4.1.3 Factors contributing to increased globalisation

Question 1

Factors contributing to increased globalisation

Answer 1

Containerisation - Costs of ocean shipping = down, helps bring prices in country of manufacture closer to those in export markets

Technological change - rapid and sustained changes = reduced costs of transmitting + communicating information

Economies of scale - Increase in minimum efficient scale associated with some industries. If MES rising domestic market may be regarded as too small to satisfy selling needs

Difference in tax system - tax competition - bid to win lucrative foreign investment projects

Less protectionism - Import tariffs have fallen however rise in non tariff barriers as countries struggle to achieve real economic growth

Growth of MNCs - invest significantly in expanding internationally

Question 2

Benefits of globalisation

Answer 2

Producers and consumers - deeper division of labour and economies of scale
Competitive markets reduce monopoly power and businesses seek cost reducing innovations
Growth = higher per capita incomes - poorer countries = faster economic growth - reduce poverty
Sharing skills / ideas/ tech
Pressure may prompt improved government and better labour protection

Question 3

Drawbacks of globalisation

Answer 3

Inequality - in income and wealth, rural urban divide, poor people excluded from benefits
Inflation - strong demand for food and energy, - food and energy inflation = poor at risk
External shocks - economies are more connected
Environment - irreversible damage
Race to the bottom - nations won’t attract inward FDI - lower corporate tax
Trade imbalances - trade surplus - tensions, new forms of import control - export dumping