Historical shifts in global economic dominance

Globalisation involves the increasing interconnectedness of economies worldwide, often leading to winners who benefit from growth and losers who face challenges. Economic dominance refers to the control or leading role a region plays in global trade, production, and investment. Throughout history, this dominance has shifted between regions, reflecting changes in technology, politics, and resources.

Key phases of economic dominance

• Nineteenth century - Europe held the leading position.
• Post-Second World War - The USA rose to greater economic power.
• Since the 1990s - Asia has increasingly dominated the global economy, generating a growing percentage of global GDP. This trend is expected to continue.

Evidence of Asia's rising role

• Asia's share of global GDP is increasing.
• In 2020, East Asian and Pacific countries received 51% of all global foreign direct investment (FDI).
• This highlights a shift in the global economic centre of gravity towards Asia.

Causes of the global shift

The global shift describes the relocation of the majority of industrial and economic activity from one region of the world to another.

Shift in manufacturing

The global shift in this sector began as TNCs moved operations to areas with lower costs.

Key developments in manufacturing shift:

• 1950s - Low-tech products, such as toys and textiles, started being made in the first newly industrialised countries (NICs).
• TNCs relocated to these NICs to access cheaper labour.
• 1980s onwards - With increased investment, NICs began producing higher-tech items, including consumer electronics like computers and mobile phones.

Outsourcing of services

As TNCs expanded globally, they needed support services available around the clock without high labour expenses.

Factors enabling service outsourcing:

• Businesses require 24-hour support for functions like IT help or customer services.
• Improvements in telephone and IT communications have allowed workers in distant locations to interact effectively with customers worldwide.
• This has led to services being distributed globally.

Case study: Economic growth in China through manufacturing

China has become a major winner in globalisation due to its role in the global shift. Its large population provides an abundant supply of cheaper, often well-educated labour, which lowers production costs for TNCs previously reliant on workers in Europe or the USA. China's 1978 Open Door Policy was a key factor in attracting foreign investment. Initially, factories offered poor and dangerous working conditions, but they provided regular wages, sparking large-scale rural-to-urban migration towards manufacturing hubs like Shenzhen.

Progression of manufacturing in China

1. 1980s - Focused on cheap, competitive goods known as 'throwaway' consumables.
2. Increased FDI - Allowed investment in industrial infrastructure, such as coal-fired power stations and railways, plus advanced worker training.
3. Shift to higher-order goods - China began producing items like consumer electronics, attracting brands such as Apple to set up factories.
4. Late 2000s - Development of home-grown products, like Huawei mobile phones, to compete internationally.

Social and economic impacts

• Working conditions have improved with more FDI, though issues like excessive working hours have drawn criticism from human rights groups.
• A growing middle class has emerged, creating a domestic market for goods produced in China.
• Extreme poverty has declined dramatically, with 800 million people lifted out of it between the early 1980s and 2022.

Case study: India's role in outsourcing services

India has benefited from the global shift by becoming a hub for outsourced services, attracting TNCs due to its skilled workforce and cost advantages.

Key attractions for outsourcing to India

• Large, youthful population - Provides a growing number of graduates, with nearly one in ten 25-year-olds holding degrees in 2011, many in IT and engineering.
• English-speaking skills - India has the second-largest English-speaking population globally, facilitating communication with clients in English-speaking countries.
• High wages in the sector - Call centre jobs can pay three times more than the average income, making them desirable.

Development of outsourcing hubs

• In 1990, technological parks were established on the edge of Bangalore with low set-up costs to encourage technology firms.
• Companies like Barclays have outsourced back-office operations and technical call centres to Indian cities.

Benefits of the global shift

The global shift has created numerous advantages for Asian countries, transforming economies and improving living standards. These benefits stem from increased investment and industrial growth.

Infrastructure investment

Greater FDI has funded expansions in transport and energy systems.

Examples of infrastructure improvements:

• Ports - Shenzhen's port capacity has grown to handle more ships.
• Energy - China has built over a thousand active coal power stations and invested in renewables, such as the Longyangxia Dam Solar Park, one of the world's largest solar facilities.

Improvements in education, training, and health care

National revenues from industrial growth have enabled greater public spending.

Key outcomes:

• More investment in schools and health care facilities.
• Higher literacy rates as more children complete schooling.
• Increased access to graduate-level qualifications.

Waged work and poverty reduction

The shift has boosted employment and wealth distribution.

Impacts on wealth and poverty:

• Rise in secure, well-paid waged work, leading to higher disposable income.
• Expansion of the middle class, with fewer people in poverty.
• In China, the percentage living on less than US$2.15 a day fell from 72% in 1990 to 0.7% in 2017.
• Remittance payments have spread wealth to families and rural areas.

Comparison of poverty reduction