What this lesson teaches
I can explain how flows of trade, capital and labour connect the global economy and create interdependence.
Syllabus 9173, Topic 1.2, 2. Geography of the Global Economy and Transnational Corporations (TNCs). How do global patterns of flows of trade, capital and labour illustrate the interconnectedness within the global economy?
Make a guess
A major port is closed for a week. Who is most likely to feel it?
- The port's own workers and their families.
- No one, because goods can wait a week.
- Firms and workers in several countries.
- The country where the port is located.
Show the answer
Firms and workers in several countries.
Parts are delayed, factories cut output, suppliers lose orders and workers lose hours. Links in trade carry the disruption to many places.
Trade, money and workers link places, so a change in one place can ripple to others.
The global economy links production, exchange, distribution and consumption across the world. Trade links producers to suppliers and customers. Capital links investments to owners and lenders. Migration links jobs in one place with workers and families in another.
Interconnection means these links exist. Interdependence means activities rely on them. A factory needs imported parts, a supplier needs orders, and a family may need a worker's wages. Dependence is often unequal. A small supplier may rely on one buyer, while the buyer has many other options.
So problems spread. A port closure delays parts, factories cut output, suppliers lose orders and workers lose hours. A fall in demand spreads back through cancelled orders. Stockpiles, other routes and how long the disruption lasts affect the damage.
Put these in order
A key port closes. Put the ripple through the network in order.
- A key port closes after a blockage.
- Workers at the factories and suppliers lose hours and pay.
- Suppliers lose orders.
- Factories cut their output.
- Parts for factories abroad are delayed.
Show the answer
- A key port closes after a blockage. Ships cannot load or unload, so parts bound for factories are stuck.
- Parts for factories abroad are delayed. Factories need those parts to keep working, so without them they must slow down.
- Factories cut their output. Factories making less need fewer inputs, so they cancel orders from their suppliers.
- Suppliers lose orders. With fewer orders to fill, suppliers need less work done.
- Workers at the factories and suppliers lose hours and pay.
Links also spread benefits. Using several suppliers, routes and markets reduces risk, but costs more. Many links do not help if they all pass through one bottleneck.
- Interconnection
- Links exist between places.
- Interdependence
- Activities rely on those links.
- Bottleneck
- One essential link that can stop the whole network.
Step by step
Map the link
What moves, and between which places?
Find the dependence
What cannot continue without it?
Trace the effect
Follow it, and look for alternatives.
Real examples to use
Suez Canal, 2021
The container ship Ever Given blocked the canal for six days, holding up billions of dollars of trade each day.
Worked example: A missing part
A made-up appliance maker uses a special switch from one supplier. A short delay stops all assembly, even though every other part is available. The switch matters because it is essential and hard to replace, not because it is expensive.
Watch out for this
The place with the smallest trade value cannot matter to the network.
A small but essential part can stop production.
Check your understanding
A supplier relies on one buyer, but the buyer has many other suppliers. What does this show?
- Both firms have equal bargaining power, as each needs the other.
- The supplier is more vulnerable if the deal ends.
- There is no interdependence because it is unequal.
Show the answer
The supplier is more vulnerable if the deal ends.
Yes. The dependence is unequal.