Globalisation Flashcards
1
Q
Globalisation
A
- Globalisation refers to the increased economic integration between countries (increased international trade and inward investment).Globalisation is not new but the pace of globalisation increased significantly in the 50 years up to the financial crisis of 2008
-with the election of Trump as president in 2016, globalisation slowed due to protectionism
-coronavirus pandemic in 2020 caused a complete disruption of global trade and globalisation
2
Q
1) Characteristics of globalisation
A
- Free trade across national boundaries of goods ans services so that, for example, it becomes as easy for a firm in London to sell to a firm in Poland or Vietneam as it is to sell to a firm in Birmingham, Manchester or Belfast
- Free movement of capital between countries, so that a UK pension company might invest in China, or the Chinese central bank use some of its foreign currency reserves to invest in the USA, or a US company buy a UK company
3
Q
2)Characteristics of globalisation
A
- Free movement of labour between countries, in the same way that there is currently free movement of labour within the UK or within the EU
- Free interchange of technology and intellectual capital across national boundaries; so that, for example, a South African company can licence technology from the USA on the exactly the same terms as a US company; or a US company can protect its patents in China on the same terms as it can in the US-or a UK company can use its own pattened technology in a factory in Brazil in the same way it can in the UK
4
Q
1) Causes of globalisation
A
- A decrease in transport costs-e.g containerisation resulted in economies of scale
- A decrease in the cost of communications-especially due to the internet
- A reduction in world trade barriers-engineered by the General Agreement on Triffs and Trade (GATT) and its successor, the World Trade Organization (WTO)
5
Q
2)Causes of globalisation
A
- The opening up of China and the collapse of communism in Eastern Europe
- The growth of trading blocs
- The increased importance of global companies or transnational companies moving manufacturing to a country where production costs are lower-known as offshoring
6
Q
1)Benefits of globalisation
A
- Living standards-with lower trade barriers and increased trade, countries can specialise in producing goods in which they have a comparative advantage. This results in hoigher world output and, therefore, an increase in living standards
- On public finances of government-tax revenues will increase, which may be used on public services such as health and education or tax infrastructure.However, many firms use transfer pricing to avoid tax
7
Q
2)Benefits of globalisation
A
- On consumers-consumers can expect lower prices (increased consumer surplus) and greater choice
- On producers- firms will be producing on a larger scale and so will benefit from economies of scale and higher profits. Further, technology transfer is likely to occur-that is, when TNC’s invest in other countries they are likely to bring modern technology with them
-additionally,TNC’s are more likely to introduce modern managerial techniques designed to increase productivity.
-local businesses may be out of business as they arent as competitive
8
Q
1)Weaknesses of globalisation
A
- On a countries trade balance-a country that does not have a competitive advantage may come to rely increasingly on imports. Could cause a deterioration in its trade balance becasue imports would be rising relative to exports
- On inequality-A reason for this is due to how there has been a decreased demand for unskilled labour in developing countries so increasing the gap between the highest paid and the lowest paid workers.
9
Q
2) Weaknesses of globalisation
A
- On supply chains-globalisation has made supply chains lenghthier and more complex. The coronavirus exposed this weakness of this and many countries, led by the USA, are trying to shorten them by encouraging production in their home countries.
- On the environment-there will be increased external costs. Increased trade will increase road and air transport which is associated with noise and air pollution
-additionally,FDI by countries in search of raw materials may result in exploitation and depletion of natural resources
10
Q
Impact of Globalisation consumers
A
- Consumer choice-avalibility of goods and services has considerably increased with globalidsation leadingto greater consumer choice
- Prices-Globalisation is leading to a fall in the price of some goods and services because production is being switched from high-cost locations to low-cost locations.
- Incomes-Globalisation has raised incomes round the world. However,not every consumer has gained as a worker in South Wales who has lost his job because production has ,moved to wales
11
Q
Impact of Globalisation on Workers
A
- Employment and unemployment-opportunitiesd vary across the world as the developed world like Europe and the US have lost jobs in manufactring by the developing world like China there have been many more job opportunities
- Migration-Increased migration due to how many economic migrants move due top how they believe they can enjoy a better standard vof living. By doing so, they fill gaps in the economy and so raise productivity of existing workers
- Wages-globilisation is shifting workers to different locations around the world to persue more competetive wages.
12
Q
Impact of globalisation on producers
A
- Specialisation and economic dependancy-Economic agents are becoming dependant opn each other due to lengthy, complex supply chains.
- Costs and markets-allows firms to source products from a wider variety of countries and firms. Key to lower costs is to use lower paid workers
- Footloose capitalism-firms which operate in several countries have the power to move. Profits are then reduced in a country A and increased in country B. Overall, the multinational makes a tax saving
13
Q
Impact of globalisation on governements?
A
- Governments have to adopt policies which will capturte as large as a share of tax as they can and to minimise the losses of globalisation too. This could mean lowering taxes or increasing spending on education to increase global market competitiveness
- Governments are also prone to corruptiopn and bribery. Multinationals have a long history of doing this by gaining control of resources through bribing governments or officials
14
Q
Impact of globalisation on envronment
A
- This could be throigh air and noise pollution
- Additionally, logging of tress can cause massive issues on different levels
- UK and Sweden have made considerable amounts of progress to reverse envrionmental degredation
15
Q
Impact of globalisation on individual countries (EXAMPLE)
A
- Globalisation and competition from the far East in the 1950’s,60’s and 70’s decimated theUK’s texile and shipbuilding industries
- This had massive knock on effects on the coal and steel industry
- In countries like China, the benefits from rapid growth in incomes have to be offset against the very large negative impacts that the growth of heavy industry has had on the environment
