Globalisation Flashcards
Define globalisation
A process which national economies have become increasingly integrated and interdependent
What has caused globalisation
Reduced transport costs —> low oil prices
Improved communications —> internet allows communications over large distances, enables firms to buy and sell over large distances —> can control operations in other countries easier
Removal of protectionist policies —> countries can exploit comparative adv
Deregulation of domestic financial markets —> easier to buy and sell financial assets in foreign countries
Growth of trading blocs —>overcomes issues of transport costs
What are the benefits of globalisation
Free trade —> comparative advantage, enhances CPF
Develop larger global markets —> increased competitiveness
Benefits of FDI
Enables LEDCs to achieve economic development
Improved productivity —> increased specialisation and training MNCs give workers in LEDCs
What are the problems with globalisation
MEDCs still have protectionist policies so LEDCs don’t have access to developed markets
Traps LEDCs in primary product dependency
Competition between developing economies to attract FDI results in lack of social protection
Environmental costs arise from poor regulation of MNCs in LEDCs (negative externalities)
Brain drain impact —> emigration of high skilled workers from LEDC to MEDC for higher wages —> reduces productivity of LEDC —> LRAS curve shifts left —> depresses wages in low skill sectors of MEDCs —> increase in relative poverty in MEDCs (reduction in living standards)
