Factors contributing to increased globalisation 4.1.3 Flashcards
What is globalisation?
Globalisation refers to the spread of the flow of financial products, goods, technology, information, and jobs across national borders and cultures.
What are the features of globalisation?
- Goods and services throughout the world
- Events in one economy are likely to effect another
- Capital flows freely between different countries
- Intellectual property across borders
What is trade liberalisation?
The move towards greater free trade through the removal of protectionist barriers to trade.
What are the opportunities from trade liberalisation?
- Companies that rely on imported materials and components will enjoy lower costs leading them to reduce prices to compete with cheaper imported rivals.
- Due to the bilateral (two sided) nature of trade agreements, liberalisation can lead to increased export opportunities with the removal of barriers in the other direction.
- Helps improve political relationships.
What are the threats from trade liberalisation?
- Allowing imports into a domestic market does increase competition for domestic firms. The most efficient should survive; those who could only survive due to the barriers will lose that protection and possibly face closure.
What are the factors effecting globalisation?
- Political change
- Reduced cost of transport and communication
- Increased significance of transnational corporations
- Increased investment
- Migration
- Growth of the global labour force
- Structural change
Political Change:
New governments being elected meaning new policies being implemented like to be more ‘trade- liberal’ or more ‘protected’ depending on the country
eg - Brexit , trump election 2016
Reduced cost of transport and communication:
Transport - has made it easier for businesses to transport their goods at a cheaper rate due to sea freight and airfreight.
Communication - such as advances in technology allow businesses to communicate faster and at a lowered cost. As well as fibre optics
Increased significance of transnational corporations:
TNCs: These are businesses who have their main headquarters in one country and has different subsidiaries (branches) around the world.
- Global giants, selling in hundreds of markets seek growth by entering new markets in order to boost sales year by year and keep shareholders happy.
- They sell their products in so many markets, consumer choice increases and consumers become accustomed to different cultures and trends.
TNCs are a key driver of globalisation because they have been re-locating manufacturing to countries with relatively lower unit labour costs in order to increase profits and returns for shareholders.
Increased investment:
- Financial banks investing not only in the home country but also all around the world.
- Companies act internationally by increasing their international investment out of mutual interest and the need to stay internationally competitive.
- An increase in the ratio of FDI and GDP implies a greater share of FDI thus an increase in the level of globalisation. FDI flows (inward and outward) as a percentage of GDP indicate the degree of global investment activities of the economy for a given time period and reflects the changes between the two periods.
Migration:
A movement from one country or region to another.
- They tend to be well-educated which means increased migration can stimulate economic growth.
- Growing numbers of people move within countries and across borders, looking for better employment opportunities and better lifestyles.
Growth of labour force:
Seeing the world as a global labour market and moving production to cheaper locations. Offshoring has resulted in the brain drain leading to the high mass unemployment of certain sectors in developed countries so the rise in quaternary jobs is crucial for their development as lower sectors move to cheaper locations.
Structural Change:
Moving from primary sector to secondary to tertiary. Links to the brain drain.
