L1- globalisation Flashcards
Define globalisation
The economic integration of different countries through growing freedom of movement across borders of goods, services, capital and people.
why does globalisation result in the world economy becoming more like a single economy?
- increases the interdependence of economies around the globe.
- Changes in economic conditions in one country consequently have a larger impact on other economies in a highly globalised world
One disadvantage of globalisation (example)
global financial crisis (2007/2008)- downturn in Americas housing market resulted in a global crisis due to a deeply integrated international banking system
factors contributing to globalisation over last 50 years (TTCET)
- trade liberalisation
- transport
- communications technology
- economic and political transitions
- transnational companies
trade liberalisation
- removing trade barriers
- increases globalisation
- e.g multilateral- EU single market, bilateral- Chile-US free trade agreement
- supported until financial crisis and global recession
Transport
- tech advances in aerospace and shipping(containerisation)= cost down= easier to sell goods+services globally
- rise of commercial aviation
Communications technology
- TNCs rely on tech (GPS) to operate globally
- advancements in comms tech- quality, cost fallen
Economic and political transitions
-e.g. economic reformations (China)= opening to foreign investment + entrepreneurship- authoritarian capitalism= economic growth
transnational companies
- no. of global companies increasing
- need trade liberalisation + comms tech to allow this
- global supply chains
- biggest 500 TNCs =70% of world trade
impact of globalisation on..(CIGPEW)
- consumers
- individual countries
- governments
- producers
- environment
- workers
impact of globalisation on individual countries
- macroeconomic conditions have larger impact on other countries (recession= less imports= AD down for trade partners
- countries can specialise= productive in comparative advantage goods+services= living standards up, wages up
- strong national firms can become global firms= employment up, living standards up
- more interdependent on each other- overdependent= countries vulnerable to changes in comparative advantages= unemployment up, living standards down
impact of globalisation on consumers
-specialisation= costs down (productivity up, economies of scale)= cost savings passed to consumers- lower prices
-more choice= options from whole world BUT difficult to see production process (ethical concerns)
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impact of globalisation on governments
- loss of comparative advantage= deindustrialisation= long term structural unemployment (esp in developed countries- low skill to high skill is hard)
- less tax revenue= firms move to countries with reduced corporation tax- can cause ‘race to bottom’, undercut
impact of globalisation on producers
- more competition- compete with foreign producers and compatriots
- global supply chains- shift production to most advantageous location - reduces labour costs (‘footloose companies’)
- more choice with suppliers
impact of globalisation on workers
- offshoring= workers demand improvements, TNCs threaten to relocate production= less bargaining power with TNCs
- in developed economies= workers in industries with comparative advantages (tech) do well- higher wages, but low skilled= uncompetitive due to rise in manufacturing industries in emerging economies (demand low, wages low, employment low)
