4.1.1 - Globalisation Flashcards
What is globalisation ?
Globalisation is the process of interaction and integration among companies, people and governments worldwide
What are the aspects to globalisation ?
- Economic
- Cultural
- Political
What can globalisation result in ?
It can result in the world economy becoming more like a single economy because of the increased interdependence around the globe
In what directions can globalisation move ?
Forwards and backwards
Forward integration and backward integration
What are the factors contributing to globalisation ?
- Trade liberalisation
- Transport
- Communications Technology
- Economic and Political transitions
- TNCs
Define bilateral
Involving two parties
Define consensus
A general agreement
Define multilateral
Involving several parties
Define orthodoxy
Authorised or generally accepted theory, doctrine, or practice
What is trade liberalisation ?
The removal/reduction of restrictions on the free exchange of goods and services between nations
What is trade liberalisation ?
The removal or reduction of restrictions on the free exchange of goods and services between nations
What does trade liberalisation lead to ?
It can lead to more free trade
It allows for trade to become easier
Give an example of trade liberalisation making trade easier
- The EU single market is an example of this
- Firms can sell products anywhere within the EU single market without any restrictions on trade
How has the cost of transport changed over the last 50 years ?
It has decreased due to technological advancements
What has improved transport led to ?
Firms can more easily sell goods and services on a global basis as a result
What is a transnational company ?
A business that is based or registered in one country but has outlets/affiliates or does business in other countries.
How has the cost of communications changed over time ?
They have fallen significantly over time
What do TNCs rely on ?
They rely on communications technology as they are located around the world
Where do TNCs base their manufacturing, assembly, research and retail operations ?
They base them around the world in many countries
What is industrialisation ?
It is the development of industries in a country or region on a wide scale
What does globalisation allow countries to do ?
It allows countries to specialise and become more productive in the goods and services that they have a comparative advantage in
What are the downsides to globalisation for countries ?
It can lead countries to become overdependent on certain sectors of the economy
This is because countries now trade more with one another than in the past
What does globalisation allow consumers to do ?
It allows for choice to increase for consumers
However it is difficult for consumers to find out how goods that are imported are produced
How can deindustrialisation arise ?
Due to the loss of comparative advantage
The loss of industry can cause an increase in unemployment
What is the transferability of skills like in declining industries ?
They often have limited transferability
This is especially true in developed economies
What is one limit of globalisation on the government ?
It can limit a governments ability to raise tax revenue
What type of tax does globalisation limit ?
Corporate tax
How does globalisation reduce corporate tax incomes ?
- If one country decides to reduce corporation tax, TNCs will have an incentive to relocate to that country – Ireland is a good example of such a country
- The departure of TNCs will reduce the amount of tax revenue governments in other countries earn.
- This can create a ‘race to the bottom’ in which countries reduce tax rates to undercut each other.
How does globalisation affect producers ?
Globalisation also allows firms to develop global supply chains and shift production to the most advantageous location
What are footloose companies ?
Companies which choose to relocate
Relationship between footloose companies and globalisation
Globalisation increases the number of footloose companies.
What does globalisation allow firms to have access to ?
- Firms have more choice when it comes to suppliers.
- This allows them to obtain cheaper and/or higher quality raw materials and components.
What is offshoring ?
The relocation of a business process from one country to another—typically an operational process, such as manufacturing, or supporting processes, such as accounting.
What is bargaining power ?
In negotiating, capacity of one party to dominate the other due to its influence, power, size, or status.
What can TNCs do if workers demand more wages ?
They can move production abroad. This is known as offshoring.
What does offshoring lead to for workers ?
- This makes it harder for workers to gain pay rises and improved working conditions.
- Therefore, workers have less bargaining power when dealing with multinational rather than national firms.
What is the effect of globalisation on the environment ?
Globalisation has increased environmental destruction and contributes to global warming through raising greenhouse gas emissions.
What has rising industrial activity led to. ?
It has led to an increased demand for raw materials
How has the transportation of goods lead to regarding the environment ?
The increased transportation of goods associated with international trade has led to a rise in greenhouse gas emissions.
What are the pros of globalisation ?
Lower prices
Businesses can access raw materials at cheaper prices
Benefits of trade
Greater employment
Firms benefit from much larger economies of scale
Free movement of labour and capital
Technological transfers and innovation
