Globalisation Flashcards
Week 1
When was the first age of globalisation?
1870-1914 (Up until WW1)
What did WW1 do to Globalisation? And when did it resurge?
It caused a 75 year slow in the global flows of trade, capital and migration.
It resurged in the 1990’s
What is Globalisation?
A shift into a more integrated and interdependent world economy (Hill, 2022)
What are the forms of interdependence in globalisation? (4)
Economic
Cultural
Political
Technological
How can the forms of interdependence be split? (into 2)
1 - The globalisation of markets
2 - The globalisation of production
What is the Globalisation of Markets? What are the advantages and disadvantages?
Where convergence in buyer preferences in markets around the world occurs, including in consumer goods, industrial products, or business services.
Benefits: Reduce marketing costs, creates new market opportunities (when a local market is small in one country a business can look elsewhere), and it levels uneven income streams (such as extreme weather in certain seasons)
Downsides - The product needs to be adjusted to the local buyers needs, and ensure the development is sustainable for future generations needs
What is the Globalisation of production? What are the advantages?
The disperse of production activities to locations that help minimise costs and quality-maximise objectives for a good or service.
Benefits: Lower cost workers, access technical expertise, access production inputs either due to unavailability locally or lower cost abroad.
What do global institutions do?
Because business activity cross boarders requires a framework that manages, regulates, and polices the global marketplace, there are global institutions that help regulate cross-national business activities
What do the global institutions GATT and WTO do?
GATT - General Agreement on Tariffs and Trade and its successor WTO - the World Trade Organisation, Police the world trading system and ensure nation-states follow the signed treaties’ rules.
What does the global institution IMF do?
The International Monetary Fund (IMF): Maintains the order in the international monetary system
What does the global institution, the World Bank, do?
World Bank: Promotes economic development, with 189-member countries
What does the global institution, the UN, do?
United Nations (UN): meant to preserve peace through international cooperation and collective security
What are regional trade agreements? (Global institutions)
Regional Trade Agreements: Smaller groups of nations agreements, NAFTA, EU, APEC.
How can Globalisation be measured?
Globalisation can be measured by the KOF Globalisation index, measuring the economic, social and political dimensions, in De Jure measurement (What is by law) and De Facto measurement (What is in practice). It uses an array of variables to create these measurements which are:
Trade
Financial
Interpersonal
Informational
Cultural
What is international trade?
International trade is a firms export of goods or services to consumers in another country
What is Foreign Direct Investment?
Foreign Direct Investment (FDI) is a firm’s investment of resources in business activities outside of its country
What are the barriers of Globalisation?
- Tariffs on imports of manufactured goods, retaliatory trade policies, trade wars
- No framework for the protection of intellectual property inventions, etc.
What barriers are declining for globalisation?
- GATT (General Agreement on Tariffs and Trade) negotiations among members of states on lowering the barriers to the free flow of goods and services (first round of negotiations in 1948)
- WTO (World Trade Organisation) was established to police the international trading system.
What technological change has driven globalisation?
- Communications (Wireless technologies, satellite etc.) are microprocessors that allow higher-power low-cost computing which increases information that can be processed by individuals and firms.
- The internet
- Transportation technology
What are some of the changing demographics of the Global Economy?
Changing world output and world trade:
- In the 1960s the USA was the world’s dominant industrial power: 38.3% of world output
- In 2020, the USA accounted 24.7% of the world output, and China 17.4%
Forecasts predicted a continued rise of share in world output accounted by developing nations (China, India etc.) and a decline in rich, developed countries (UK, UAS, Germany etc.)
What is changing in the foreign direct investment picture? (FDI)
Due to barriers to trade, international services and capital have declined, so an increasing number of countries have began investing abroad and dispersing production to locations where there are lower labour costs
What are the changing factors of MNEs? (Multi National enterprises)
1 - There is a rise in non-US MNE’s
2 - There is a growth in mini MNE’s (the internet lowered the barriers that small firms faced when trying to reach markets abroad)
What are the risks of globalisation?
- Issues in one country can quickly spread to another/all e.g. Covid19
- Job losses in industries with foreign competitors
- Downward pressure on wages
- Environmental degradation
- Cultural imperialism of global media and MNEs (Multi-national enterprises (companies that operate in 2 or more countries)
Wha tare the 4 factors of the Globalisation debate?
1 - debate about the effects on jobs and income
2 - debate about the labour policies and the environment
3 - debate about national sovereignty
4 - Debate about globalisation effects on poverty
Explain the arguments for and against the globalisation debate: effects on jobs and income
Argument: Worries about the effects of international trade on manufacturing jobs and services in wealthy economies with outsourcing
Counter-argument: Cheaper products and services in the wealthy countries and the flow of income in developing countries may increase exports from the wealthy countries to the developing countries, creating more jobs in wealthy countries and closing the gap.
Explain the arguments for and against the globalisation debate: labour policies and the environment
Argument: Adhering to labour/environment regulations is costly for businesses, but they may exploit workers in less developed countries harming their environments instead
Counter-Argument: As the richer a country becomes the stricter regulations become, less developed countries with become richer and eventually protect workers and the environment
Explain the arguments for and against the globalisation debate: national sovereignty
Argument: Decision powers are taken away from democratically elected governments of nation-states and giving to unelected officials such as the WTO
Counter-argument: the power of supranational organisations are limited to what the nation-states collectively decide to grant them.
Explain the arguments for and against the globalisation debate: effects on poverty
Argument: The inequality gap between developed and less developed nations has been growing for the past 100 years, despite the benefits of free trade and investment
Counter-argument: The percentage of the worlds population living in poverty has been dropping
What is an international business?
A firm that engages in international trade or investment
Does a firm need to be a MNE to be an international business?
No
How is managing an international business different to managing a national business?
1 - countries are different with respect to culture, political systems, economic systems, legal systems, and level of economic development
2 - Wider more complex problems in international business e.g. marketing approaches, managing staff, interactions with domestic governments etc.
3 - limits imposed by varying government interventions
4 - Converting between/into currencies
