globalisation Flashcards
Globalisation
Globalisation refers to the freer movements of goods, services, investment, ideas, and people around the world. This allows developing countries with new access to markets, technology, and foreign investment.
As a result of globalisation, the world has become more interconnected, and more interdependent. It has been the most important factor in raising global living standards and economic development.
Indications of Globalisation
Value of exports as a percentage of GDP
Foreign direct investment
Factors influencing Globalisation
Trade liberalisation
Technology advancements (transport, communication and IT)
Multinational corporations (MNC’s)
Arguments FOR globalisation
greater access to a variety of goods and services
lowers prices
provides more and better paying jobs
increases competition and efficiency
reduces global poverty
increases economic growth
increases living standards
enables access to foreign investment for developing economies
increases multiculturalism
Arguments AGAINST globalisation
higher unemployment among low skilled workers
lowers wages
destroys local cultures
erodes democracy
increases poverty
unfair to developing countries
increases environmental damage
capital flows have destabilised developing economies
enables rapid spread of a pandemic
World Trade
China, Germany, and the United States dominate world trade, accounting for 30% of world goods exports. China is the worlds largest exporter and US the largest importer.
International Competitiveness
International competitiveness is the degree to which a country can produce goods and services which meets the test of international markets, while simultaneously maintaining and expanding the real incomes of its people over the long term.
A fall in competitiveness implies that goods and services produced in a country have difficulty finding consumers in foreign and domestic markets. It can be impacted by:
economic performance
government efficiency
business efficiency
infrastructure
Determinants of International Competitiveness
trade liberalisation
fta’s
structural change
corporate behaviour
changes in labor productivity
changes in a country’s wage relative to trading partners
changes in exchange rate
Purchasing Power Parity (PPP)
PPP is the theory that suggests the same goods should sell for the same price in different countries after prices are converted using current exchange rates. The formula to see if PPP is followed is:
Ep = P1/P2
PPP:
Ep = P1/P2
Ep is the PPP exchange rate between two countries
P1 is the price of the good in country 1
P2 is the price of the good in country 2
It should equal the actual exchange rate.
Factors influencing Trade
Exchange rates
World economic growth
Domestic economic growth
Relative inflation rates
Relative interest rates
Productivity & cost efficiency
Links between Economies
Trade; goods and services imports and exports
Tourism
Foreign investment
Immigration
The WTO has identified four new trends that have affected the relationship between trade and development since the start of globalisation.
I. the economic growth of many developing countries
II. the growing integration of global production through supply chains
III. the higher prices for agricultural goods and natural resources
IV. increasing interdependence of the world economy, which causes shocks to reverberate quickly and globally
Multinational corporations
Multinational corporations (MNC’s) are very large firms with headquarters in one country and subsidiaries in one or more other countries. These firms establish production and/or retail and distribution facilities in other countries.
