National Governments Role Flashcards
National governments play a vital role in globalisation when they implement strategies to encourage the growth of TNCs, for example:
Free trade blocs
Special Economic Zones (SEZs)
Tax Incentives
Free-market liberalisation
Privatisation
Business start-ups
Free Trade Blocs allow
governments to trade freely with neighbouring countries and allies
free trade block advantages
Companies grow as they gain access to more customers
A bigger market increases demand of products and services
Smaller companies can merge to form TNCs reducing production costs
The growth of TNCs can be encouraged through a range of government policies:
Free-market liberalisation
It involves removing price controls, breaking up monopolies(asingle seller is dominant in a market (e.g. trade union monopolies of labour supply) and encouraging competition - including foreign competition, which increases efficiency further and promotes globalisation.
Privatisation
allowing companies to take over important national services e.g., railway and energy supply to reduce government spending. This is attractive to TNCs as they would gain a stake in vital services
Encouraging business start-ups –
how did UK attract more TNC doing this
aims to increase profits for businesses by using strategies such as low business taxes and changes in the law, for example the UK became more attractive to TNCs when Sunday trading was introduced in 1994
Special Economic Zones (SEZs) –
the industrial areas, near the coast, where favourable conditions have been created to attract TNCs
Government tech/ industry subsidies -
an incentive for TNCs to locate in these countries as costs will be reduced
Changing attitudes to FDI –
countries working to attract FDI to increase their global presence, for example Saudi Arabia changed its official weekend to Friday-Saturday to be more in line with other countries to be able to participate in the global market
China’s ‘Open Door Policy’
Introduced in 1978 to begin opening up to FDI whilst remaining under a one-party rule
benefits of china open door policy
how much urbanisation how does affect wages
what zones to attract SEZ
How is China’s economy fair now
Rapid urbanisation occurred with over 300 million people leaving rural areas which lead to an increase in low-wage factories in urban areas
SEZs 4 were created which attracted TNCs, leading to rapid economic growth
e.g including Shanghai and pearl river
China is the world’s largest economy but is still not entirely open to global flows
