Globalisation Flashcards
International economics
Define globalisation
The process of increasing the integration of the world’s local, regional, and national economies into a single international market. ( Increases economic interdependency).
Globalisation is characterised by increasing economic flows of …
- International trade
- Information
- labour migration
- financial capital
- Foreign direct investment
- Production through global supply chains
- Interchange of technology and intellectual capital
Describe International trade as a characteristic of globalisation.
Free trade of goods and services across national boundaries.
What is production through global supply chains?
Global production of a good involving a network of countries.
What are the impacts of globalisation on consumers?
+ Increase in consumer choice ( wider range of G/S due to a global market)
+ lower prices ( firms are able to lower production costs by exploiting comparative advantages, they can produce in countries with lower costs, eg: labour costs)
- Could lead to demand pull inflation as a result of rising incomes/more employment opportunities.
- loss of culture
What are the impacts of globalisation on workers?
+ More employment opportunities
- Large scale job losses due to an increase in global competitiveness (Eg: western manufacturing sectors are are unable to compete with china)
- Increased migration leads to lower wages due to an increase in supply of workers
+ Immigrants provide new skills > innovation > increases firm productivity > investment increases > AD shifts out
- International competition leads to a fall in wages for low skilled workers in developed countries (however increases those in developing)
- Wages for high skilled workers increases due to more demand for their work
> increase in income inequality
+ Transnational corporations provide training & new job opportunities
- Workers lack rights in places like sweat shops
What is a transnational corporation?
Corporations that have a global reach, operating in a number of countries.
What are the impacts of globalisation on producers?
+ Reduces risk because firms are able to source products from more countries and sell to more countries - makes them less reliant thus reducing risk as a collapse of market in one country will have a smaller impact on the impact.
+ larger market
> increases profits.
+ Lower costs of production by exploiting comparative advantage ( Eg: employing lower skilled workers is much cheaper in developing countries - due to less worker rights , min wage etc…)
> increases profits
- Increase in competition means that firms unable to compete internationally will lose out.
What are the impacts of globalisation on governments?
- Reduced control over their economies due to their international trade agreements, and global market forces
+ increase in tax revenue ( Transnational corporations pay corporate tax + more people in employment to pay income tax)
- Increase in tax avoidance
- Firms may move offshore if corporation taxes become too high
- Government corruption as a result of Tncs having power to lobby governments
What are the impacts of globalisation on the environment ?
- Increase in world production leads to an increase in demand for raw materials
> increased resource extraction + pollution
> environmental degradation - Increase trade + increased production = more carbon emissions > pollution
+ Growing emphasis on sustainability & responsible business practices to mitigate environmental harm
What are the impacts of globalisation on individual countries?
+ Stimulates economics growth by increasing trade, foreign investment, consumption
> shift AD out
- Increase in income inequality
What factors have led to an increase in globalisation in the last 50 years?
1) Technological advances
2) Trade liberalisations
3) Economic liberalisation
4) Transport infrastructure - Eg: containerisation
5) Financial intergration
6) Multinational corporations
7) Political stability
Explain how advancements in technology have led to an increase in globalisation in the last 50 years.
- Development of information technology ( internet, mobile communications)
- has significantly reduced communication and transportation costs
- this facilitates global business corporations.
Explain how trade liberalisations have led to an increase in globalisation in the last 50 years.
- Removal of trade barriers through
- international agreements > Eg: general agreement on tariffs and trade, GATT.
> Eg: The world trade organisation, WTO. - has promoted international trade
Explain how economic liberalisation has led to an increase in globalisation in the last 50 years.
- Many countries have adopted market-orientated economic policies
> Eg: deregulation
> Eg: privatisation - this encourages foreign investment and trade.
