Chapter 68- Factors Contributing to Increased Globalisation

Question 1

Globalisation

Answer 1

• Is the increased interdependence of economies around the whole.

Question 2

Features of globalisation:

Answer 2

• Increased trade throughout the world
• Exchange of intellectual property
• Work anywhere
• Capital flow between countries across boundaries
• Increased use of technology
• Drawbacks to interdependence such as 2007-2008 crisis, TATA steel

Question 3

Factors leading to globalisation:

Answer 3

• Reduction in international trade barriers
• Political Change
• Reduced cost of transportation
• Increased significance of multinational companies

Question 4

Reduction in international trade barriers

Answer 4

The World Trade Organisation has been largely responsible for establishing either free trade agreements or reduced barriers to trade between countries. E.g. between Singapore and the EU.

-Within a trade bloc, free trade is encouraged by the removal of internal
tariffs
-This is used to promote trade activities within certain areas, whilst also
assisting in economically managing specific regions.
-By implementing trade blocs, a means of agreement between the countries
within that trade bloc is provided which enables them to benefit from each
other through trade activities.
-As well as increased integration amongst members of a trading bloc. It is argued that trading blocs help globalisation through making global negotiations easier.

Question 5

Political Change

Answer 5

A number of political changes have taken place since the 1980s which have contributed to the globalisation process, e.g. collapse of communism, fall of iron curtain, China starting to develop rapidly after initiation of open door policy in 1978

Question 6

Reduced cost of transportation

Answer 6

• containerisation

Question 7

Increased significance of multinational companies

Answer 7

TNCs are incredible powerful and exert a considerable presence in international markets because they sell goods and services all over the world. They are often based in countries with a low tax regime, transferring their profits to these countries to avoid paying large amounts of corporation tax.
-TNCs come in two distinct forms

Publicly traded TNCs whose shares are owned by numerous shareholders (usually other TNCs, banks and large financial institutions such as pension funds around the world)
State-owned TNCs that are majority or wholly owned by government

Question 8

The dominance of TNCs in the global economy has been caused by a number of factors:

Answer 8

 Their economies of scale mean they can outcompete smaller
companies and, in many cases, take them over
 Their banks balances and ability to borrow money to invest has allowed
them to take advantage of globalisation by investing in new technology
 The move towards free-market capitalism and free trade has opened up
new markets, allowing them to expand

Question 9

Migration

Answer 9

Migration flows, particularly involving the UK have been significant in the last 15 years, particularly from Eastern Europe resulting in a ready supply of both unskilled and skilled labour.

These immigrants have clearly contributed to boosting economic growth but some people would argue that they have placed additional strains on social services, housing, education and health care. – Remittances have boosted source regions GDP

• International immigration has created extensive family networks that cross-national borders – world city-societies become multi-ethnic and pluralistic
• Migrants often import their cultures into their new environment. Along with this often comes the importation of goods from their home countries.
• Migrants often provide a supply of low-cost labour to a nation. As a result, businesses can lower their costs and gain a competitive edge in overseas markets. This helps them to sell more overseas.
• A significant proportion of the money earned by migrants is sent back to their place of birth. This money is usually spent by families and helps to generate demand in these countries.
• Some migrants, such as lawyers, doctors, teachers can help fill the skills gap

Question 10

Growth of the global labour force

Answer 10

The growth in the global labour force has helped to drive global demand because of the desire to buy different goods and services as people’s incomes increase. This increase in the labour supply has helped to drive down labour costs, which has encouraged businesses to expand. Some of these people will also start their own businesses which provides additional impetus to international trade.