globalisation Flashcards
Characteristics of Globalisation
Increased foreign ownership of companies
Increased trade in goods and services
Increasing global media presence
Deindustrialisation in developed countries and the service sector becomes more prominent.
What factors have contributed to globalisation since 1970?
Improvements in transport infrastructure
Improvements in communication technology
Trade liberalisation
Growing influence of global companies
The end of the cold war
The role of international financial markets
What are 2 strengths of globalisation for countries and governments?
Rising incomes and therefore lead to rising tax revenue.
Better quality jobs as MNCs invest in new factories and facilities.
What are 2 weaknesses of globalisation for countries and governments?
Decline of traditional industries, which leads to structural unemployment and lower wages.
Many countries also experience increased migration out of the country for poorer countries.
What is the impact on consumers of globalisation?
Reduces the price of goods as they can be produced more cheaply and competition forces prices to decrease.
Far greater choice and increased availability of goods and services.
Impact on producers of globalisation?
Lower costs as firms are able to obtain products and materials from a wide range of countries.
Increased competition means firms need to aim for productive efficiency.
Tax avoidance where firms can choose where their central operation is and therefore where they pay tax.
What are the possible impacts on workers of globalisation?
+ Higher economic growth has lead to rising employment and higher wages.
- Traditional industries have suffered and workers in those industries have become unemployed.
- Due to migration into countries wages might decrease due to increased supply of workers.
What impact might globalisation have on the environment?
Resource depletion- greater production of goods leads to the use of finite resources.
Climate impacts- Transportation of goods and individuals could lead to higher carbon emissions.
Rising world population is linked to globalisation and this places stressors on natural resources.
Absolute advantage
When a country can produce a good at a lower cost per unit than another country.
Comparative Advantage
If the opportunity cost of a country producing a good is lower than the opportunity cost for another country.
Comparative advantage 5 assumptions
Constant cost of production- no economies or diseconomies of scale
Transport costs are zero
Perfect knowledge exists
FOP are perfectly mobile so can easily switch
No tariffs or trade barriers
Comparative advantage 3 limitations
Transport costs exist and these might outweigh any comparative advantage.
Increased specialisation may lead to larger firms which could lead to diseconomies of scale.
Governments may introduce tariffs or other barriers to trade.
Advantages of specialisation and trade
Lower price and more choice for consumers
Countries have access to goods and services they would otherwise not be able to access
Innovation as free trade encourages competition which leads to firms being innovative.
Disadvantages of specialisation and trade
Risk of dumping by foreign firms
Increased unemployment due to competition and dumping
Increased integration might lead to countries growing more exposed to external shocks.
Growing influence of global monopolies, which might lead to higher prices
Environmental degradation
Developing economies may face particular problems as monopsony power in developed countries may take advantage.
Globalisation
the increasing integration of economies internationally through free trade - technology advance meant, low transport cost - WTO(1980s) - political social
- Global economic growth due to specialisation and competition.
Trade based on comparative advantage results in those countries with the lowest ¬oppturnity cost producing goods.
This results in specialisation and therefore greater efficient, lowering average cost and therefore greater output.
As a result of higher global competition, companies are incentivised to invest , improving the state of technology, raising efficiency.
As a result, world economic output rises.
argument of against global economic growth due to specialisation and competition
Economics of scale
Cost of transportation outwights the comparative advantage when they are low within the eu they can trade easily – landlocked country – therefore comparative advantage is not useful
Assume there are no trade barriers Germany and France vs uk and France
- Export led growth in developed countries
Developed countries are able to specialise in high level manufacturers and services, assuming that they have a comparative advantage.
The price of these services are high therefore resulting in high export revenue shifting AD right resulting in higher economic growth
arugemenst against export led growth
You need money in the first place uk colonialism
Only get good FDI if you have good workers in the first place
Over reliant with Russia and gas
Pandemic were very reliant on others with specialisation
Sunset indrusty – tawian – structural unemployment – education
what is a sunset industry
an indrusty that has existed for a long time and that is less successful and making less profit that precisely like the steel indrusty
- Export led growth in developing countries
Developing countries specialise in primary products, low level manufacturers, or possibly higher-level services like tourism.
Exporting these goods to rich countries results in large injections, raising revenue resulting in higher economic growth
arguments against export led growth in developing countries
Primary product depends – good weather –
Exploit
- FDI, innovation and technology transfer
Globalisation also results in higher Foreign Direct Investment from transnational companies to developing countries, shifting LRAS and AD right, resulting in higher economic growth
arguments against fdi innovation
Transnational organisations
Extractive fdi – repatriated profits, externalities, corruption
Inclusive FDI – banglandish creates a lot of local employment, training, improve infrastructure
- Employment
Higher exports and AD results in economic growth and therefore a higher derived demand for labour. As a result, more jobs are created, lowering cyclical unemployment. – high skilled
arguments against employment globalisation
Domestic structural unemployment – depends on the country and your comparative advantage – foe developing countries the main problem in geographical immobility –
in devlopped likely to be occupational
- Global inequality
Developing countries trading with developed countries are able to raise exports and increase growth. As a result, countries such as the BRICS may ‘catch up’ with developed countries, lowering inequality between nations.
arguemneyts against global inequality
National inequality – skilled workers income rise – unskilled loss of jobs
