Globalisation Flashcards
Define globalisation
Refers to the increasing integration of the world economy, increasingly the world economy is being seen as a single market.
What are some effects of globalisation? (on the UK) (3)
Economies like the UK largely depend on globalisation due to a large increase in goods, services, people, money and ideas being traded between countries in recent years. For example the UK sells most (roughly 50%) of its exports to the EU, we buy our imports from all over the world. We are increasingly dependant on foreign companies coming to the UK to create jobs (E.g-McDonalds) In recent years a large factor helping the UK economy grow is migrants.
What are the factors that contribute towards globalisation?
1) Improvements in communications - E.g- Internet and phones, this has made it much easier for companies to operate on an international basis 2) Improvements in transportation- E.g-Large ships, planes, Much cheaper for businesses to sell their goods to other countries. 3) Decreasing number of protectionist measures in general around the world 4) Increasing number of advantages for businesses if they operate on an international basis. (There’s a separate card on this) 5) Cultural Factors - The effects of films, TV, music and tourism mean that peoples tastes around the world are becoming similar which has mad it easier for businesses to sell their goods/services.
What are some advantages to businesses of globalisation?
-Expand quicker -Greater economies of scale -Spreads risk across multiple markets -Can choose to produce their goods in countries where costs are lowest -Can reduce the amount of tax they have to pay (E.g-Transfer pricing)
What is transfer pricing?
Transfer pricing is a method of pricing goods and services transferred within a multinational company in order to reduce tax burdens and maximise profits. The purpose of transfer pricing is to push profits into territories where either the tax rates are more favourable, or where more loopholes exist to be exploited (Tax avoidance).
What are 6 advantages of globalisation?
- Benefits consumers- More choice and lower prices, due to increased competition; this means consumers real income rises and Aggregate Demand increases enabling economic growth.
- Businesses benefit - Expand much quicker, economies of scale, spreads risk etc..
- Benefits the economy - GDP grows much quicker for all countries as it should lead to increases in real incomes due to: -Increased competitive pressure (efficiency up, PPF out) - Countries specialise making more efficient use of resources, increases economic growth. If they all specialise they’ll all allocate resources more efficiency, output increases, the world economy grows much quicker.
- Workers will benefit from jobs created by the growing economy
- Poorer Countries could benefit because they may be able to make and sell goods to richer countries, particularly if they can attract multinationals.
- Encourages the world to work together to solve global problems such as global warming.
What are 4 disadvantages of globalisation?
- Some workers might lose out, particularly in industrial countries if they’re working in infant industries that can’t compete. (Structural unemployment).
- Individual governments have less control over their economies. E.g 2008 banking crisis in USA spread due to globalisation.
- Globalisation largely ignores negative externalities - It encourages countries to produce more and we’re using more of our natural resources to do it.
- Increases inequality both within and between countries.
Within countries skilled workers benefit the most within as their skills as in demand all over the world. Unskilled workers lose out because they have to compete against unskilled workers in other countries.
Between countries industrial countries benefit the most as they produce manufactured goods which they can keep improving and sell for a higher price. Poorer countries only offer basic raw materials for which prices stay the same most of the time.
