Globalisation Flashcards
Define Globalisation
An increasing amount of integration of economies, financial sectors, trade and communications on a worldwide scale, according to “The Business Dictionary”.
Intrinsic to the process is the widening of perspectives at a local and national level, to accepting an interconnected world.
What does Globalisation imply?
Markets increasingly accessible worldwide
Capital, goods and services can move freely (Cross border transactions less hindered by national borders).
Labour isn’t necessarily free moving
National level governments and market conditions less important.
MNCs are responsible for the developments in global markets, production and distribution systems.
Describe how globalisation can increase growth and growth of income
Can increase income and raise people out of absolute poverty; in China since 1978 600 million have been lifted out of absolute poverty and GDP has grown by 8-10% per year. China is one of the world’s biggest trade partners.
On the other hand there is no promise this growth will be spread equally either at a regional level or across the globe, in contradiction to Thomas Friedman’s Flat Earth Theory. Ecuador for example, a major trade partner of the USA exports oil, bananas and seafood, yet still only grows at 1.38% in recent years.
Describe how MNCs can exploit underdeveloped countries under globalisationo
In theory, since MNCs drive globalisation the increasingly open markets allow for better competition, creating lower prices and higher quality goods, i.e. smartphone companies Apple (USA), LG(Korea), Huawei (China).
However, the darker side of this is that MNCs can exploit the labour conditions of developing countries and pay smaller wages.
This was the case with Apple Inc. and FoxConn, after it was revealed that FoxConn was paying meagre wages, forcing high working hours and even installing nets around the exterior of buildings to prevent suicides taking place.
However, it could also be argued that the increasing interconnectedness of technology and the rise of the internet has allowed for some sort of accountability on this issue, forcing firms to change their labour practices.
Describe how Globalisation can worsen relative income distributions
Another problem is that the income inequality in society can be raised. companies tend to agglomerate in major cities, i.e. London or Hong Kong at the expense of surrounding regions, creating income and wealth inequality. This is the case inside Russia, where GINI has risen from 0.34 in 1994 to 0.44 in 2016. Inside Russia, regionally income has risen in Moscow, often to the minds of Russian’s outside Moscow at their expense.
Describe how Political Problems can be created under Globalisation
-The rise in inequality can lead to political upset, as people feel they are being “left behind”. This was one of the key factors in the success behind the Brexit and Trump/America First phenomenons.
Another key problem is that citizens can perceive a loss of national sovereignty, as foreign companies may spread their influence (China buying up Cinema Chains in the USA), or national governments may be overruled by foreign governments, institutions (EU, WTO) or international agreements (Paris Climate Agreement).
The rise of internet too means that political groups from top down or grassroots up (Bernie Sanders $23 dollar average, Jeremy Corbyn, Brexit) may influence political events. The interconnectedness also means that companies like Cambridge Analytica can harvest data and use it for advertising purposes, causing a degree of outrage.
How can globalisation crush infant industries?
By opening all national markets to the rest of the world, the demand for higher quality goods means that some infant industries may be crushed before they can reach an internal economy of scale where they can compete on that market place. This is the case with Nigerian Paper Companies, who fear the Continental African Free Trade Agreement could destroy their livelihood.
What environmental harm can globalisation cause?
In the drive for short term profits, countries can destroy their environments unintentionally. The Central African Republic for example, is in the midst of a growing desertification and soil erosion problem as deforestation and over farming exacerbate the problem. raw wood exporting is CAR’s biggest export, China their biggest partner at $25m a year
How can globalisation lead to better security
The integration of economies increases reliance on each other, making war or conflict detrimental to the self. For example, the rise of the EU has made warfare in Europe in order to gain resources or land less worthwhile, as it would be more costly to try and gain those things through war than through free trade.
However, it has led to the rise of trade blocs, who have members relying on each other inside the trade blocs, i.e. China, USA, EU. This is a source of tension as they vie for greater economic control and influence USA vs. China trade war for example.
