Effects of globalisation on production
When corporations become global, they pursue options that satisfy their best interests. This could include tax minimisation by taking advantage of government incentives, setting up in a strategic location for a particular region or market or settling in a place where costs are low. This chapter introduces some of the concerns with regard to the effect of globalisation on production.
In the last century, there has been a distinct increase in demand for natural resources, such as timber, minerals, materials and food. Resources are scarce in many developed countries, either because the land is not viable or because of urban development. Primary industries therefore benefit from globalisation because resource-poor countries provide the market and the capital to establish commercial interests in countries that still have natural resources. This gives the resource-rich countries something valuable to export in the global marketplace.
A negative side effect of globalisation is the possibility of exploitation of the resources and some of its harmful consequences. The mining industry in Australia, for example, has been accused of destroying natural heritage such as bushland containing sacred Indigenous sites.
Developing countries are particularly susceptible to exploitation because many corporations wield more power in the global economy than struggling governments. To compete on a global scale, governments open their resources to export markets at the expense of long-term economic sustainability. It is sometimes the case that the market takes what it wants and leaves the rest for the country to deal with. Often, the country is too poor to solve some of the more complex social and ecological problems.
Secondary industries deal with the labour and equipment required to process primary products. This includes industries such as manufacturing and food preparation. Globalisation has enabled corporations to relocate secondary operations to countries where the cost of labour and/or equipment is low. If the place of operation is also close to the market where the products will be sold, then the company benefits again from lower distributions costs.
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The downside of the labour market is that often, countries with higher standards of living and higher minimum wages lose secondary industries to other countries. Australia's manufacturing industry, for example, has suffered because labour costs in some other countries are cheaper than the equivalent labour here. Global distribution of technology also plays a role in reducing the labour market for secondary industries. As the cost drops, even poorer countries can start to adopt technology that replaces the work force, which affects unemployment.
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Tertiary industries are service industries, including tourism, customer assistance and education. This is one of the areas where developed countries can compete with low wages in other countries because many tertiary industries require employees with certain educational standards and, sometimes, specific skills. Tourism, for example, is an industry that cannot be removed from the source country.
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The disadvantage of tertiary industries is that they require a balance of supply and demand. Unlike primary and secondary industries, which depend on global needs, tertiary industries are susceptible to the variations in market forces. An example is the decline suffered by the travel industry following the World Trade Center attacks in New York in 2001.
Technology may influence some tertiary industries that are not location specific. Call centres in the customer assistance industry, for example, can be relocated to any place that contains employees who speak the language of the source country. Some forms of education can be completed via correspondence over the internet. Globalisation therefore affects tertiary industries, but the extent of trade depends on the demand for the skills and services that tertiary industries supply.
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Globalisation affects all three tiers of production, but in different ways. Globalisation provides a market for primary industries, but demand can sometimes take priority over sustainability, to the detriment of long-term practicality. Secondary industries benefit from globalisation because corporations choose areas where the market suits them, but this may lead to unemployment for skilled workers who live in countries with a higher standard of living. Globalisation, combined with technology, is an advantage for tertiary industries when corporations can sell services on the global marketplace without relocation. They are, however, susceptible to market fluctuations.