Globalisation Flashcards
What is globalisation
Globalisation is the increasing integration of the worlds local, regional and national economies into a single, international market
- It involves the free trade of goods and services, the free movement of capital and labour and the free interchange of technology and intellectual capacity
- With the spread of globalisation came more trade between nations and more transfers of capital and FDI. Moreover, brands developed globally and labour has been divided between several countries.
What are the factors that contribute to globalisation?
Trade in goods
Trade in services
Trade liberalisation
Multinational corporations (MNCs)
International financial flows
Communications and IT
Containerisation
How do trade in goods contribute to globalisation ?
- Developed countries have acquired the capital and knowledge to manufacture goods. The efficient forms of transport makes it easier and cheaper to transfer goods across international borders
- Some developing countries have access to cheap labour, so MNCs move their production abroad. This causes developed countries to trade with these developing countries, so they can access the manufactured goods
How do trade in services contribute to globalisation ?
The trade of tourism, call centre services and software protection has increased from developing countries to developed countries
How does trade in liberalisation contribute to globalisation ?
The growing strength and influence of organisations, such as the world trade organisation (WTO), which advocates for free trade, has contributed to the decline in trade barriers
How do MNCs contribute to globalisation ?
MNCs are organisations which own or control the production of goods and services in multiple countries. They have used marketing to become global, and by growing, they have been able to take advantage of economies of scale. The spread of technological knowledge and economies of scale have resulted in lower costs of production
How do international financial flows contribute to globalisation ?
E.g. the flows of capital and FDI across international borders has increased. Also, the foreign ownership of firms have increased. There have been more investment in factories abroad
- The removal of capital controls have facilitated this increase
How does communications and IT contribute to globalisation ?
This has resulted in it being cheaper to ship goods across the world.
This causes prices to fall, which helps make the market more competitive
Containerisation also means that goods are distributed in standard sized containers, so it’s easier to load and cheaper to distribute using rails and sea transport
What are the consequences of globalisation on individual countries ?
There could be trade imbalances between countries e.g. the US runs a large account deficit with China who has a large account surplus
There could be imbalances and inequalities in consumers and countries access to health, education and markets
Within individual countries, there could be income and wealth inequalities if the benefits and cost of globalisation aren’t evenly spread
Possibility of weakening of culture due to global branding however culture can also spread e.g. Chinese takeaway food in the UK
What are the consequences of globalisation on government ?
Some governments may lose their sovereignty due to increase of international treaties. Individual states may find it hard to resist the force of them, and if countries become members of their organisations, they’ll have to abide by their rules
What are the consequences of globalisation on producers and consumers ?
- Firms operate in a more competitive environment, which encourages them to lower their average costs and become more efficient
- Producers can lower AC by moving production to places with cheaper labour. The spread of technology results in firms being able to employ the most advanced machines and production methods
- Globalisation leads to an increase in world GDP, which increases consumer living standards and helps lift people out of absolute poverty
- Consumers take advantage of wider range of goods and services because of the increased availability of goods and services. However some services may become homogenised, such as hotels
What are the consequences of globalisation on workers ?
- Workers can take advantage of job opportunities across the globe, rather than just their home country
- However there could be structural unemployment e.g. in the UK after the collapse of ship building and mining industries. This is because it was more efficient to manufacture goods to occur agora,d so the production shifted to lower cost nations
- When production shifts to lower cost nations, the creation of jobs can be seen as beneficial or harmful. On one hand, MNCs could be exploiting their labour and providing poor working conditions, e.g. sweatshops. On the other hand, working in sweatshops may provide a higher, more stable income than alternate forms of agriculture
What are the consequences of globalisation on the environment ?
- Industrialisation and increases consumer living standards may lead to more pollution through increased production and transportation of goods
- Some of the negative impacts on the environment could include deforestation, water scarcity and land degration
