Theme 4 Content

Question 1

What are some of the characteristics of Globalisation

4.1.1 - Globalisation

Answer 1

• Increased trade of goods and services across national boundaries.
• Increased movement of labour between countries. (international migration)
• Increased movement of capital between countries
• Increased interchange of technology and intellectual capital.
• Standardisation - products, services and business practices become standardised to meet international expectations and norms
  Leads to greater specialisation and interdependence.

Question 2

What are 6 causes of globalisation

4.1.1 - Globalisation

Answer 2

1. Trade in goods and services - For developed countries goods are increasinhly produced abroad in countries like China and Thailand. Due to developing countries acquiring the captial equipment and production techniques needed. Containerisation. Trade in services is also growing, call centres are now being locted in developing countries and India is becoming a world leader in writing software
2. Trade liberalisation - World trade in goods and services growing in part due to the increasing relaxation of protectionist policy since the end of the second world war
3. Multinationals - Multinational companies have grown in number and size, in some industries like the car manufactoring industry this is due to economies of scale nad technological knowledge. In other industries, for instance food and household products, multinational have used highly effective marketing campaigns to build their brand images e.g. Coca Cola and Mcdonalds.
4. Foreign ownership of firms - Increase, many multinationals for example have invested in factories adn companies in China and vice versa. A number of developed oil states such as Norway and Qatar have state investment firms which buy stakes in companies or purchase them outright
5. Communications - Developments in communications and information technology have shrunk with the time needed for economic agents to communicate with each other. In industries such as software writing programmers are arguably jsut as effective regardless of where they are located in the world
6. Political Stability - Greater political stability in many regions has reduced the risks associated with doing business abroad

Question 3

What are the impacts of globalisation for consumers (3)

4.1.1 - Globalisation

Answer 3

1. Consumer choice - range of global products from global producers
2. Prices - more competition and production is being switched from high cost to low cost locations. Lower wages in areas like China and Bangladesh. But, wages and prices are rising.
3. Incomes - Have risen globally and consumers are able to buy more goods. But depends, some people have lost their jobs and had stagnant earnings, such as people victim of offshoreing

Question 4

What is the impact of globalisation on workers (4)

4.1.1 - Globalisation

Answer 4

1. Employment and Unemployment - Large scale job losses in the developed world - production has moved from Western Europe to China. But increase in employment in the developed world. This can cause mass scale structural unemployment in certain areas and sectors
2. Migration - Increased migration is a characteristic of globalisation. Many migrants have moved for better economic opportunities and standard of living. Migration can fill skill gaps in the economy, raise productivity, reduce wage costs and increase competitiveness. But native workers might see migrants as lowering wage rates due to competition in the job market. Might strain the welfare state, strains healthcare, educaiton and housing. Immobility of labour can be seen as market/government failure.
3. Wages - Workers have to compete with eachother on a global scale. Depresses the wages of the unskilled as TNCs can move operations abroad. But skilled workers are in high demand because there are relatively few of them in developing countries. The result is a slow growth in inequality as high earners earn more and low earners less
4. Multinationals - Create jobs wherever they set up operations. Usually employ the low-skilled labour locally and import more highly skilled labour from abroad. Training locals to increase productivity is however becoming increasingly common resulting in improved human capital in the local area

Question 5

What is the impacts of globalisation on producers (4)

4.1.1 - Globalisation

Answer 5

1. Specialisation and economic interdependency - Firms are now dependent on long and complicated supply chains of other firms. Firms are increasingly specialised on specific tasks. Increased specialisation increases risks when trade breaks down. Equally however it also reduces risks for there is a much larger market to source products from
2. Costs and markets - Larger supply network so prices can be cheaper. Costs also lowered by using cheap labour from developing countries so that is why production is often shifted to developing countries to capitalise on lower costs and comparative advantage. New markets firms can sell to- economies of scale. Forces firms to compete with each other - Greater dynamic efficiency and prevents x-inefficiency. Prevents build up of monopolies.
3. Footloose capitalism - Firms can operate in several countries to maximise profits. Might move production from the UK or USA to India or Thailand. This means that they are exploiting comparative advantage.
4. Tax avoidance - Firms which operate in several countries (multinationals) have the possibility to engage in tax avoidence. It can be done by either Transfer pricing, Tax haven or Transfer production facilities. All of these are methods of tax avoidance

Question 6

What are the impacts of globalisation on governments

4.1.1 - Globalisation

Answer 6

• Some governments forced to concede to the power of multinationals - Uber withdrew operations in Tanzania after government tried to regulate fares and cut comissions
• Governments should adopt policies which aim to maximise the benefits and minimise the losses. This might mean lowering corporation tax rates or subsidising multinationals, could also mean increasing spending on R & D to become internationally competative. Some, typically smaller countries, have capitalised extensively on taxation of large multinationals

Question 7

What is the impact of globalisation on the environment

4.1.1 - Globalisation

Answer 7

• Rising world production inevitably has a detrimental effect on the enviroment. If sales of wooden furniture increase then so does logging in some forest around the world
• If every Chinese and Indian household is to own a refridgerator, demand and therefore supply of energy has to increase leading to increases in pollution
• Economic growth can be sustainable enviromentally however -> countries like the UK and Sweden have used some of the proceeds of their economic growth to invest in greener methods of production