Globalisation 4.1 Flashcards
Globalisation Def.
the increased interdependence between the economies of individual countries and different regions of the world.
4 Characteristics of Globalisation
- Free trade in goods and services (fall in trade barriers, especially tariffs, in recent years)
- Free movement of labour (e.g. EU)
- Free movement of capital (freedom of businesses in one country to invest in another country)
- Free transfer of technology and knowledge
Causes of Globalisation
5
Trade Liberalisation - Since the end of World War II bodies such as the WTO, the IMF and the World Bank have sought to reduce tariffs and other forms of barriers to free trade
Emerging market economies – Countries like China, Brazil and India have emerged as major economies in the last 30 years
Technological change – The huge progress in digital and communication technologies makes it far easier (and cheaper) to trade in financial services, and to share knowledge and information. e.g. outsourcing call centres to India
Improved transport - Them most important single development is probably containerisation. This is the movement of goods in steel containers of a standardised size that can be easily moved from ships to lorries
TNCs
Impact of Globalisation on Growth
Increases investment due to TNCs -> Injection -> Larger impact due to the multiplier. This creates an incentive for countries to make supply-side improvements to attract TNCs
TNCs can bring high quality management and production techniques which can be used by other industries e.g. Ireland GDP per capita being one of highest in world, almost doubled between 2010 - 2020
Comparative Cost advantages can erode over time -> TNCs may leave -> structural unemployment and lower growth
Impact of Globalisation on Governments
Multinational companies often shift to low tax countries, meaning less tax rev., however, higher tax rev. gained from foreign investment.
Corruption in developing countries, bribes from TNCs e.g. BAE fined $400m for bribing officials such as those in Saudi Arabia, or Walmart bribing in Mexico to build stores
Impact of Globalisation on Producers
Lower costs as firms take advantage of comparative advantage
Less risk, collapse in market in one country will have a smaller impact on the business (although next point), risk-bearing EoS
increased interdependence e.g. German car industry heavily affected by financial crisis
Impact of Globalisation on Consumers
Lower prices generally, as firms take advantage of comparative advantage (like low labour costs) although meat prices increased due to Chinese demand.
More choice
Impact of Globalisation on Workers
Structural unemployment, such as the decline of mining in the 80s, some areas of South Wales still affected.
Drive down wages of low skilled workers in MEDCS due to outsourcing. Many manufacturing jobs outsourced to Poland & China
Not all negative, skilled workers can benefit from greater salaries due to more demand (although this could further inequality)
Increased migration can lower wages due to increased supply, but migrants are essential in certain industries, contributing greatly to AD which will increase the number of jobs in the future e.g. Construction in UK is 10% migrants
Impact of Globalisation on Environment
2
Increased greenhouse gases due to transport moving goods
Relocation of polluting industries to avoid regulation (pollution havens i.e. Bosnia, Slovakia)
Increased demand for raw materials e.g. Huge depletion of Amazon Rainforest
Globalisation Pros & Cons
4 & 5
Pros
- Lower prices (due to Int. - Competition) so higher CS
- Greater employment (Ireland 15% unemployment 2012, 4.9% in 2019)
- Free movement of labour & capital (FDI)
- Technological transfers & innovation (e.g. Ireland FDI)
Cons
- Growing inequality between nations (sub-saharan africa)
- Higher structural unemployment (e.g. mines in north & manufacturing jobs outsourced to Poland or China)
- Environmental Costs (Demand for raw materials & pollution from transport)
- Greater risk of external shocks (e.g. German car industry affected hugely by 2008, Mexico GDP dropping 12%)
- Less cultural diversity
