2.4.1 Globalisation Flashcards
Define globalisation
The integration between countries and increasing interconnectedness
free movement of goods/service, capital, labour and increased culture exchange
What are the characteristics of globalisation?
- Increased Investment flows (FDI)
- Increasing trade
- Increasing migration
Explain increased FDI flows
The increased ability in the free movement of capital has meant that firms can invest in other countries which can reduce their cost of production and increase economic prospects in the foreign countries.
Explain increased trade
Increased free movement of goods and services through trade liberlisation has increased export opportunities and made levels of GDP increasingly dependant upon exports due to the significant impact on economic welfare
Explain increased migration
Globalisation has allowed for the best skilled workers to migrate to countries where theyre required. Creates a ‘brain dump’ for the country where the emigration is happening.
What factors have contributed to globalisation in the past 50 years?
- trade liberalisation
- capital market liberlisation
- Change in politics of the Chinese and Indian economy
- Increase in the number of MNC’s
- reduced cost of transportation and communication
Explain capital market liberlisation
The relaxed regulation on the movement of capital as meant firms can now move capital for free or at very low cost leading to great integration between countries.
Explain the opening up of China
Fast emerging economies such as China and India were also closed and had the political value of not opening up to trade with other countries. However since the opening up, its allowed for greater interconnectedness between countries and as China were fast growing country with cheaper costs of production, FDI flows increased from foreign countries into china.
Explain the reduced costs in transportation and communications
With greater advancements in tech, communications globally has become much easier reducing the costs for MNC’s. Also has reduced labour costs making it easier to transport labour and operate in countries with lower costs of production.
Explain increase in the number of MNC’S
Through the trade and capital liberilisation, it has allowed for free movement of capital as well as labour which are two factors of production for firms which are essential. The free movement has allowed for global transnational companies to set up in multiple different locations to try and tap into unexploited markets in countries with lower costs of production and lower wage-economis, in order for them to profit maximise. The opening up of these MNC’s in the foreign country will also benefit the foreign country as it drives capital expenditure and investment in the country.
