Rise of the Global Economy

A transnational corporation (TNC) is a large company that operates in more than one country — typically with its headquarters in one country and production, sales or services spread across many others.

Example: Apple Inc. — headquartered in Cupertino, California, USA. iPhones are designed in California, components are sourced from Japan, South Korea and Taiwan, and final assembly takes place in China at Foxconn's "iPhone City" in Zhengzhou (~250,000 workers). Apple sells products in over 100 countries and has a market capitalisation of ~$3 trillion.

FDI stands for Foreign Direct Investment — when a company or government invests directly in another country by building a factory, buying a business, or setting up a subsidiary.

Global FDI flows total approximately $1.4 trillion per year (UNCTAD data). The largest sources are TNCs based in the USA, EU, China and Japan. The largest recipients are the USA, China, Brazil, India and ASEAN economies.

Driver 1 — Trade liberalisation. The WTO (founded 1995) replaced GATT and now has 164 members covering ~98% of global trade. Tariffs fell sharply; China's WTO accession in 2001 unlocked the world's biggest manufacturing base. Trade as a share of global GDP rose from ~6% in 1950 to ~25% today.

Driver 2 — Transport revolution (containerisation). The standard 20/40-foot shipping container, introduced in the 1960s and now universal, cut shipping costs by ~90%. Maersk is the world's largest container line. Shanghai is the world's busiest port (~47 million TEU/year). Roughly 80% of world trade by volume goes by sea.

Driver 3 — Communications technology. The internet, mobile telephony and satellite communications mean a TNC can coordinate ~200 suppliers in 50+ countries (Apple) or run a supply chain across 12 time zones in real time. Combined with English as the global business language, this enables global value chains.

Other notable drivers (bonus context): the rise of China as the "world's factory" since the 1980 Shenzhen Special Economic Zone; deregulation of capital flows; the rise of TNCs themselves (Apple's market cap ~$3 trillion exceeds the GDP of most countries).

A global value chain is the sequence of activities — design, sourcing, manufacturing, assembly, distribution, retail — spread across MULTIPLE COUNTRIES to make a single product. The iPhone illustrates this clearly.

Stage 1 — Design (USA). Apple designs the iPhone at its Cupertino, California headquarters. This is the high-value "knowledge work" — software, branding, marketing strategy — that captures most of the profit.

Stage 2 — Components (East Asia). Camera sensors are made by Sony (Japan); memory chips by Samsung and SK Hynix (South Korea); the A-series processor is designed by Apple but fabricated by TSMC in Taiwan; displays by LG and Samsung (Korea); glass by Corning (USA). Several hundred suppliers across 50+ countries contribute.

Stage 3 — Assembly (China + India). Foxconn assembles iPhones at "iPhone City" Zhengzhou (~250,000 workers) and Pegatron in Shanghai. Since 2022 Apple has also assembled in Tamil Nadu, India (friendshoring response to US-China tensions).

Stage 4 — Distribution + retail (worldwide). Containerised shipping (Maersk and others) takes phones from Shanghai to ~100 country markets. Apple's retail stores + online distribution complete the chain. The profit is highly UNEQUAL — Apple captures most of the value while the assembly worker in Zhengzhou earns ~$400-600/month.

Deindustrialisation is the long-term DECLINE of manufacturing as a share of an economy — typically replaced by services (banking, retail, professional). In the UK, manufacturing fell from ~25% of GDP in 1970 to ~9% today, employing ~2.6 million people compared to ~7 million in the 1970s. The USA, Germany, France and Japan have followed similar trajectories.

Mechanism 1 — TNC offshoring. From the 1980s, TNCs moved production to low-wage countries to cut costs. The iPhone case (design in California, assembly in Zhengzhou where workers earn ~$400-600/month vs ~$3,000+ for US equivalents) is the modern example; the textiles, electronics and steel industries followed the same pattern decades earlier.

Mechanism 2 — Trade liberalisation. The WTO (1995) and China's WTO accession in 2001 made imports cheaper. HIC manufacturers could not compete on price for standardised products.

Mechanism 3 — Technology + automation. Even where production stayed in HICs, automation replaced workers, so manufacturing's SHARE OF EMPLOYMENT fell even faster than its share of output.

Named case — Sheffield, UK. Sheffield was Britain's "Steel City". Its steel industry employed ~60,000 workers in 1970; today employs ~3,500. Steel became cheaper to import from China, India and South Korea. Sheffield's population fell during the 1970s-1990s; whole communities were hollowed out.

Consequences:

• Loss of well-paid skilled jobs.
• Rising unemployment in old industrial regions (UK North-East, US Rust Belt — Detroit's population halved from ~1.85m in 1950 to ~640k today).
• Reskilling challenges as ex-industrial workers struggle to enter the service economy.
• Political backlash — Brexit (2016) and Trump's 2016 election both drew strong support from deindustrialised regions.

Wider pattern. The same deindustrialisation hit Germany's Ruhr (coal + steel), France's Lorraine, Belgium's Wallonia, and the US Rust Belt. The geography of globalisation has been UNEVEN — manufacturing jobs gained in East Asia have come at the cost of manufacturing jobs lost in HICs.

Growth of global trade since 1950.

Trade as a SHARE of global GDP has thus grown ~10× since 1950. In absolute terms, global merchandise exports rose from ~$60 billion in 1950 to ~$25 trillion today (WTO data).

Geographical pattern.

Asia has been the big winner. China's share of global manufacturing rose from ~3% in 1990 to ~30% today. ASEAN, India, South Korea, Taiwan, Japan together produce most of the world's electronics, textiles, ships, steel. Shanghai is the world's busiest container port (~47m TEU/year).

HICs (USA + EU + Japan + UK) shifted from manufacturing to services. They still trade huge volumes but increasingly in services (finance, IT, professional, education) rather than goods. EU is the world's largest single trading bloc.

Africa remains under-traded. Sub-Saharan Africa accounts for only ~2% of global trade, despite ~17% of world population. The AfCFTA (African Continental Free Trade Area, 2021) aims to boost intra-African trade.

Recent shifts. Since 2008 trade as a share of GDP has plateaued — partly because of: (a) US-China trade war (tariffs from 2018); (b) COVID-19 disruption (2020-21); (c) deliberate reshoring + friendshoring (CHIPS Act 2022 $52bn; IRA 2022 ~$369bn for US manufacturing).

Explanation of pattern. Container shipping cut transport costs 90%; WTO + bilateral free trade agreements cut tariffs; communications technology enabled TNCs to manage global value chains. Cheap manufacturing labour (especially in China + ASEAN) attracted FDI ($1.4tn/year globally). Asia's geographical advantage: coastal location + deep ports + workforce + government investment in infrastructure + Special Economic Zones (Shenzhen from 1980).

Since the 1980s, globalisation has fundamentally re-mapped where in the world things are MADE — and to some extent where they are CONSUMED and where corporate VALUE is captured. The claim that economic geography has shifted from "North" (HICs of the Global North) to "South" (LICs/NEEs of the Global South) is partially TRUE — but needs careful qualification.

Evidence FOR the North-to-South shift.

1. Manufacturing has moved south. China's share of global manufacturing rose from ~3% in 1990 to ~30% today; ASEAN (Vietnam, Thailand, Indonesia), Bangladesh, India have all captured significant manufacturing. UK manufacturing employment fell from ~7 million in the 1970s to ~2.6 million today; US manufacturing employment fell from ~19 million in 1979 to ~13 million today.

2. Trade flows reflect the shift. Shanghai is the world's busiest container port (~47m TEU). Of the world's 10 busiest container ports, 7 are in China. East Asia accounts for ~30% of world merchandise exports.

3. China's "miracle". The World Bank estimates ~1 billion people in China + East Asia were lifted out of extreme poverty (1990-2015), largely through manufacturing-led growth integrated into global value chains.

4. Rising NEEs across the South. India ($3.5tn GDP); Brazil; Indonesia; Vietnam; Bangladesh — all have major manufacturing or services exports. ASEAN combined GDP is ~$3.6 trillion.

Evidence AGAINST / qualifying the claim.

1. Value capture stays in the North. Although the iPhone is ASSEMBLED in China, the VALUE goes to Apple in California. Studies show Apple captures ~$200+ per phone in profit; Foxconn captures ~$10. The HIGH-VALUE STAGES (design, branding, software, intellectual property) remain in the Global North.

2. Headquarters of TNCs are overwhelmingly Northern. Of the world's largest 500 TNCs by revenue (Fortune Global 500), most are headquartered in the USA, EU, Japan. China has risen rapidly (now ~130+ Global 500 firms) but USA + EU + Japan still dominate.

3. Global South gains are uneven. While East Asia + India + parts of Latin America have grown, much of sub-Saharan Africa remains under-traded (~2% of global trade despite ~17% of world population). LICs that lack infrastructure, political stability, or proximity to markets have been LEFT OUT.

4. Finance + IP remain Northern. New York + London + Singapore + Hong Kong dominate global finance. Patent ownership is overwhelmingly North + East Asian (USA, EU, Japan, China, Korea). Higher education + R&D similarly concentrated in HICs.

5. The recent reversal. Since 2020, reshoring + friendshoring (CHIPS Act 2022 $52bn; IRA 2022 ~$369bn; TSMC Arizona $40bn; Apple expanding India production) suggests the North-to-South shift may be PEAKING. China-US trade war + geopolitical risk + rising Chinese wages are pulling some production BACK toward the North or to allied (mostly Northern) countries.

Synthesis.

The North-to-South shift is REAL but PARTIAL. Production geography HAS shifted south — and this has lifted ~1 billion people out of poverty and reshaped world cities (Shanghai, Shenzhen, Bangalore, Dhaka). But the high-value parts of the value chain (design, IP, finance, headquarters) have largely STAYED in the Global North. Apple in Cupertino captures most of the iPhone's value; Foxconn in Zhengzhou captures only assembly margin.

A more accurate description: globalisation has DECOMPOSED economic activity into stages and SPREAD them geographically, with each stage going to wherever it is cheapest — leading to assembly in China + Vietnam + Bangladesh, but headquarters + design + finance still in HIC cities. The "North-South" frame oversimplifies what is really a SOPHISTICATED SPATIAL DIVISION of the production process.

The post-2020 reshoring/friendshoring trend suggests the North-to-South shift was not unstoppable — it can be REVERSED by geopolitics + trade policy + technological change (automation reduces the wage advantage of LIC assembly). Whether the next decade sees continued southward drift or a partial reversal will depend on how the US-China rivalry plays out, on technology, and on whether AfCFTA + India + ASEAN can capture the next wave of manufacturing.

The period from roughly 1990 to 2008 is often called "hyper-globalisation" — trade as a share of global GDP rose from ~30% to ~58%, China rose as the workshop of the world, container shipping + the internet collapsed distance, and TNCs reorganised production into globally distributed value chains. Since 2008, however, trade has plateaued; since 2020 reshoring + friendshoring have accelerated. The statement that hyper-globalisation is OVER deserves serious scrutiny.

Evidence that hyper-globalisation HAS ended.

1. Trade has plateaued. Trade as a share of global GDP peaked at ~58% in 2008 and has not significantly risen since. The "trade-GDP elasticity" — the rate at which trade grows faster than GDP — has fallen sharply. Hyper-globalisation's defining feature was OUTPACING GDP growth; that has stopped.

2. Trade war + tariffs. Trump's 2018 tariffs on Chinese imports (~$370bn worth at 25%) reversed decades of liberalisation. Biden largely retained them. The EU is imposing carbon-border tariffs (CBAM 2026). The WTO's Doha Round of trade liberalisation failed (2001-15). The political consensus FOR free trade has frayed in HICs.

3. Reshoring + friendshoring is real. Apple expanding iPhone production in Tamil Nadu, India (away from China). TSMC building a $40bn chip plant in Arizona. Intel building a$20bn plant in Ohio. The US CHIPS Act (2022, $52bn for US semiconductor manufacturing) and Inflation Reduction Act (2022, ~$369bn for clean-tech manufacturing) are explicit industrial policy to PULL manufacturing back to the USA + allies.

4. Geopolitical fragmentation. Russia's 2022 invasion of Ukraine produced sweeping Western sanctions; Russia + China + Iran + a few others have formed a "BRICS+" alternative bloc; US-China rivalry over Taiwan threatens the most critical chip supply chain. Companies are explicitly DE-RISKING from China.

5. Populist political backlash. Brexit (UK 2016 voted to leave the EU; took effect 2020); Trump's election (USA 2016, re-elected 2024); rise of populist parties across the EU + Latin America. Voters in deindustrialised regions (US Rust Belt, UK North, French Lorraine) blame globalisation for lost jobs.

6. COVID-19 exposed supply chain fragility. 2020-21 saw factory closures, container shortages, semiconductor shortages that halted car production for months. CEOs and governments concluded that "just-in-time, globally distributed" supply chains are too fragile.

7. Rising costs. Chinese factory wages rose from ~$200/month (2005) to ~$1,000+/month today; shipping costs spiked during COVID; energy costs rose. The economics of offshoring weakened.

Evidence that hyper-globalisation is NOT over.

1. Trade is still ~58% of global GDP. The plateau is not a collapse. World trade is still ~10× larger as share of GDP than in 1950. The structures (container shipping, internet, English as business language, WTO with 164 members) have NOT disappeared.

2. Services trade is GROWING. Cross-border services (digital, professional, financial, education) are surging. India's IT services exports ($200bn+) are larger than ever. Globalisation has shifted from manufacturing to services rather than ending.

3. Global value chains persist. The iPhone still has components from 50+ countries. A typical car has parts from 30+ countries. Even with reshoring, the underlying integration is too deep to undo quickly.

4. China remains the workshop. Despite trade war + tariffs, China's manufacturing share of global output (~30%) has barely fallen. Many "friendshored" production in Vietnam or Mexico still depends on Chinese inputs.

5. Africa is just beginning. AfCFTA (2021) is the world's largest free trade area by countries (54 African nations). If it succeeds, the next wave of globalisation could pull sub-Saharan Africa into integrated production.

6. Digital globalisation is exploding. Streaming services, cloud computing, social media, AI tools — Netflix in 190 countries, ChatGPT used worldwide, TikTok with ~1.5bn users. The DIGITAL economy is becoming MORE global, not less.

7. Climate transition demands global coordination. Renewable energy supply chains (solar panels, batteries, EVs, critical minerals) are deeply globalised. The IRA + EU Green Deal + China's renewables build-out all interlock.

Synthesis.

The statement is PARTLY TRUE but OVERSIMPLIFIED.

What HAS ended: the political consensus for unrestricted trade liberalisation; the rapid offshoring of manufacturing from HICs to LICs/NEEs; the assumption that globalisation will continue to accelerate.

What HAS NOT ended: the underlying integration of global supply chains; services globalisation; digital globalisation; China's manufacturing dominance.

What is changing the SHAPE of globalisation:

• From "anywhere" production to friendshoring (allies + politically reliable countries).
• From manufacturing globalisation to services + digital globalisation.
• From Western-led to multi-polar (China + India + ASEAN as poles alongside USA + EU).
• From driven by trade liberalisation to driven by industrial policy (CHIPS Act, IRA, EU Green Deal).

Judgement. Hyper-globalisation in its 1990-2008 form — accelerating, politically supported, manufacturing-led, China-centric — IS over. But globalisation itself is NOT over; it is RESHAPING into a more fragmented, more political, more services-oriented, multi-polar form. The 2020s are best described as "slowbalisation" (The Economist's term) or "fragmentation" — not de-globalisation.

The KEY GEOGRAPHICAL CONSEQUENCE of the next decade will be where manufacturing ends up: Mexico is benefiting from US nearshoring; India is benefiting from Apple's diversification; Vietnam + Indonesia are absorbing some China-displaced production. Sub-Saharan Africa COULD benefit if AfCFTA succeeds and Western investment looks for friendshoring destinations. The "North-South" geography of hyper-globalisation may be replaced by a "Bloc geography" — USA-led, China-led, EU-led — each integrating its own preferred partners.

The Pearson 4GE1 spec covers globalisation since the 1980s — but the 2026 syllabus reality is that this is a RAPIDLY CHANGING story. The hyper-globalisation era is over; what comes next is being written in real time.