow export base. Moreover, since 2013 many commodities have lost much of their previous value while external markets have been squeezed because of the slump in Europe and Asia. In the meantime, Africa accounts for less than 1 per cent of the world’s GDP. To add to the catastrophe, external debt has exploded— from $89 billion (1980) to $149 billion (2010). [pp. 116-7]

3. Some analysts believe that globalization is basically just “another face” of imperialism, allowing the powerful, mostly in the Global North, to extend their reach and widen the net of international capitalism. The core, not to say the bulk, of key economic, commercial, and finan­cial transactions remains concentrated in the “triad,” the traditional centre of power composed of western Europe, Japan, and North America. Although representing less than fifeteen per cent of the world’s population, the triad accounts for most of the economic output, even if the emergence of new economic powers is eroding this supremacy. For Samir Amin, a radical economist from Egypt, “their domination is exercised directly on all the huge companies producing goods and services, like the financial institutions (banks and others) that stem from their power” (Amin 2009). Amin (2004) suggests that globalization is setting the stage for a new offensive from the United States to protect its imperial interests. The “empire” relies on unlimited military might and the overwhelming influence of transnational corporations (TNCs), compelling other countries to submit. [p. 116]

4. The World Bank also remains convinced that globalization—i.e., integration into the world market— is working for the poor and the developing world. For David Dollar (2004), an economist working for the bank, the simple proof that globalization works is that poor-country growth rates were higher than rich-country growth rates for the first time in modern history. These positive trends toward faster growth and poverty reduction are strongest in developing countries that have integrated most rapidly into the global economy. The World Bank is also encouraged by the fact that the growth of exports from developing countries is mostly in manufactured products. At the same time, foreign direct investment (FDI) to devel­oping countries accounted for 52 per cent of all FDI. However, the flows are asymmetrical. Four countries (China, India, Brazil, and South Africa) have received most of the FDI flows to developing countries. [pp. 114-5]

5. Globalization is a trans planetary process or set of processes involving growing multi-directional flows of people, objects, places and information, as well as the structures they encounter and create that are barriers to, or expedite, those flows. Although globalization and transnationalism are often used synonymously, the latter is a more limited process which refers largely to interconnections across two, or more, national borders. The sheer magnitude, diversity and complexity of the process of globalization today lead to the conceptualization of the current era as the “global age.” [p. 115]

6. By the early 1990s, the dominant discourse argued that capitalism had triumphed worldwide with the collapse of the Soviet Union. “Underdeveloped” countries would follow the policies promoted by the advanced capitalist “core.” The World Bank predicted that most of the world would prosper and pro­gress through fully “globalizing” and integrating with the world economy. Globalization was then defined by former World Bank official John Williamson as implying the adoption of “Washington Consensus” policies. The term has been associated with neoliberal policies first adopted by the United States and Britain in the early 1980s and later promoted by the World Bank and the IMF in developing countries. The “consensus” recommended the liberalization of capital flows and trade (through free trade agreements), the privatization of the public sector, and the abolition of market-restricting regulations. It became a cen­tral component of structural adjustment programs imposed by the bank and the IMF on countries that required loans. [p. 114]

7. Globalization has also faced other challenges. In 2007-8, the world system was struck by a huge financial crash that destabilized many countries. Despite attempts to reform some of the liberal policies of globalization, the crisis aggravated income gaps, contributed to environmental deterioration, fomented nationalist responses and political competition between superpowers, while, at the same time, a wave of new conflicts threatened millions of lives. In 2016, the election of Donald Trump as president of the United States was at once a symptom and an accelerator of this evolution. The COVID-19 pandemic that began in China in early 2020 simultaneously thrived within and threatened the processes of globalization. Through the dense global web of international chains of production and mass tourism, it rapidly reached Europe and, later, the Americas and Africa, infecting millions and killing hundreds of thousands. While states and international agencies are still trying to develop coping strategies and the World Bank predicts a substantial global economic downturn, it is still unclear how the pandemic will affect the process of globalization. [p. 113]

8. For former President Cardoso and other heads of state of the developing world, there was simply no alternative in the early stage of globalization. In the 1990s, this “mode of development” had appeared to be successful in the form of the “East Asian miracle.” Developing countries in that part of the world had found competitive niches and succeeded in attracting foreign capital, thereby triggering economic growth and development. This strategy seemed to have worked in China, South Korea, and other smaller “tigers” and “dragons” that emerged at that time, reducing poverty (from 78 per cent in 1981 to 8 per cent in 2011). More than 600 million Chinese were lifted out of poverty. Parallel to these achievements, North America and western Europe struggled to come out of the financial and economic slump of 2008, the most severe since 1929. Indeed, China has become the workshop of the world, exporting a vast surplus of industrialized goods and, increasingly, high-tech products. The United States’ share of world industrial production decreased from 25.1 per cent (2000) to 17.7 per cent (2015), while China’s share exploded from 6.5 per cent (2000) to 23.6 per cent (2015). China’s share in global merchandise trade in 2017 was 11.5 per cent while the United States’ was 11.1 per cent. Yet globalization was broadly thought to contribute to economic growth and prosperity in the Global North, even though a large part of productive capacities was moved to low-wage Southern economies often managed by authoritarian governments. [pp. 113-4]

9. Territory as a geographic reality no longer constitutes the whole of the “social space” in which human activity occurs. Because of these major changes, social geographer David Harvey believes that modern capitalism has integrated the world much more profoundly than ever before. Time and space are no longer insurmountable, as they were in the past, because with modern communication and transportation, everything moves everywhere, including goods, services, and people. Therefore, the geographic divide between the North and the South appears to have become blurred. This is not to say that the gap has disappeared. Rather, globalization is generating a new pattern whereby poverty and wealth are redistributed through a reconstituted structure of exclusion. For Harvey, current patterns of development under globalization lead to “shifts in the patterning of uneven development, both between sectors and between geographical regions.” [p. 115]