Evaluate the major geographical shifts that have occurred in the global economy during the past thirty years

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Evaluate the major geographical shifts that have occurred in the global economy during the past thirty years

Since the 1970’s there has been a great change in the geography of different aspects of the global economy.  The emergence of the tiger economies in South East Asia and Latin America has seen a global change in the geography of manufacturing from industrialised Western countries such as North America, the UK and West Germany.  Using the measure of foreign direct investment (FDI) as an indicator, there has also been a change in the location of transnational companies (TNC).  In 1960, U.S TNC’s accounted for nearly half the world total of FDI, with British, Dutch and Swiss companies making up the remainder (in rank order).  Due to the expansion of the global economy over the past thirty years, the U.S now only provides a third of the world total, Britain just under fifteen percent in second and Japan and German TNC’s close behind (Berry, 1997) (fig.1).  How important have these geographical changes been to the global economy?

Figure 1 - Berry, B. 1997 Global Economy in Transition

The significant shift in the geography of the manufacturing industry within the global economy is due primarily to the rapid growth of the Newly Industrialising Countries in the sector and the deindustrialisation of Western countries.  Asian NIC’s emerged in the 1960’s, and began to grow rapidly; this success is due to a huge increase in FDI from Japan, USA and Britain.  The TNC’s from these countries wanted to take advantage of the number of opportunities in the Asian market.  One of the main attractions was that the price of labour in these countries was the fraction of the cost in their home country, therefore this would slash the cost of their products.  The reason that labour was so cheap was the fact that many of the people who lived in South Korea and Singapore worked in the countryside prior to 1967.  It was the government intervention of these countries that moved rural workers into the factories.  In South Korea grain prices were held down in cities to help keep wages down.  This also meant rural incomes were depressed between 1967 and 1976, leading to 7 million people leaving agriculture to become industrial labourers (Barnes, 1991).  Foreign TNC’s not only took advantage of cheap labour but other incentives as well.

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        Inducements from the governments of the Asian NIC’s helped attract TNC’s, because they would be able to cut product cost further.  Export Production Zones (EPZ’s) were established in which TNC’s were given reliable and cheap access to electricity and an efficient infrastructure (Smith, 1995).  In addition laws on pollution control and safety were relaxed, to cut costs for TNC’s further, and at the time there was a lack of organised trade union activity.  The majority of FDI from TNC’s in South East Asia has been Japan, Sony developed television plants in Singapore, Taiwan, Malaysia and South Korea.  In fact by ...

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