Globalisation Flashcards
Define globalisation
The economic integration and interaction of different countries through growing freedom of movement across borders of 🚘, 🧹, capital and people 👨 👩
What has globalisation done for the relationship between nations?
Globalisation- ways in which countries becoming more closely integrated- economically, politically and culturally
What has globalisation been like in the last 50 years?
Pace of global integration ⬆️ over 50 years until 2008 global financial recession
BUT 2008 crisis and recent protectionist policies (especially by 🇺🇸)- slowed process
What are the characteristics of globalisation?
1) ⬆️ in trade as proportion of 🌎 GDP
2) ⬆️ movement of financial capital and people between countries
3) ⬆️ international specialisation and division of labour
4) Growing importance of TNC’s
5) ⬆️ in FDI
What is a potential negative of globalisation?
⬆️ interdependence between nations- world economy becomes like single economy
- countries become over dependent on certain sectors of economy- vulnerable to changes in comparative advantage over time
When were negatives of globalisation seen in real life?
1) Interdependence seen in 2008 Financial crisis where downturn in 🇺🇸 housing 🏠 market-> global crisis (deeply integrated banking system)
2) Ship building in Sunderland- South Korea and Japan made own shipbuilding industries which outcompeted 🇬🇧 industry-> unemployment and ⬇️ living standards
What is FDI?
Foreign direct investment- cross border investment by a business/firm in 1 economy with the objective of obtaining lasting interest in an enterprise in another economy
What factors contribute to globalisation?
1) ⬇️ transport costs e.g. containerisation- goods imported and exported ⬆️ cheaply
2) ⬇️ in cost of communications e.g. cost of using the internet
3) ⬇️ trade barriers since WW2- WTO responsibility for negotiating ⬇️ in tariffs and other trade barriers
4) TNCs taken advantage of ⬇️ trade barriers and development of internet to organise trade on global scale
5) Growth ⬆️ in no. and size of trading blocs (regional trade agreements)-> ⬆️ trade between member countries of blocs
What are the impacts of globalisation on individual countries?
1) Enables application of law of comparative advantage- countries specialise in 🚘 with lower opportunity cost-> ⬆️ world output and living standards as profitability and wages ⬆️
2) Greater reliance- e.g. 2008-> deglobalisation (countries adopted protectionist policies to protect domestic employment)-> ⬇️ in specialisation and trade- trade recovered BUT protectionist policies ⬆️ since 2016
ALSO Sunderland example- reliance on economy sectors
3) ⬆️ inequality within countries BUT ⬇️ inequality between countries- many manufacturing and other unskilled jobs were transferred from developed economies to developing economies as more developed economies have shifted into more advanced sectors e.g. tertiary sector and now rely on developing economies for manufactured goods … developing economies faces a ⬆️ in incomes and a ⬇️ in average real incomes in developed nations BUT the top 1% of before tax household incomes e.g. in 🇺🇸 since 1979⬆️ 7 times faster than bottom 20%
What are the impacts of globalisation on governments?
1) ⬆️ economic growth-> ⬆️ incomes and ⬆️ profit … ⬆️ government tax revenue (income and corporation tax)- spend on public services
BUT transfer pricing (global companies operating in various nations manage their internal accounts to show their highest profits to be earned in countries with the lowest corporation tax … maximising profit) from global companies may-> ⬇️ tax revenue from corporation tax
What are the impacts of globalisation on producers and consumers?
1) Producers- benefit- ⬇️ production costs due to offshoring potentially (relocation of business process from 1 country to another- potentially where costs lower e.g. 🇨🇳) and/or due to economies of scale (as firms grow- experience lower ⬇️ costs per unit of output- cost advantages because producing ⬆️ 🚘 ⬆️ efficiently … costs spread over larger no. of 🚘 as producing ⬆️)
2) Consumers- benefit- wider choice of 🚘 ALSO if ⬇️ prices-> ⬆️ in consumer surplus (extra amount of 💵 consumers willing to pay above what they actually pay)- ⬇️ price due to ⬆️ and economies of scale- some cost saving passed to consumers
What are the impacts of globalisation on workers?
1) Promoted exploitation in drive for ⬇️ costs including 👶 labour
2) ALSO wages ⬇️ especially of unskilled workers
3) Health 🏥 and safety laws (regulations) ⬇️ demanding in developing nations … 👎 effects on workforce
What are the impacts of globalisation on the environment?
1) ⬆️ trade-> ⬆️ ✈️ travel, 🚢 travel, 🚛 travel and other environmental transport costs-> ⬆️ pollution-> environmental degradation-> global warming- external cost
