Globalisation Final Flashcards
Define International Competitiveness
International competitiveness is defined as the degree to which a country can produce goods and services which meet the test of international markets, while simultaneously maintaining and expanding the real incomes of its people over the long term.
Factors affecting international competitiveness;
o Inflation relative to trading partners o Wages relative to trading partners (e.g. minimum wage may decrease competitiveness) o Productivity (labour, multifactor) o Changes in the exchange rate
Define Multinational Companies and Transnational Companies
Multinational Corporations (MNCs) Transnational Corporations (TNCs) are organisations that control productions of goods or services in one or more countries other than the home country. For example, when a corporation is registered in more than one country or has operations in more than one country, it may be attributed as MNC.
Explain the role of the: World Trade Organisation
Promotion and liberalisation of world trade by discouraging protection.
Explain the role of: World Bank
. Source of financial and technical assistance to developing countries around the
world.
• Provides low-interest loans, interest-free credits and grants to developing countries
for various purposes including investments in education, health, infrastructure,
private sector development, etc.
Explain the role of the following: International Monetary Fund (IMF):
. The IMF is an organisation of 186 countries
• Fosters global monetary cooperation, secure financial stability, facilitate international
trade, promote high employment and sustainable economic growth, and reduce
poverty around the world.
Explain the role of the following: Department of Foreign Affairs and Trade (DFAT):
• The department’s role is to advance the interests of Australia and Australians
internationally.
• This involves working to strengthen Australia’s security, enhancing Australia’s
prosperity, and helping Australian travelers and Australians overseas
Factors promoting globalisation include:
. Trade liberalisation: the deliberate efforts by governments around the world to reduce trade barriers.
o Organisations that are set up through international efforts to encourage economic liberalisation such as the WTO, IMF, World Bank.
o Innovations in transport/technology such as containerisation, storage, chemical preservatives for foodstuffs, and port handling. Exponentially improving information technology has also been a key factor, especially the use of the Internet.
o Telecommunications: the Internet has facilitated greater commerce between nations especially in trade in goods where products are purchased online (e.g. online software). Communications between countries have become much faster and lower-cost.
o Deregulation of domestic economies overall on a global scale have made countries more efficient and competitive and more open to trade liberalisation. E.g. MER in Australia, unilateral trade reforms.
o MNC/TNC: large transnational or multinational corporations that have expanded to establish operations around the world have made supply chains (production and distribution) truly global and have been a powerful driver of economic integration. Greater access to the factor advantages of countries (e.g. cheap labour) has enabled MNCs to expand and achieve greater economies of scale.
o Media/Travel: the influence of a global media network and greater travel has seen the transfer of culture and knowledge between countries. Barriers are being reduced (such as language and customs), and relationships and tolerance built. There is the creation of a global labour force with approximately 140 million people now working in countries outside their country of birth.
. Consumers/End Users: in domestic markets there is now greater acceptance and demand for the goods and services provided through globalisation; familiar products in unfamiliar places.
Benefits of globalisation:
BENEFITS
Provides access to a wider range of goods and services.
Lowers prices, thereby placing downward pressure on inflation and increasing purchasing power.
Access to global markets will translate to increased output and employment. Increases competition and efficiency.
Reduces global poverty.
Increases economic growth.
Increases overall living standards.
Results in technology and managerial expertise transfer.
Has enabled greater direct investment, particularly in less developed countries – a mechanism to break out of the poverty cycle.
It increases multiculturalism and racial tolerance.
Costs of Globalisation:
COSTS
Increases unemployment amongst low-skilled workers.
Can increase structural unemployment as the rate of structural change is accelerated (those working in relatively inefficient industries will more likely become structurally unemployed).
Exploitation of workers in less developed countries with less stringent workplace regulations, e.g. child labour.
Can lower wages.
Can destroy local cultures (e.g. mining at sites that may have cultural significance to Indigenous Australians) if the profit motive becomes of greater priority than culture. Volatile capital flows can have a destabilising effect on economies.
Increases the possible contagion effect of shocks. Examples are the 2008-09 GFC and the 2011-12 European Sovereign Debt Crisis. These contagion effects are not only limited to economic issues but also health issues, such as the Ebola epidemic that the world is currently facing as a major threat to human wellbeing.
It arguably increases environmental damage and resource depletion if regulatory measures are not in place to discourage or penalise firms that do this.
STATS:
The value of exports as a percentage of world GDP increased from
from 19% in 1980 to 30% in 2013.
Since 1980, inflows of foreign direct investment have increased by a factor of thirty - increasing from
$US51 in 1980 to $US1664 in 2013.
The number of broadband internet subscribers per 100 people has increased from
0.4 in 1999 to 9.5 in 2013
The number of mobile phone subscriptions per 100 people has increased from
0.1 in 1990 to 92.6 in 2013.
The number of international tourist arrivals has:
quadrupled between 1980 and 2013.
