8.1, 8.2 - Commodity chains, global institutions and unequal gains

Production is connected across places

Globalisation is the increasing connection and interdependence of places through flows such as goods, services, investment, information and people. A commodity chain links the stages that turn raw materials into a product and deliver it to consumers. It can extend to reuse, recycling and waste.

Consider a garment assembled in Bangladesh. Cotton may come from one country, be spun and woven in another, and reach a factory near Dhaka. A brand can organise design and marketing elsewhere, while shipping, finance and retail involve further firms. This is an illustrative chain: actual suppliers and routes vary between products and over time.

The garment's retail price is not the factory worker's income. It also covers materials, transport, property, marketing, taxes and returns to businesses at different stages. Firms controlling a brand, technology or distribution may capture substantial value even where they employ few assembly workers. A country exporting more garments can still depend on imported fabric or machinery.

A TNC may own overseas production or contract with separate local suppliers. Buying from a Bangladeshi factory does not automatically mean the brand owns that factory. This distinction matters when judging responsibility, control and the flow of profits.

Why international production becomes feasible

Trade allows firms to sell beyond a domestic market and obtain inputs from elsewhere. Lower tariffs and simpler border procedures can reduce costs, although differences in standards, infrastructure and political relationships still matter. Foreign direct investment establishes or acquires a lasting business interest abroad, bringing capital and potentially skills or technology.

Labour supply, skills and wage differences influence locations, but low wages alone do not make a site attractive. Firms also need reliable power, transport, suppliers and institutions. Modern container shipping can lower handling costs; air freight supports valuable or time-sensitive products. Digital communications let managers coordinate orders, payments, designs and inventories across time zones. A disruption in one place can therefore delay production elsewhere.

Aid can improve roads, training or health and help people participate in economic activity. It differs from commercial investment: purposes, finance and conditions vary. Labour migration can supply skills and create overseas networks; remittances and information can strengthen connections with origins. These factors reinforce each other, so no single invention or agreement explains all globalisation.

Different institutions do different jobs

The World Trade Organization (WTO) provides a framework of negotiated trade rules, monitors policies and provides processes for trade disputes. More predictable rules can encourage firms to invest in cross-border trade. Its members are governments with different interests; agreements do not remove every barrier or guarantee equally shared gains.

The International Monetary Fund (IMF) monitors economies, provides policy advice, lends to members facing financial difficulties and supports institutional capacity. Financial stability can help countries pay for imports and attract investment. Lending conditions can be controversial when policy adjustments impose short-term costs on households or public services. The IMF is not a company building every factory, and its main role differs from the WTO's trade-rule role.