Economics Theme 2.4.1 Flashcards
What is globalisation
Globalisation is the process of greater integration and inter-connectedness between countries
What are characteristics of globalisation
Free movement of goods and services
Free movement of labour
Free movement of capital
Increased cultural exchange
why does a company globalise
The greater freedom of movement of capital enables firms to invest outside their country of origin. This may lower their own costs of production and improve economic prospects and job opportunities in the invested country
how does globalisation raise gdp
World trade rising as a proportion of world Gross Domestic Product (GDP)
The increased freedom of movement of goods and services increases export opportunities and therefore has a significant effect on economic welfare. This has led to a greater dependency on trade as a proportion of GDP
Countries benefit from increased specialisation where they have a comparative advantage which lowers their production costs and improves efficiency
How has globalisation increased migration
Increased migration
Globalisation allows the best talent to move quickly and easily across borders, creating a ‘brain drain’
Less skilled workers can undercut wages in developed economies as the workforce of poorer countries seek to better their standard of living
Although not always visible, increased globalisation has arguably damaged traditional cultures. The proliferation of multinational companies creates a uniformity of many economies and arguably less cultural diversity
At the same time, traditional cultures have struggled to accommodate new ones, leading to social tension
How has trade liberation happened
Trade liberalisation
The World Trade Organisation (WTO) has assisted in the reduction or removal of trade barriers and there has been a greater proliferation of trade agreements across the world
How has there been capital market liberation
Capital market liberalisation
There has been a significant relaxation on the rules and regulations surrounding the movement of capital, which can move either freely or at very low cost quickly across the globe
How has there been change politically from globalisation
Political change resulting in the opening up of China and the former Soviet Union
Large and rapidly developing countries such as India and China, which were previously largely closed to trade have become increasingly integrated into the global economy and play a vital role in the creation of new markets and the provision of low cost labour
How has there been reduces costs with transport and comms
Reduced costs of transportation and communications
This has made the movement of people, goods and services across the globe faster and cheaper
Advances in technology have revolutionised communications, making it easier to communicate globally and lowering the cost of communication e.g. teleconference and Skype v face to face meetings
Lowered labour costs and enabled businesses to access new foreign markets
How has there been a significant increase of global companies
Increased significance of global (transnational) companies
Many large organisations have taken advantage of lower trade barriers, labour mobility and cheaper transportation to grow rapidly and enter previously untapped market
How have global companies increased development in gloablisation
Capital inflows and inward investment
Global companies are principally driven by profit motives
If they can spot opportunities for new markets or the chance to reduce production costs by moving to low-wage economies, they may take advantage of these openings, which drives capital expenditure and investment funds into a country
Economies of scale
Global companies can seek low production costs and spread their production over greater units of output, which allows them to reduce unit prices
Employment
Create employment opportunities for local workers
Infrastructure
Global companies will often invest in training the workforce to improve their skills, and also spend money on local roads and transport infrastructure to aid their own trading opportunities and distribution
Diversification
Developing countries may have very few industries to help them generate economic growth and the arrival of global companies may help to diversify the economy across a wider range of businesses and sectors
Standards
Global companies will often work towards the provision of minimum standards in either production e.g. health and safety considerations or the improved final goods/services
What are the positives for individuals from globalisation
Higher standard of living
Reduction in absolute and relative poverty
Increased income per capita
Improved health/life expectancy
What are the negatives for individuals from globalisation
Longer hours worked
Stress/obesity/related illnesses
Consumerism/creation of artificial needs/”Keeping up with the Jones’”
Lower quality of life from pollution/emissions
What are the positives on the economy from globalisation
Increased consumption
Improved international competitiveness
Improved public services
Lower unemployment
What are the negatives on the economy from globalisation
Greater inequality
Social dislocation
Inflationary pressure
Worsening BoP deficit
(imports are higher than exports)
What are the positives on the environment from globalisation
Development of low carbon technologies
R&D into sustainable technologies
what are the negatives on the environment from globalisation
Depletion of non-renewable resources
Pollution
De-forestation/loss of natural habitats/less bio-diversity
Global warming
