Political and economic decision making Flashcards
Politics and Economics of Globalisation:
- Globalisation can be viewed as a threat so governments can try to protect themselves by implementing FDI (foreign direct investment) from TNCs
- International organisations work with countries to encourage them to consider the idea of a global economy differently
The World Trade Organisation:
- Promotes trade liberalisation
- Facilitates international trade by reducing barriers such as tariffs, quotas and subsidies
- Provides a framework of rules and agreements that govern international trade
- Encourages economic growth and stability
Evaluation of ‘The World Trade Organisation:
+ Reduction of trade barriers: promoting free and fair trade
+ Provides a stable and predictable trading system
+ Boosts economic growth and development - access to international markets
- Bias towards developed countries (wealthier countries have more resources, expertise and negotiating power, allowing them to shape trade agreements in their favour)
- Unequal benefits (increased inequality)
- Widening gap between rich and poor)
International Monetary Fund:
- Transfer loans from high income countries to countries that have applied for help
- Recipients of the loan must agree to run free market economies so TNCs can locate easily there
- Promotes international economic cooperation
Evaluation of the ‘International Monetary Fund’
+ Financial aid during crisis - provides financial aid to countries facing problems
+ Offers technical assistance/training to member countries to help them develop stronger economic institutions/policies (helps governments strengthen public finance management, tax systems etc)
- Harsh economic policies: strict conditions on governments borrowing may reduce governments spending on education, healthcare etc. - higher unemployment , lower wages, reduced social services
The World Bank:
- Lends money on a global scale
- Gives direct grants to developing countries
- Regulates the global economy
- Role is to ‘reduce’ poverty by lending money to the governments
Evaluation of ‘The World Bank’
+ Funding for development projects
+ Reduced poverty
+ Promotes global economic stability
- Imposes strict conditions on loans and grants
- Lack of transparency and accountability (not transparent in decision making)
- Environmental impact (i.e. some of the world banks big projects such as large dams and industrial developments causing an environmental impact)
What is the National Governments role?
Play a vital role in globalisation when they implement strategies to encourage the growth of TNCs e.g.
- Trade blocs
- Special economic zones (SEZs)
- Tax incentives
- Free market liberalisation
- Privatisation
- Business start ups
What are Free Trade Blocs?
Allow governments to trade freely with neighbouring countries and allies which may bring many benefits:
- 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
What are some examples of Government policies?
- Free market liberalisation
- Privatisation
- Encouraging business start ups
The growth of TNCs can be encouraged through a range of government policies
What is free market liberalisation?
Lifting restrictions for companies and banks reducing the costs for TNCs to locate and operate in these countries
What is privatisation?
The selling of government - run businesses and serves to private investors in order to reduce government spending
What are the three approaches that have improved the spread of globalisation?
- Special economic zones
- Government subsidies
- Changing attitudes to FDI
Special economic zones:
Areas within a country that business and trade laws differ from the rest of the country - which attracts TNCs
Government subsidies:
Financial support/assistance provided by governments to individuals, businesses or industries promoting economic activity. - (An incentive for TNCs to locate in these countries as costs will be reduced)
