Theme 4 Slatman Flashcards
How has globalisation impacted wages as a percentage of gdp
More migration so increased supply of labour
Growth of TNC’s
Reduces trade barriers so easier to base manufacturing in low- wage countries
Globalization increases competitiveness, which breeds income inequality and job relocation. Technological change has resulted in a widespread shift in labour demand, favouring skilled workers at the expense of less skilled ones.
Impacts of globalisation on the global economy
• Increased global trade
• Increased global output with reference to comparative advantage
• Increased incomes in developing countries due to growth of export industries/investment from
MNCs
• Increased global competition between firms leading to lower prices for consumers globally
• Increased supply globally leading to less global inflationary pressures
• Growth of multinational corporations
• Increased migration reducing unemployment globally as people move to where jobs are available/where their skills are in need
what is globalisation
the interdependence of world economies for trade.
this includes people, products and ideas
why has globalisation come about
better transport systems
more free trade agreements
internet
capitalism. the pursuit of profit
impact of globalisation on the uk
• worker employment and unemployment - employment rises as it is easier for migrants to enter work. lower skilled jobs worst
• worker wages -> higher skilled jobs avilable so workers demand a higher wage. although wages difficult to compete with indonesia for low skilled jobs
• consumer price and choice -> increased consumer choice as access to world and more innovation, lower price due to economies of scale
• producer specialisation-> specialise in higher quality goods
• environmental and social concerns
• increased producer footloose locations -> more firms move abroad
impact of globalisation on producers
increased consumption to more revenue for reinvestment
economic growth so accelerator theory
more jobs available as demand for jobs increases
increased incentive to reduce costs to remain competitive
what is the chinese belt and road initiative
a large infrastructure programme that connects china to the rest of the world
why are the chinese doing the belt and road initiative
and evaluate
spur economic growth
improve international relations
to have global influence
ease of tranpsport to improve efficiency
eval: opp cost
what is terms of trade
tells you the amount of imports a country can buy for each unit of export
what are imporvements in terms of trade
export prices increase relative to import prices
what are deteriorations in terms of trade
when a countries import prices increase relative to its export prices
how to work out terms of trade index
index of exports
––––––––––––––––– x100
index of imports
what are trading blocs
trading blocs are created to encourage trading partners to buy and sell goods amongst its members
more favourable trading conditions are offered to its members
e.g EU
what are the different types of trading bloc
free trade area
customs unions
common markets
economic union
what is a free trade area
a group of countries that have agreed to mutually lower or eliminate trade barriers for trade within the area
what is a customs union
a group of countries that apply one common system of procedures and rules and tariffs for all of their imports, exports and transitioning goods
what is a common market
an agreement between 2 or more countries removing all trade barriers between themselces and establishing tariff and non-tariff barriers for imports and also the free movement of the FACTORS OF PRODUCTION (CELL)
whats an economic union
An agreement between 2 or more countries to allow goods and services, money and workers to move over borders freely
benefits of a trading bloc
improve trade ties
increase competition
provide new opportunities to trade
increased FDI
more workers available
negatives of trading blocs
trade diversion - trading blocs distort world trade as countries trade with other countries based on whether they are in a trading bloc with them
makes it more expensive to trade with countries outside the tading bloc
increased interdependence on economic performance in other countries in the trading bloc
why may globalisation not cause an increase in jobs
increased availability of technology to replace human work
positives of being in the EU
trade creation - more trade opportunities
increased funding and investment
more job opportunities for citizens
economic growth
more negotiating power
increased competition so more innovation
incentive for producers to produce more as lower costs
against being in the EU
• huge EU costs (yearly cohesion fund)
• increased migration into the country causing NHS, housing issues as well as causing unemployment due to over supply
• trade diversion
• loss of sovereignty - less power over making laws
what is trade diversion
when a countries trade shifts from a more efficient producer to a less efficient producer due to a free trade agreement
what are the different types of protectionism
tariffs
quotas - limit on quantity
embargos
subsidies - investments into domestic markets
admin and red tape
reasons for tariffs
protect domestic goods
protect new industry
government tax revenue
incentive for producers to produce more
reasons against tariffs
damages global economy
trade wars (retaliation)
loss of economic welfare - higher prices and less choice
creates inefficient zombie firms
Domestic inflation causing less exports
benefits of quotas
increased variety
benefits low income families
still protecting domestic goods
forces increased competition between firms
can mean the quotaed country gives the Uk a quota in return, increasing exports
disadvantages of quotas
domestic trade will still decrease
trading with foreign countries is bad for sustainability
what 4 things does the WTO do
• monitor the trade policies of its members
• training to gov officials in developing countries to help them engage with other WTO members
• settling disputes
• setting rules and making sure members follow them
what is the WTO
an international organisation that governs global trade. their main goal is to ensure trade in goods and services flows freely
e.g stops big countries exploiting smaller countries by using tariffs
beneifts of the WTO
promotes international trade
lowers trade barriers for members so lower costs of production
ensures members follow laws
non discrimination pinciple
negatives of the WTO
favours powerful countries as they have moe power within the WTO
carbon emissions
what is relative poverty
measures people who’s income is below 60% of the uk median incomes
what is absolute poverty
measures people who’s income is below what is socially acceptable as a min living sandard ($2 a day)
causes of poverty
geographical location
lack of access to basic services (education, water, food)
lack of employment opportunities
lower economic growth in the area
conflict
rising rent costs
if large firms dont move there as they need high skilled workers
impacts of poverty
lower economic growth
huge governemtn costs so opp cost
higher inequality
lower quality of life so dont live as long
no entrepeneurship
more crime
ways of reducing poverty
increased government investment in the area
subsidies for firms based there
increased investment in training, healthcare and education
attract FDI
diversifying economy - not being primary product dependant
reasons for poverty in south sudan
food insecurity - has to import lots of items
debt burden
dependence on oil
landlocked so no sea trade
conflict
conditions for the Harod Domar model to work (do flashcrads first)
a stable government
confidence
low interest rates
profitable entrepeneurship
how do you workout capital-output level
capital investment
—————————-
output increase
what is warranted growth rate
this is the growth rate at which all saving is absorbed into investment
harrod domar model strengths
encourages responsible lending
harrod domar model weaknesses
opp cost for gov
needs a stable gov
corruption
could have a low MPS
what is primary product dependency
when a nation is over dependant on a primary product for economic output and government revenues
why is something like oil a good exporter
inelastic as its a necessity
when global economy improves, demnd increases
nigeria size of oil sector and population
40% of GDP
population : 230m
positives of primary product dependancy
source of large government revenue
attracts FDI
creates jobs
encourages supply side investment
funds long term development (revenue can be reinvested into economy)
why is primary product dependancy bad
• volatile prices - low prices drastically impacts economy
• lack of whole economy investment (opp cost) undiverse economy
• lack of entrepeneurship
• Income from exports can rise if commodity prices rise and exports can decrease rapidly if commodity prices fall. This uncertainty may deter investment in that country.
• underdeveloped infrastructure
• can cause the dutch disease - the rapid development of one sector of the economy (particularly natural resources) precipitates a decline in other sectors
what does the lorenz curve show
the graphical representation of income and welathh distribution
what does a large gini coefficient show
greater inequality
what is the lewis model
moving unproductive labour from rural areas into industrial/urban areas
building an economy based on productive manufacturing and eventually moving to a service related economy
positives of the lewis model
economic growth as more capital output
positive multiplier as factory gets bigger and needing more workers
grows cities
reduced inequality
negatives of the lewis model
difficult to move workers to city and expensive
affects rural food supply
creates urban inequality
what is FDI
when a global firm sets up factories or makes ownership investment in another country
how would a country attract FDI
offer subsidies and rax reliefs such as lower corp tax
investment in healthcare and education - more productive workers
how does FDI benefit an economy
increased tax revenue
economic growth
creates jobs directly and indirectly
problems with FDI
using up domestic resources
Negative effects on environment
can reduce competitiveness in area
overdependacy on firm - consequences if they leave
often low paying jobs
what is microfinance
the provision of small scale loans to promote enterprise
the government facilitate th setting up of microfinance
particularly targets women and low income people in rural areas
lends small amounts to poor people who are ignored by conventional banks
benefits of microfinance
encourages entrepeneurship
allows consumers to have access to essentials
increased investment
helps reduce poverty
incentive to pay loan back so works more
problems with micro finance
higher interest rates than commercial banks
can cause server long term debt
may not use the money for entrepeneurship
those who receive loans most likely dont have much business knowledge so may struggle to use it to make money
benefits of tourism
jobs
tax revenue
diversifies economy
attracts FDI
increases spending so economic growth
negatives of tourism
congestion pollution
increased national debt
seasonal
infrastructue cost - opp cost so taxes will have to rise
economic dependance - so huge impact on economy if demand changes
How would increased transport links lead to an increase in economic growth in Africa
Encourages FDI
Increased trade
Lower costs and more productive
reasons for providing aid
to build international relations to become trading partners
for security
for government that receive the aid - the gov receive the aid and spend money on the supply side to grow the economy
reasons against aid
opp cost
country becomes dependant on aid
only a short term solution
corruption - capital may not actually make it into economy
when is debt considered unsustainable
considered unsustainable when the debt to exports ratio exceeds 200-250%
what is debt relief
cancelling the debt of developing countries
benefits of debt relief
stability
poverty reduction
taxes wont need to be as high
less government revenue needing to be spent on interest payments so more can be spent on economy
How do HIPC (heavily indebted poor countries) get debt relief
develop a poverty reduction strategy
stable gov free of corruption
face an unstable debt burden
negatives of debt relief
confidence may decrease when debt relief stops
debt relief programmes take a ling time
country can become dependant
