Environmental risks

Threats to people, businesses and supply chains

Emerging threats to state sovereignty

Globalization, nationalism and geopolitical tension

Weighing globalization’s advantages and risks

### Cyber threats to individuals and businesses

**Hacking** means gaining unauthorized access to a computer system, network or digital account. An attacker might steal information, interrupt services, demand payment or damage an organization’s operations.

Globalization connects individuals, businesses and countries through digital networks. These connections support communication and trade, yet they also extend the geographical reach of cyber threats. Without crossing a physical border, an attacker in one state can target people or businesses elsewhere.

**Identity theft** is the unauthorized use of another person’s identifying information, usually for financial or personal gain. Attackers can use stolen passwords, banking details or official identification to access accounts, make purchases or impersonate the victim.

Consequences include:

- direct financial losses for individuals and firms
- costs of restoring systems and strengthening cybersecurity
- reputational damage and declining customer trust
- interruption of production, communication or payment systems
- greater vulnerability where businesses share data with suppliers and contractors

### Surveillance and personal freedoms

**Surveillance** is the systematic monitoring of people’s activities, communications or movements. Governments may defend its use on the grounds of national security and crime prevention. Businesses may collect data to manage services or target advertising.

When monitoring is excessive, secretive or weakly regulated, it can restrict personal freedoms. People may lose privacy. They may also avoid lawful speech, association and political participation because they believe someone is watching them. Large stores of personal data can themselves become targets for hacking and identity theft.

Its impact depends on who collects the information, what they collect, how long they retain it and whether independent oversight exists. Surveillance may improve security, but that benefit must be weighed against privacy and freedom of expression.

### Risks to global supply-chain flows

A **global supply chain** is the linked sequence through which materials, components, information and finished products move between suppliers, producers, distributors and consumers in different countries.

These supply chains can reduce production costs and give businesses access to larger markets. However, their wide geographical spread, along with their reliance on transport and digital networks, creates multiple points of vulnerability.

| Risk type | Sources of disruption | Possible consequences |
|---|---|---|
| Political | conflict, sanctions, changing border controls or government restrictions | blocked trade routes, delayed customs clearance or loss of access to suppliers |
| Economic | sudden price changes, business failure, reduced demand or exchange-rate instability | higher costs, shortages and declining profitability |
| Physical | damage to ports, roads, factories or communications infrastructure | interrupted production and delayed movement of goods |

One disruption can create a **cascading effect**. If a specialist supplier stops operating, factories elsewhere may be left without an essential component. Retailers can then experience shortages, while consumers may face higher prices. Businesses that depend on a small number of distant suppliers are especially exposed. Diversified sourcing and spare capacity can make them more resilient.

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An annotated global supply-chain network showing raw-material suppliers, component factories, assembly plants, ports, retailers and consumers in different countries. Label political, economic and physical disruption points and use arrows to show how one disruption can cascade through the network.

### Political and economic sovereignty

**Sovereignty** is the authority of a state to govern its territory and make decisions free from control by external actors. **Political sovereignty** covers control over laws, security and public policy. **Economic sovereignty** refers to control over taxation, production, trade and national resources.

In practice, global interactions can weaken state power. Money, information, technology and business activity often cross borders faster than national regulations can respond.

### Profit repatriation

**Profit repatriation** occurs when profits earned in one country are transferred back to a TNC’s home country. This is a normal part of international investment, though it can reduce the income retained and reinvested in the host economy.

A host state may receive employment, investment and tax revenue from a TNC. If a large proportion of the profit leaves the country, however, less remains for local reinvestment, wages or public revenue. Governments may hesitate to introduce stricter conditions because they fear mobile investment will relocate elsewhere.

### Tax avoidance

**Tax avoidance** uses legal arrangements to reduce the amount of tax paid. TNCs can organize transactions across several tax jurisdictions. Wealthy individuals may also move income or assets to places with lower taxation.

States may then struggle to tax economic activity that occurs within, or is connected to, their territory. This threatens economic sovereignty. Lower revenue limits government spending and can place more of the tax burden on less mobile workers and businesses. Competition for investment may also discourage states from increasing corporate tax rates.

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### Disruptive technological innovation

**Disruptive technological innovation** is a new technology that significantly alters established economic activities, regulations or power relationships. Its effects may spread quickly through global networks, before governments can develop effective controls.

Drones challenge political sovereignty by crossing borders, entering restricted airspace and carrying out surveillance or attacks without placing a pilot in the territory. They offer benefits such as rapid delivery and remote access. At the same time, they make it harder to regulate airspace, privacy and security.

Three-dimensional printing turns digital designs into physical objects. As a result, production may shift closer to consumers, reducing some long-distance freight and manufacturing flows. Yet digital designs can cross borders without going through conventional customs controls. States may find it more difficult to regulate products, protect intellectual property and collect import duties.

Both technologies redistribute power. Individuals and businesses acquire capabilities that were once limited to governments or large manufacturers, forcing states to adapt their laws and enforcement methods.

A flow diagram showing revenue generated in a host state, followed by three pathways: local wages and reinvestment, taxation by the host government, and profit repatriation to a TNC’s home state. Include a separate tax-avoidance pathway through a low-tax jurisdiction and indicate the resulting reduction in host-state tax revenue.

### The relationship between globalization and nationalism

**Globalization** describes the growing integration and interdependence of places through flows of people, capital, goods, information and ideas. **Nationalism** is the belief that a nation’s interests and identity should be given particular political priority.

**Tribalization** occurs when loyalty to a narrower identity group becomes stronger, sometimes alongside distrust of outsiders or rival groups. Such groups may be based on ethnicity, religion, region, language or political identity.

Increased globalization correlates with renewed nationalism and tribalization. A **correlation** is an association between two variables; on its own, it does not prove that one directly causes the other.

Several processes can explain this relationship:

- International trade and investment bring gains, but those gains are distributed unevenly. Groups facing insecure employment or industrial decline may turn towards protectionist or nationalist policies.
- Migration and global cultural flows create greater diversity. However, some groups see these changes as threats to established identity or social cohesion.
- International agreements may require states to share decision-making, leading to perceptions that national sovereignty has weakened.
- Global social media networks allow ideas to spread internationally. They also enable polarized identity groups to form and reinforce their own viewpoints.
- Geopolitical tension may push governments to place greater emphasis on national security, strategic industries and loyalty to the state.

The relationship runs in the opposite direction as well. Renewed nationalism may limit global interaction through tariffs, tighter migration controls, sanctions and restrictions on foreign firms. Yet nationalist governments still rely on global markets, finance and communication, so this resistance rarely leads to complete isolation.

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### Detailed example 1: the United Kingdom and the European Union

The United Kingdom’s integration with the European Union created extensive flows of goods, investment and people, supported by shared rules. Opposition grew among groups who felt that national control over borders and law-making had declined. In 2016, the vote to leave the EU turned the debate over sovereignty into a major geopolitical change.

Withdrawal introduced new barriers and political tensions, although the UK and neighbouring European economies remained highly interconnected. This example demonstrates how nationalism can emerge within an advanced globalized economy. It also shows that resistance to integration may increase friction without ending interdependence.

### Detailed example 2: tension between the United States and China

Globalization produced deep trade and investment links between the United States and China. At the same time, concerns developed over trade imbalances, technological competition, strategic dependence and national security. Tariffs, export controls and restrictions affecting selected firms became tools in their geopolitical rivalry.

Businesses responded by reconsidering where to obtain components and locate production. Economic interdependence can therefore exist alongside nationalist policies and geopolitical tension: both states pursue the benefits of international trade while trying to protect strategic interests.

These are illustrative models; the detailed examples chosen in class may differ. Any detailed example should identify the places and actors, explain how globalization contributed to tension, show the nationalist or tribalized response, and establish the political or economic consequences.

A feedback-loop diagram linking increased cross-border flows and interdependence to uneven economic outcomes, identity concerns and perceived loss of sovereignty; then to nationalism or tribalization, protectionist policies and geopolitical tension; and finally to reduced or redirected global flows.

### A balance rather than a simple choice

Globalization brings advantages, but these need to be weighed against greater geopolitical and economic risks. It isn’t automatically beneficial or harmful. Outcomes differ across places, actors and time periods.

| Advantage of globalization | Associated risk |
|---|---|
| Fast digital communication and exchange of information | hacking, identity theft and expanded surveillance |
| International production using specialist suppliers | exposure to disruption across global supply chains |
| Inward investment from TNCs | profit repatriation and pressure on national taxation systems |
| Transfer of technology and digital designs | regulation may fall behind developments in drones and three-dimensional printing |
| Economic and political interdependence | nationalist reactions and new geopolitical tensions |

### How the balance should be judged

Several considerations shape the balance:

- **Scale:** A TNC may benefit from lower costs while a state loses tax revenue. Consumers may pay lower prices, yet particular workers can face insecurity.
- **Distribution:** Benefits and risks aren’t shared evenly, either within states or between them.
- **Probability and magnitude:** A disruption may be unlikely, but it can still cause severe consequences across a highly connected network.
- **Duration:** Adaptation may follow short-term disruption, whereas lost privacy or weakened tax capacity can have longer-lasting effects.
- **Resilience:** Diversified suppliers, effective cybersecurity and spare capacity can reduce vulnerability without bringing global interaction to an end.
- **Governance:** Tax cooperation, surveillance oversight and regulation of new technologies can protect the benefits while limiting risks.

### Overall evaluation

By connecting markets, firms, technologies and consumers, globalization creates economic opportunities. Yet that same connectivity lets cyberattacks, financial leakage and supply-chain disruption spread quickly across borders. Interdependence can encourage cooperation. However, perceived losses of control or unequal outcomes may strengthen nationalism and geopolitical rivalry.

The central issue isn’t whether all global interaction should be accepted or rejected. Instead, it is whether governments, businesses and societies can manage new risks as quickly as globalizing and technological processes create them. Strong regulation and resilience make the advantages more likely to outweigh the risks. When oversight is weak and benefits are unevenly distributed, globalization can increase economic insecurity and geopolitical tension.

Geography

IB Geography explores the complex interactions between physical environments and human societies through a comprehensive approach. Students analyze global issues like climate change, resource management, and globalization, developing critical geographical skills through case studies and fieldwork.

6.1 Geopolitical and economic risks

Question 1

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Question 2

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Question 3

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Question 5

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Question 8

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