In depth revision notes for superpowers enquiry question two that follow the edexcel specification, including in case study examples from official textbooks and wider world examples.
7.4 superpowers have a significant influence over the global economic system
Influence of superpowers over the global economy
Some IGOs and TNCs have more power than a country, often they have linked to a current
superpower and have economic or political influence over other
IGOs - regional or global organisations whose members are nation states. They uphold
treaties and international law
Capitalism - an economic and political system in which countries trade and industries are
controlled by private owners for profit, rather by the state - capitalism has dominated the
global system for more than a century and became stronger after the collapse of the USSR
World bank
- 1944
- 189 members
- International organisation that provides loans and advice to developing nations to aid
their economic development it acts to reduce poverty by increasing economic growth
- The money originates from developed countries
- Funds projects countries wouldnt be able to afford
Cons:
- Provided funds for projects which have been unethical and have damaged the
environment eg rainforest clearance to make way for development
World trade organisation
- 1995
- 164 members
- Promotes free trade by removing barriers to international trade
- Has negotiated a sequence of global free trade agreements that have gradually
removed trade taxes and quotas
Cons:
- Failed to stop developed nations from protecting their own industries eg USA and EU
have given subsidies to their farmers which has affected developing nations (where
farmers have become less competitive
International monetary fund
- 1944
- Promotes economic stability
- Allow currency to be exchanged freely between members
- Comes to the aid of countries in economic difficulty
- Aids economies in opening up to world trade and investment
- The USA has 17% of votes
Cons:
- Given loans to countries who are unable to pay back their loans - these countries in
attempt to reduce their debt, have had to agree to SAPs (forcing them to open up
their markets and privatise their companies)
, World economic forum
- 1971
- Swiss non profit organisation
- Promotes public-private cooperation
- Promotes free trade in and is in favour of TNCS
- Acts as a forum for discussion between business, politicians and IGOs
Cons:
- Costs $19,000 to attend - which makes attendance for small businesses or
under-represented countries limited
Dominnace of TNCS
Some TNCs are state owned, these are owned by the government often related to energy or
communications eg Gazprom in Russia
- The 500 largest TNCs account fr 70% of world trade
- Many of the TNCs are based in the USA or emerging superpowers
- TNCs invest in one country and later expand to other nations to take advantage of
lower labour costs and incentives - Walmart is the top TNC by revenue and its supply
chain involves 30,000 factories in China, directly employing 2.3 million people in its
stores
- Gain dominance through economies of scale
- The process of moving manufacturing around the globe has resulted in the
development of emerging countries such as China and India
- Huge profits of TNCs mean they can exert political pressure and influence
TNCs have become dominant and more influential than IGOs due to many reasons:
- Economies of scale - allowed them to reduce costs and out-compete their smaller
competitors, gaining huge profits
- Able to merge and acquire competition
- Ability to borrow money has allows them to invest in new technology
- Move towards capitalism has opened up more opportunities for them
- Directly influenced the patterns of power - eg he economic power shifting to
emerging countries such as china
- Dominate certain goods markets so countries have no choice but to trade with them
due to lack of alternatives eg pharmaceuticals
The power and influence of TNCs has mainly come from the growth of free market
capitalism - they have benefited from globalisation while also being the reason for its
continued growth
Patents
Patents are used by TNCs to protect their technology and innovations
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