Globalisation Flashcards
What are key characteristics of globalisation?
-An increase in the ration of the value of overseas trade to a nation’s GDP. Increase in (X-M).
-Expansion of financial capital flows from one country to another. For example, increasing foreign direct investment flows moving across national borders.
-Deeper specialization of labour in making specific component parts or technology transfers. Bangladesh and textiles, Europe and automotives, middle east and oil.
-High levels of labour migration across national border, especially for high skilled workers as there is a shortage of high skilled labour globally.
-
What are the key factors driving globalisation?
Containerisation - the real prices/costs of ocean and air shipping come down due containerisation & economies of scale in freight industries and the huge port built to serve them.
Technological advances - which lowers the cost of transmitting and communicating.
Trade deals - overall, import tariffs have fallen - but we have seen a rise in non-tariff barriers such as import quotas, domestic subsidies and tougher regulations leading some to see a new period of de-globalisation.
Differences in tax systems - Some countries have adjusted their corporate tax rates to attract inflows of FDI.
Examples of TNCs…
Tata Group from India has made significant investment in Western economies including Jaguar, Land Rover.
What are the economic benefits of globalisation?
-Cheaper goods and service for consumers.
-More competition in consumers markets.
-Reduction in absolute poverty rates.
-Gain from specialisation of factors of production.
-Rapid transfer of ideas stimulated innovation.
-Gains from improved labour mobility.
What are the economic benefits of globalisation?
(more detail).
There are more competitive markets reduced the level of monopoly profits and can incentivize businesses to seek cost-reducing innovation. An example of this is Uber entering the taxi industry, which in turn has reduced the average cost of taxis.
-Trade can help driver faster economy growth which leads to high per capita incomes. This has reduced extreme poverty in many LICs.
-There are advantages from the freer movement of labour between countries including helping to relieve skilled labour shortages and promoting the sharing of ideas from a more diverse workforce which can then promote innovation.
Economic and social costs of globalisation?
Rising inequality - the gains from globalisation are unequal leading to growing political and social tensions when equality of income and wealth increases.
Threats to global common - including irreversible damage to ecosystems, land degradation, deforestation, loss of biodiversity and water scarcity. Globalisation can lead to expoitation of the environment including the impact of trading toxic waste to countries.
Trade imbalances - increasing trade imbalances (both surpluses and deficits) lead to protectionist tensions, more import tariffs and quotas and a move towards managed exchange rates - this can lead to de-globalisation.
Jobs - Workers in the West have suffered for decades from structural employment due to outsourcing of manufacturing to lower-cost countries and rise in share of imports in GDP.
Elephant curve - Branko Milanovic
(effect of globalisation).
Why have the poorest 5% not benefited from globalisation?
The subsistence trap in these economies means that it is difficult to develop, as there is no surplus and output is only what is required to survive - little output is produced to trade in a globalised world.
Why have the 80th global percentile not benefited from globalisation?
Low-skilled/semi-skilled workers in developed economies like the US and UK - the only group to have seen incomes fall, as often jobs have be lost as firms move abroad to where production is cheaper (such as China and India).
Who has benefited the most from globalisation?
The 50th global percentile.
Middle class such as Brazil, China and India- there is an emerging middle class who have benefited. They have jobs in TNCs, countries have become more industrialised - leads to multiplier effect.
What is de-globalisation?
De-globalisation/Anti-globalization, refers to a process in which countries or regions become less integrated with the global economy. It involves a reduction in the value of the flow of goods, services, capital, information, and people across international borders.
It is characterized by a shift away from the principles of increased economic interconnectedness and openness that are associated with globalization.
UK lost access to pharmaceutical intelligence.
What are the causes of de-globalisation?
Protectionism: Governments might implement protectionist measures such as tariffs, quotas, and trade barriers to shield domestic industries from foreign.
Economic shocks: Economic downturn or recessions can lead countries to focus on more domestic priorities and reduce their reliance on global trade and investment.
Changing Trade Agreements: Countries might renegotiate or withdraw from trade agreements that were previously promoting globalisation.
Environmental Concerns: Growing concerns about climate change and environmental sustainability might lead to policies that prioritize local production local production and reduce the carbon footprint associated with long-distance trade.
