Globalisation EQ1 Flashcards
Define Globalisation
The growing interdependence and interconnectivity of countries due to increasing flows of goods, money, people, culture and infomation.
What does “interconnected” mean?
The deeper links between countries.
What are the 5 key flows of Globalisation
- Commodities
- Capital
- Infomation
- Migrants
- Tourism
What does “interdepedency” mean?
The reliance of countries on others.
What does the Length and Depth of Globalisation mean?
Length - connections are being built further away (I.e More products being sold worldwide from Fiji)
Depth - Connections become stronger and more united.
Explain the stages of development for Globalisation?
Phase 1 - Industrial Revolution - emergence of IGOs and technological advancement
Phase 2 - Onset full scale 1950+ - Global economy - more movement of people - media
Phase 3 - Global instutions have signifcant influence and power, high levels of technological advancement, era of instant infomation.
What does “Shrinking World” mean?
Distant places are starting to feel closer due to technological advancements like commercial airlines. This results in “Time - Space compression”
What are the main reasons for increasing the speed of Globalisation?
- Transport improvements - Containerisation, EasyJet, Steam powered ships.
- Infomation and Communication improvements - Mobile Phone, Social Media, GIS and GPS, internet - era of Instant Infomation
- Global markets / Trade Liberalisation
- Specialisation and Trade
- TNCs / FDI / Colonization
What are the benefits of a trading bloc?
Protection from Foreign Competitors - I.E cheap Chinese imports against “Sunset” industries.
Political Stablity - increased cooperation and integration maintains internationa relations.
Competition and Specialisation - leads to higher quality and cheaper goods for consumers -> raising living standards.
National Firms can merge to form TNCs and compete globally.
AID/FDI - EU members eligble for structural funds to develop and recover economies.
What are the general outcomes of Globalisation?
- Increased Consumer Choice
- Varying employment levels
- Poverty Reduction
- Exploitation
- Brain Drains
- Global Brands
What are the different types of Trading Blocs?
“Free Trade Area” - Eliminate internal barriers but maintain independent external ones.
“Customs Union” - Eliminate internal barriers but maintain AGREED external ones.
“Economic Union” - Elimanate internal barries, adopt common external barries and the FREE movement of resources AND migrants / tourists etc (Like the EU)
Assess the importance of factors in accelerating Globalisation (12)
- Infomation flow increasing through improvements in technology -> social media.
- Capital flows increasing through IGOs - World Bank promote trade liberalisation worldwide.
- Tourism increasing through transport improvements - EasyJet providing cheap flights.
How can Governments intervene to increase Globalisation?
Trade Liberalisation - Promote economic growth by opening up to international markets and reducing the use of restrictive measures.
Trade Blocs - Group of countries form an area where tariffs, quotas etc are lower promoting trade.
FDI -
Privatisation - more competetive worldwide
SEZ’s - promote TNCs , Trade etc to there countries.
What are the negatives of a trading bloc?
Loss of Sovereignty - lose control of monetary policy / human rights / enviromental policy etc.
Loss of businesses and jobs - Tariffs removed means businesses now have to compete with all the member countries in the Trade Bloc.
Over Specialisation - nations are encouraged to specalise as product quality improves and prices can fall but over reliance on one industry can be unstable and volatile.
Retaliation from non members who might impose higher tariffs / more expensive to import from non member countries.
Why might Governments not want to encourage global flows?
- Imports are seen as a threat to domestic industry.
- TNCs can takeover domestic industry.
- Migrants bring cultural change that is not embraced by everyone.
What do the IMF do?
The IMF channel loans from rich nations to countries that apply for help in times of struggle (Like Greece, 2010). In return, said countries must agree to run free market economies (Washington Agreements!!!). As a result, TNCs can enter these countries more easily.
What is a Special Economic Zone?
They incentivise the set up of TNCs through tax breaks and investment in infrastructure (Like docks / airports). Subsidies can be granted to companies in SEZs to create competitive prices worldwide.
Best example is China, 1978 “open door policy”.
What do the World Bank do?
The World Bank lends money on a global scale. It provides development aid and invests into infrastructure projects worldwide.
What is the Washington Consenus?
A set of 10 economic policy recommendations including trade liberalisation, privateization etc.
What do the WTO do?
Advocates for trade liberalisation and asks countries to abandon protectionist attitudes in favour of untaxed trade.
How do countries attract FDI?
Countrywise = Low Wage Rates , Skilled Labour, Political Stablity, Raw Materials
Governmentswise = Low corporate taxes / Income taxes, SEZs, lower Tariffs
Advantages and Disadvantages of FDI?
Advantages: Provides Jobs, Develops needed infrastructure, TNCs bring expertise and technology not otherwise accessible.
Disadvantages: Enviromental Exploitation, Low Wages, Low tax revenue for Governments, Technology often not appropriate for level of development.
Why is it hard to measure Globalisation?
Globalisation is a contested, vague term and it is therefore difficult to quantify the depth of the globall links of a particular place.
How can we measure globalisation?
KOF index - Economic, Political and Social globalisation measured on a national scale.
AT Kearney index - An examination of a current CITY’s performance based on 5 dimensions like infomation exchange, business activity or cultural engagement.
Limitations of the KOF index?
- Small countries always score high often beacuse they are forced to import to survive
- Smaller EU countries rank high - not necesarily because of globalisation but more due to their regional links with the EU.
- Large economies like the US score high as they trade lots internally.
Why do TNCs operate globally?
- To be closer to their markets / customers
- Take advantage of cheap factors of production
- To operate inside trading blocs / SEZs
- Spread risks across countries
- Gain market share in other countries
What are the 4 main strategies used by TNCs?
- Offshoring - Occurs when TNCs move parts of their own production process to other countries to reduce costs.
- Outsourcing - Occurs when TNCs contract foreign firms to produce goods / for services.
- Glocalisation - The adaptation of a product to a markets culture.
- Mergers and acquisitions - Vertical intergration (Buying their suppliers) and Horizontal intergration (Buying up competition).
What is Glocalisation?
The adaptation of a product’s design to meet local tastes or laws. This allows TNCs to conquer new markets more accurately and effectively.
What are the costs of TNCs
- Local companies lose market share and become less competitive.
- TNCs exploit poor health and saftey / enviromental regulations abroad.
- Recipient governments may reduce social and enviromental protections to attract investment by multinationals.
- TNCs often shift their tax bill (like to Ireland) and so original countries governments can lose out in billions in tax revenue.
- TNCs often leak profits abroad - isnt reinvested into the recepient country.
What are the benefits of TNCs
- Multiplier effect in host country.
- Use of locally sourced goods.
- Inflows of capital either directly or through tax revenue for host GOVT.
- Spread of technology / technology leap frogging.
- TNCs invest in roads and other infrastructure.
- TNCs can employ lots of people - reducing unemployment and providing decent wages.
What are the physical reasons a country might be “switched off” from globalisation?
- Distance from markets (Solomon Islands)
- Landlocked
- Wilderness / still a village country
- Low agricultural potential
- Lack of resources such as energy and minerals
- Extreme Climate
What are the political reasons a country might be “Switched off” from globalisation?
- Corruption
- Terrorist Groups
- Civil or Tribal Conflict
- Ideology - I.e communism
- Exclusion from trade blocs
- Government censorship
- Authoritarian regimes
What are some economic reasons a country might be “Switched Off” from globalisation?
- Government debt
- Poor education and workforce skills
- Poor transport and communications infrastructure
- Dutch disease - unstable economies.
