globalisation Flashcards
What is globalisation
process of increasing interconnectivity between countries
-people, culture, finance, goods, information –> transfer between countries
explain economic globalisation
- the growth of TNCs accelerates exchanges of raw materials, goods
-> rapid growth in world trade
->spreading of investement around world
explain the effect of the shrinking world
the physical distance between places remains unchanged but new technologies reduce the time taken to transport goods/people/communicate information
explain the technology that has led to globalisation
- telephone and the telegraph
- broadband and fibre optics
- GIS and GPS
- internet
- electronic banking
What is the world trade organisation (WTO)
- an international organisation that works to reduce trade barriers -> free trade -> ^ movement of goods -> ^ interdependency
explain the EU
- composed of 28 members
- largest free trade bloc in the world today
-issues; euro not being used in all countries, migration and open borders, brexit
-guarantees free movement of goods, capital and people
what are two examples of trade blocs?
the EU
ASEAN
what is a trade bloc?
group of countries that agree to reduce trade barriers between them.
promote free trade between members, increasing economic globalisation
explain the work of ASEAN
-free trade area with 10 members
- association of south East Asian countries
- encourages free trade between countries and encourages FDI
- china is a connected member of this trade bloc -> didn’t want to damage their economic power -> negotiated a deal in order to get preferential conditions
- it has allowed the movement of skilled workers
what are the 4 roles of the national government in globalisation?
1) joining trade blocs
2) free market liberalisation
3) privatisation
4) encouraging business start ups
how do trade blocs lead to globalisation?
specialisation
- countries specialise in goods being produced -> competitive advantage (produce at lowest cost) -> trade these products for other members’ specialisms
- firms producing a country’s specialisation become TNCs -> sell outputs through the bloc
explain free market liberalisation
- involves promoting free markets (tax = minimal) & reduces government intervention in economy
- competition between firms -> innovation & lowest cost production
-means you can choose your supplier for telephones, broadband, gas and electricity, based on quality and price.
-created competition in once restricted markets.
explain privatisation
-where state-owned companies are now privately owned
-e.g. UK governments allowed foreign investors to gain stake in privatised national services (railways)
-this is because running these services were costly
-so it reduces government spending & raises money
explain the encouragement of business start-ups
- encourages people to set up business by offering financial incentives -> grants, loans
-low business taxes also encourage new firm creation
-this creates innovation and competition in new production techniques
what are government subsidies
they are grants given by governments to increase profitability of key industries
explain government subsidies
-why does WTO usually prohibit them
- Govs may provide subsidies (grants) to attract FDI (finance made by TNC into a nations economy)
e.g. could cover relocation costs, payment per worker to attract FDI
- WTO usually prohibits subsidies to domestic firms as acts as a trade barrier- as subsidy allows firm to accept lower market price, undercutting price of imports
- WTO may accept a subsidy for FDI, e.g. in SEZs as this promotes trade
- through gov subsidies they can increase globalisation as through the financial injection, firms can work on a more global scale. it increases consumption so the firm can expand, leading to economic and cultural globalisation
what are the 3 positives of government subsidies?
- ^ in consumption & output, -> ^ business’ profits
-prevents long-term decline of industries (fishing, farming) -> sustains culture these industries bring
-reduces unemployment by investing into the creation of new jobs -> benefitting economy
what are the 3 negatives of government subsidies?
-very expensive
-sometimes when firm receives subsidies -> it reduces incentives to cut costs -> so should only be given subsidies if there is a clear social benefit
- difficult to measure success when they receive subsidies, hard to see whether the subsidies have positively affected area
how can you measure globalisation?
using indicators and indices
KOF index
A.T Kearney index
What is an indicator
measure of an individual aspect of globalisation
e.g. the amount of FDI
what are the disadvantages of the KOF index?
- trade flows will not include informal economy flows, will understate degree of globalisation in developing and emerging countries
- choice and weighting of indicators is value of judgement and may contain cultural bias
- fewer missing or estimated data is increasing accuracy and comparability
explain the A.T index
-ranks NYC, LDN, PARI, TKY, HONKON as top 5 cities for commerce
-rankings established by analysising; business activ, culutral experience, political engagement
what are the disadvantages of the A.T index?
- only includes 62 countries, though these include 84% of the world’s population and 96% of global GDP
- first published in 2008
- heavy weighting given to ICT community, enables the USA to gain a high index score despite low political engagement in terms of treaties signed
how is the growth in size and number of TNCs been encouraged?
by the creation of trade blocs, removing international barriers
explain Starbuck’s position in globalisation
- there has been a change in social structuring, before there were much less coffee shops and more pubs, they drank more alcohol
- Starbucks have shifted social interactions, more of a coffee culture
- linguistic globalisation has come from this, they are interacting with American businesses
- westernisation has led to greater aspirations, they have adopted a better work ethic, increased profitability of businesses
- increased carbon emissions from the flow of goods
explain globalisation in china
china embraces economic globalisation but not social and cultural globalisation as they have a communist approach
what are economic reasons for why countries are switched off
- lack of money to invest in infrastructure, cannot have interdependence, can’t trade (economic), no telephones or airports (cultural), poor infrastructure and low literacy rates makes it unattractive for offshoring FDI
- high level of government debt, can’t embrace foreign companies, e.g. Senegal, cannot afford to purchase imported goods
- dependency on one industry -> can’t be interdependent, this is when they specialise their industry on one of their natural resources , bananas in windward islands, risky
- poorly developed transport and telecommunications infrastructure
what are environmental reasons why countries are switched off
- Arid conditions, Sahel region countries have a semi-arid climate and so agricultural exports are reliant on a good rainy season
- desertification as getting rid of trees reduces transpiration and evapotranspiration, this reduces the amount of clouds and therefore rain
desertification has been due to overpopulation as more grass is eaten, also deforestation, THIS MEANS: there is a reduced amount of available land area for producing agricultural exports - trees give shade (cool area), no infiltration due to baked ground, flooding, no shade for cattle, no building materials
- climate change has led to differing weather patterns, more extreme climate, heatwaves,
- lack of natural resources (e.g. discovery of coltan)
- landlocked countries, difficulty for trade, no airports, travel through other African countries
- isolation from markets
