4.1.1 Globalisation

Question 1

Define Globalisation

Answer 1

Growing interdependence of countries through different flows and the rapid rate of change it brings about.

The rapid intergration of national, local and regional economies.

Question 2

What are the factors that contribute to globalisation?

Answer 2

• Improvements in transport and infrastructure
• Trade liberalisation
• International financial markets
• TNCs
• Improvements in IT and communication

Question 3

What are the impacts of globalisation on consumers?

Answer 3

• More choice since wider goods available from all around the world.
• Lead to lower prices as firms take advantage of comparitive advantage and produce in countries with lower costs.
• HOWEVER, can rise prices since incomes rise, higher demand for goods and services, demand pull inflation.
• Erosion of culture.

Question 4

What are the impacts of globalisation on Workers?

Answer 4

• Western world - large scale job losses.
• Developing world - employment gained.
• Increased migration - increase work force - shifts LRAS outwards.
• Sweatshops
• Wage rises / decreases - inequality rises.

Question 5

What are the impacts of globalisation on Producers?

Answer 5

• Firms are able to source products from more countries and sell them in more countries.
• Spread of risk (if one country’s economy collapses - risk is spread).
• Firms who are unable to compete internationall will lose out.
• They are able to employ low skilled workers much cheaper in developing countries and can exploit comparative advantage and have larger markets, both of which can increase profits.

Question 6

What are the impacts of globalisation on the Government?

Answer 6

• May recieve higher taxes from TNCs.
• Could lose out on tax revenue from avoidance (TNCs moving HQs abroad)
• TNCs have the power to bride and lobby governments which could lead to corruption.

Question 7

Effects of globalisation on the enviroment?

Answer 7

• The increase in world production has led to increased demand for raw materials.
• Increased trade = more emissions.
• However, green ideas, technology etc can be shared around the globe.

Question 8

How does globalisation effect economic growth?

Answer 8

• Globalisation increases investment through TNCs -> multiplier
  -> incentivises governments to implement supply side policies to encourage TNCs -> workers get a wage which they spend in economy.
• TNCs bring world class management techniques and technology.
• Trade increases since comparative advantage is exploited.
• HOWEVER, Comparative cost advantages will change over time and so companies may leave the country when it no longer offers an advantage which will cause structural unemployment and reduce growth.