Globalisation Flashcards
Define globalisation
Increased integration of economies around the world
What are the characteristic of globalisation
- Increased international movement of labour
- Increased international movement of financial capital
- increased specialisation
- Increased international trade
- Increased trade - to - gdp ratio
What are the factors that contributed to globalisation
- Improvement in IT (more movement of financial capital)
- Improvement in transport (freer movement of labour)
- Improvement in shipping, containerisation (led to more international trade)
- Trade liberalisation (removal of trade barriers, more international trade)
Define tariff
Tax on imported goods
Define quotas
A fixed limit on quantity of imported goods
Define subsidies
Grant given by the government to help domestic firms become more cost competitive against imports
Globalisation for countries
advantage and disadvantage
- Greater economic development
(globalisation -> characteristics -> trade -> specialisation -> lower cost -> cheaper goods -> disposable income -> standard of living)
- overdependence on trade due to specialisation
(50% oil GDP of Saudi Arabia) - decline of manufacturing industries in developed countries
Globalisation for producers
advantages and disadvantages
AD:
1. reduced cost of production through relocation or receiving supply from the lowest cost possible
(Meta outsourcing its content moderation to india to reduce cost)
DA:
transnational companies create high barriers to entry (economies of scale) for small domestic firms (Mcdonalds in France)
Globalisation to consumers
advantages and disadvantages
AD
Wider range of products and lower price
(globalisation -> more competition -> product innovation and diversity -> consumer surplus and more choices)
DA
Less choice if large global companies dominate - monopoly power leads to more homogenous products
Lower standard of living for consumers who lost jobs from deindustrialisation
Globalisation for workers
advantage and disadvantage
AD
1. More job opportunities from growing firm, FDI from transnational or multinational firms
- Higher pay due to freedom of movement
DA
1.deindustrialisation caused unemployment (structural unemployment)
- More competitive labour market
Globalisation on government
advantage and disadvantage
AD:
increase government spending from more tax revenue
DA:
Over-dependence on TNC leading to
laws/politics influenced by TNC
Capital flight
Tax avoidance from firms moving to another country with lower tax rates (Apple in Ireland and Bermuda)
Globalisation on environment
advantage and disadvantage
AD:
global cooperation to fight climate change
DA:
more global warming
Define deindustrialisation
The decline in the relative importance of manufacturing industry in a developed economy.
Define FDI
Flow of capital from one country to another, to gain a long term
ownership of a firm in the foreign country.
Define multinational company
Firm that has a headquarter in one country who owns subsidiary companies operating in other countries.
Define TNC
firm that operates in two or more countries.
