4.1.1 Globalisation

Question 1

what are some of the causes of globalisation (include evaluation to these points)

Answer 1

• trade liberalisation i.e. through trade agreements -> reduces tariffs + quotas -> increased international trade -> increased comp. adv. -> more eocnomic integration
• technological advancement i.e. communication + transportation -> more feasible to trade -> less time and cost
• migration -> movement of labour across borders -> fills skills gaps -> fosters cultural exchange
• growth of MNCs -> they expand worldwide -> increased FDI -> firms source factors of production from diff. countries -> lower production costs -> consumers get cheaper goods

EVAL:
- limited by protectionist policies - non-member countries will suffer
- unequal access to technology
- limited by immigration policies + discrimination
- workers in low-income may get exploited as MNCs take advantage of weak labour laws; environmental concerns

Question 2

what are the costs + benefits of globalisation on individual countries?

Answer 2

BENEFITS:
- eco. growth -> larger market access -> increased exports and FDI
- law of comp. adv -> low opportunity cost -> increased efficiency + resource allocation
- increased FDI -> brings capital, technology + jobs

COSTS:
- uneven distribution of growth -> developing countries may struggle to compete w/ stronger economies -> increased income inequality
- loss of cultural identity
- dependent on global market -> economies are vulnerable to external shocks e.g. financial crises, supply chain disruptions

Question 3

what are the costs + benefits of globalisation on producers?

Answer 3

BENEFITS:
- increased profits -> lower production costs as firms can outsource to low-wage countries -> increased EoS (lower LRAC) -> access to global supply chains -> can use extra profits to reinvest into better resources, tech + efficiency
- increased competition -> incentive to innovate

COSTS:
- risk of supply chain disruptions e.g. pandemics, wars, etc. msy cause uncertainty
- increased competition -> small, domestic producers may struggle to compete -> go out of businesses
- exploitation of workers + environmental harm

Question 4

what are the costs + benefits of globalisation on consumers?

Answer 4

BENEFITS:
- greater variety -> increased choice due to global trade + more competition
- lower prices -> firms have lower production costs -> may be passed down
- higher SOL -> more affordable products -> increased purchasing power -> improved quality of life

COSTS:
- goods may be poor quality/safety standards
- if incomes rise in the LR, prices may rise as a result (‘wage-price spiral’ -> cost-push inflation)
- increased demand for goods + services creates inflationary pressures

Question 5

what are the costs + benefits of globalisation on the environment?

Answer 5

BENEFITS:
- increased green awareness -> technology transfer -> increased green innovation e.g. renewable energy
- APPL -> global agreements e.g. ‘Paris Agreement 2016’ encourage climate action

COSTS:
- increased environmental degradation -> increased demand for raw materials -> increased deforestation + resource depletion
- more trade can lead to increased carbon emissions -> increased pollution -> -ve production externalities -> welfare loss

Question 6

what are the costs + benefits of globalisation on the government?

Answer 6

BENEFITS:
- increased tax revenue -> gorwing businesses + FDI -> higher coporate tax revenue -> more funds available for public services
- stronger diplomatic + trade relationships

COSTS:
- gov. may reduce taxes to attract foreign investment -> reduces funds available for public services
- if taxes are too high -> businesses may engage in tax avoidance/evasion or may move their operations elsewhere
- repatriation of profits -> profits are sent back to the investor’s home country from the host country -> less tax revenue for the gov.

Question 7

what are the costs + benefits of globalisation on workers?

Answer 7

BENEFITS:
- job creation -> in growing industries -> increased demand for skilled labour may boost wages

COSTS:
- job losses in uncompetitive industries -> domestic workers may be replaced by automation or offhshoring
- poor working conditions in developing countries as MNCs exploit cheap labour