Governments and trading blocs 😊 Flashcards
What is FDI?
Foreign Direct Investment- money entering and exiting a country
3 different strategies to encourage investment from other countries or companies:
- free market liberalisation
- privatisation
- encouraging start-ups
What is free market liberalisation?
Restrictions were lifted on how companies and banks operated
Government interventions in markets slow down economic development
As overall wealth increases trickle- down will take place
What is privatisation?
State owned assets were sold to private companies
Competition would make these services more efficient and cheaper for people
What are start-ups?
Offer low business taxes
Change laws to gain profit
Set up economic areas with reduced taxes and enhanced services
Example UK case study to encourage FDI
Transport Act 1985- privatised services
What are trading blocs?
Groups of countries that help each other trade
Positives of trading blocs?
- free trade between members
- barriers for competitors from outside
- more customers
- bigger market so there are more products that are cheaper
Negatives of trading blocs?
- loss of sovereignty (decision making)
- increased interdependence on other members
- must open up your economy to other members
