Globalisation Flashcards
Globalisation Definition
The process of interdependence and integration between people, firms and governments around the world.
Key causes of Globalisation
Transport Improvements
Containerisation
Improved Technology
Growth of MNCs
Growth of Trading Blocks / Reduction of Tariffs increases globalisation.
Economies of Scale
Increased Mobility of Labour
Postitive Consequences of Globalisation
Encourages Specialisation
Economies of Scale
Lower production costs can be passed down to consumers for lower prices.
Access to a greater choice of goods and services.
World GDP has risen due to globalisation.
Improvement of living standards
Reduction in absolute poverty
Employment levels increase
Support Macroeconomic Objectives
Increased competition leading to lower prices.
Increased awareness of / quicker response to foreign disasters
Negative Consequences of Globalisation
Some prices rise due to higher incomes, higher demand and supply being unable to meet the new demand.
Economic dependency - leading to instability and interdependencies worldwide.
Global imbalances in BoP accounts.
Primary Dependency
Deindustrialisation / Creative Destruction
Greater risk of external shocks.
Growing inequality.
Positive Impact of Globalisation on Developing Nations
Creation of jobs, reducing unemployment
Increased investment in developing countries via FDI.
Negative Impact of Globalisation on Developing Nations
MNCs may exploit workers with low wages / relaxed health + safety regulation
Skilled workers migrate away from developing countries
Industrialisation
Cultural Homogenisation
Exploitation of the environment.
Negative Impact of Globalisation on Developed Nations
Cheap overseas production has lead to reduction of some industries (eg. manufacturing) in developed countries - this creates structural unemployment.
Deindustrialisation.
Success of emerging economies at the expense of developed nations.
Increased levels of imports due to more trade and have a negative impact on the BoP sheets.
MNC Definition
Multinational companies are ones which operate in at least one country aside from their country of origin.
What attracts MNCs to invest ?
Availability of cheap labour and raw materials
Good Transport links
Access to different markets
Pro-foreign investment Govt. policies
Low Corporation Tax.
Off-Shoring
The relocation of a business process from one country to another.
Out-Sourcing
The act of contracting work out to an external organisation.
Positive Effects of MNCs
FDI by MNC creates new jobs and brings new skills and wealth to an economy
MNCs buy local goods and services, leading to inflows of foreign countries.
Benefits from economies of scale, helping them to be more efficient.
Possibility to raise living standards by providing employment opportunities.
Negative Effects of MNCs
Exploitation of workers
Local firms go out of business / Struggling Infant Industries
Employment dependency on one MNC
Taxes paid in non-host nation
Economic power to reduce choice and increase power.
Regulatory Capture affects the local domestic economy.
Govt. may be forced to reduce corporate tax levels in order to attract / keep MNCs in their country.
