Globilisation

Question 1

Definition

Answer 1

Definition: The process in which national economies have become increasingly integrated and interdependent. Integrated - the countries have come closer together. Interdependent - the countries are more reliant on each other.

Question 2

Factors leading to globalisation

Answer 2

Factors leading to globalisation:
• Trade liberalisation - the WTO aiming to promote trade between each country and more free movement of trading.
• Trading Blocs - countries joining together to create a free trade area (like the EU).
• Growth of MNC’s - Multinational corporations growth means that they spread into more countries.
• Technology advancements - More growth in MN’s also has made transport easier and its easier for businesses to set up in other countries. Further use of websites and software to promote world wide business
• Mobility of labour and capital - government policy and trading blocs have encouraged more migration and the spread of capital.

Question 3

Pros

Answer 3

Pros:
• Increased trade helps boost international competitiveness which then leads to lower prices
• Benefits of trade - greater growth, greater tax revenues, promote economic development
• Greater employment - market size gets bigger means firms grow and therefore greater number of jobs
• Firms benefit from larger economies (economies of scale - production increases as firm increases) leads to greater investment
• Free movement of labour and capital - much easier and cheaper to move around the world and get work permits compared to 60 years ago. Business also tempted by looser government policies - therefore increasing FDI

Question 4

Cons

Answer 4

• Growing inequality - higher taxation and income has not been spread equally. Thos in relative poverty will struggle to break the barriers.
• Higher structural unemployment - integration of countries may lead some countries to struggle to compete. This leads some business to collapse and therefore increase unemployment
• Environmental costs due to lack of sustainability and negative costs from transport (pollution), firms also degrade resources in order to increase production
• Trade imbalances - an export led growth is extremely lucrative and profitable, but if there is an external shock then there may be protectionist policies implemented and an increase in trade wars
• There are greater risks of shocks. As countries become interdependent then if some countries fail to produce (like what happened with war in Ukraine) then other countries may suffer. Crises can also spread much easier (like 2008 financial crisis)
• Less cultural diversity - the same kind of MN’s - same goods and services