Globalisation Flashcards
Globalisation
A process by which economies and cultures have drawn deeper together and have become more interconnected through global networks of trade, capital flows and more. It is driven by advancements in communication, technology and more which makes it easier for businesses to operate and connect on a global scale.
Key characteristics of globalisation
-Increased international trade
-Transnational brands
-Global supply chains
-Labour migration
Key factors driving globalisation
-Containerisation-Prices and costs of ocean and air shipping reduced due to this and EOS.
-Technological advances-Lowers the cost of communicating info
-Differences in tax systems-Can attract infows of foreign direct investment
-Trade deals-Costs like import tariffs and quotas fall due to this
Transnational corporations
Businesses that base their manufacturing, assembly, research and retail operations in several countries. Many TNC’s are synonymous with globalisation e.g. Apple and Nike.
TNC’s as a driver of globalisation
This is because many TNC’s are relocating their manufacturing to countries with lower uni labour costs in order to increase supernormal profits and equity returns for shareholders.
Emerging TNC’s
-Alibaba
-Tiktok
-Huawei
Significance of TNC’s
-Major contributors to FDI, often establishing subsidiaries in foreign countries
-Around 2/3 of global trade in conducted within TNC’s or their subsidiaries.
-Higher employment
-However base erosion and profit shifting causes losses of $100-240B annually
Global value chains
Refers to the interconnected network of activities involved in the production and delivery of goods and services that are performed by multiple firms, operating in different countries. Different stages of production such as design and research are performed by different firms in different countries with each firm adding value to the final good or service.
Economic benefits of globalisation
-Cheaper goods and services for consumers
-More competition in consumer markets
-Reduction in absolute poverty rates
-Rapid transfer of ideas stimulates innovation
Economic and social costs of globalisation
-Rising inequalities-Unequal gains in different countries
-Threats to global commons-Can lead to environmental exploitation e.g. deforestation
-Jobs-Workers may suffer from structural unemployment because of the outsourcing of jobs
-In an interconnected world, external shocks in one region can affect other regions
