A1 Globailisation Flashcards
Define globalisation
A process which the world’s economies are becoming more closely integrated due to the increasing international interdependence of economic agents - producers, consumers, governments and entrepreneurs
Characters of globalisation
- increase in the trade of goods and services globally
- Increasing foreign ownership of companies
- deindustrialization in developed countries
- Migration of workers
- Transfer of technology
- Increasing global media presense
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T
D
M
T
G
Factors that caused globalisation
- Improvements in transport infrastructure and operations
- Improvements in communications technology and IT
- The increasing number and influence of global transnational companies
- Increase in free trade/trade liberalisation
- The end of the Cold War, which led to the opening of previously closed off economies.
- Increased freedom of movement for workers
- Development of international financial markets/increased international movement of capital/ deregulation of capital market
FIFI CCG
Off-shoring definition
Setting up their own operations in another country
Out-sourcing abroad definition
Employing another business abroad to do part of the production process
Tariffs definition
Tax on imported goods
Quotas
Physical limit placed on quantity of certain imports allowed
Regulations
Administrative barriers setting product standards/rules
Domestic subsidies
Grant given to domestic firms to help them be more cost competitive against imports
Globalisation for producers advantages and disadvantages
AD:
1. Source raw materials from the most cost-effective supplier globally
2. Can outsource production or services to lower cost economies to reduce their average costs of production
3. Relocate country with a lower cost base. Which may offer tax breaks and subsidises
4. Gaining economies of scale by expanding into other markets internationally and operating on a large scale
DA:
1. Overspecialisation
2. Increased competition in the domestic market from global producers
3. Issues from exporting (meeting safety standard, laws and exchange rate issue)
Globalisation for workers advantage and disadvantage
AD
1. More job opportunities from growing firm, FDI from transnational or multinational firms
2. High wages - firm becomes more profitable from economies of scale, may pay higher average wage
DA
1.deindustrialisation caused unemployment
2. Inward migration put downward pressure - more unskilled workers, leading to lowered wages due to supply of labour
3. Footloose firms may lead to unemployment - move country to country for cheaper COP
4. Possible worker exploitation by companies in developing countries
Globalisation to consumers
AD
1. Wider range of products - local products, imports
2. Business specialise according to their comparative advantage - lower prices
3. Lower prices from Specialisation and comparative advantage - real higher income
DA
1. Less choice if large global companies dominate - monopoly power leads to more homogenous products
2. Price increase for some commodities - food raw materials, eg rice from Asian countries, higher demand leads to higher price
3. Lower standard of living for those who lost jobs from deindustrialisation
Globalisation on government
AD:
1. More jobs created
2. More economic growth due to higher AD
3. More tax revenue from corporation, income tax
4. More export If country’s business become more competitive - injections to the circular flow of income
5. Attract investors from its secure and confidence in trading links
DA:
1. Tax avoidance from firms moving to another country with lower tax rates
2. “Footloose” tnc might leave economy for lower cost alternatives
3. Increased debt on government - spending education/infrastructure to attract TNCs or cut taxes but they move
4. Over-dependent/over specialisation - may be vulnerable to change in demand
5. Brain-drain move, workers in developing countries move for better alternatives
Globalisation on environment
AD:
1. Expand and more profitable - spend more on cleaner technology
2. TNCs brings cleaner technology that domestic firms copy
3. Additional tax from TNCs may give government more resources to deal with environment
DA:
1. Depletion of natural resources - non-sustainable use of natural resources as economy grows faster
2. Exporting pollution to developing countries as manufacturing relocates
3. Increase emissions in developing countries - less technology to handle emissions, less control for government to the environment
4. Low regulations of pollution attract TNCs, reducing COP
Define deindustrialisation
A decrease in the relative importance of industry and manufacturing in a developed economy.
Usually involves a decrease in absolute size of industry, or it might just mean that manufacturing industry takes a smaller share of GDP and employs a smaller % of the workforce
