Assess the view that the main cause of globalisation is the increased significance of transnational companies?
Globalisation is the process by which the world’s economies become more closely integrated and interdependent. Globalisation has increased significantly over the past 50 years due to a number of factors.
The increased significance of transnational companies, which are companies that are based in different countries i.e. have offices in various different parts of the world, has had an impact on increasing globalisation. As the companies have various offices and production points around the world it means that the world’s economies are becoming more interdependent. For example a car making firm may have its assembling parts in one country but it may have been designed in another country. This means that the process and parts of production is being placed in different parts of the world and coming together at the end as a finished product, demonstrating the world integrated economies.
Transnational companies allow the process of globalisation to take place by setting up in the different countries and bringing the parts all together to make a finished product or service. However it may be argued that the increased significance of transnational companies is not a cause of globalisation but more of a result of it as such companies wouldn’t be able to set up in other countries if it were for other significant factors contributing to globalisation.
Reduced transport cost is another factor which has increased globalisation. Transport cost have fallen over the years due to containerisation, where large amounts of goods can be containerised and stacked allowing room for more goods to be transported. This means that it has become cheaper to export and import goods to and from areas of the world meaning that companies are more likely to set up in a lower wage economy to benefit from cheaper unit costs (such as a country like India with relatively low unit labour costs) without worrying about the fact that transport cost will outweigh these benefits. Yet it could be argued that in recent years transport costs are rising due to worries about the external cost such that arise from increased air travel, i.e. global warming and the burning fossil fuels. This can mean that such countries are making air travel companies pay for green schemes to help offset their carbon emissions. Yet such schemes haven’t been made compulsory in many countries.