Globalisation (MAC) Flashcards
What is Globalisation?
Refers to the increased integration between countries economically, socially and culturally.
What is foreign direct investment?
Occurs when a company in one country establishes operations in another country or when it acquires physical assets or a stake in an overseas company.
What are the key characteristics of Globalisation?
Increased trade as a proportion of GDP
Increased capital flows between countries
Increased movement of people between countries as a consequence of investment flows into and out of countries around the world
What are capital flows?
Refers to all the money moving between countries as a consequence of investment flows into and out of countries around the world
What are the causes of Globalisation?
A decrease in transport costs
A decrease in the cost of communications (especially due to the Internet)
A reduction in world trade barriers
The opening up of China and the collapse of communism in Eastern Europe
The growth of trading blocs
Increased importance of global companies or transnational companies
What is offshoring?
Refers to companies transferring manufacturing to a different country.
What are the impacts of globalisation on living standards?
With lower trade barriers and increased trade countries can specialise in producing goods in which they have a comparative advantage. This results in higher world output and therefore an increase in living standards
What are the impacts of globalisation on a countrys trade balance?
A country that does not have competitive advantage may reply on imports, this would cause a negative trade balance because imports would be rising relative to exports
What are the impacts of globalisation on inequality?
There is evidence that globalisation has resulted in increased inequality within some countries. One reason for this is that demand for unskilled labour has decreased in developed countries, so increasing the earnings gap between the highest paid and lowest paid workers. However, inequality between countries has fallen over the last 40 years.
What are the impacts of globalisation on public finances of governments?
Tax revenues will increase, which may be used on public services such as health and education or for infrastracture. However some global companies engage in a form of tax evasion referred to as transfer pricing.
What are the impacts of globalisation on producers?
Firms will be producing on a larger scale and therefore will benefit from economies of scale and higher profits. Further, technology transfer is likely to occur. Transnational companies may also be likely to introduce modern managerial techniques designed to increase productivity. Some local producers may be adopting these, however local producers who are uncompetitive may be forced out of business.
What are the impacts of globalisation on consumers?
Consumers can expect lower prices
What are the impacts of globalisation on workers?
Workers can expect increased employment opportunities. However, transnational companies may exploit workers in developing countries by giving low wages for long working hours.
What are the impacts of globalisation on environment?
There will be increased external costs. Increased trade will increase road and air transport and associated noise and air pollution.
