Week 1 Flashcards
What is globalisation?
The rapidly increasing degree of integration and interdependence between countries, businesses and individuals in the world economy
Rattle off some components of globalisation.
- increasing international trade
- liberalisation of capital movements
- dominant role of MNEs
- growth of emerging economies
- intensification of global competition
- increasing homogenisation of global consumption
Give 3 key developments that have driven globalisation
- falling trade costs
- trade liberalisation
- emergence of regional blocs
How has trade liberalisation affected globalisation?
Average tariffs on goods have fallen substantially up to 2010.
How have regional blocs affected globalisation?
Regional economic blocs like the EU and NAFTA have promoted free internal trade between members
How have falling trade costs affected globalisation?
Substantial reduction in trade costs as a consequence of containerisation along with larger and more efficient ships.
What are two key effects of increasing integration of global markets?
- accelerated the trend towards global price equalisation
- provides and increasingly wide range of goods and services at affordable prices
What affect has removing barriers to international capital movements had?
Made possible substantial investment flows between countries. FDI has far outgrown GDP since 1945
Who are the principal agents of globalisation?
MNEs. The primary impetus in FDI and international production has come from MNEs
Give me MNE facts.
MNEs are responsible for around 2/3 of global trade.
40% is between different parts of the same companies!
Why would MNEs engage in international production?
Can source goods from around the world at low cost. Can take advantage of inter-country differences in the cost and quality of factors of production.
How have communication improvements affected globalisation?
Made management communication easier.
Talk about the implications of emerging economies.
Emerging markets offer new markets with potential growth opportunities.
They are also the potential homes of new firms and future MNEs.
Convergence of tastes and consumption?
Increasing dominance of MNEs and global products is converging tastes irrespective of religion, culture and location.
Emergence of international institutions
Many international institutions have been formed to monitor, manage and regulate the economic environment.
IMF
World Bank
GATT/WTO
How can we measure globalisation?
- Global trade/GDP ratio
- KOF Globalisation index
- Global price convergence
What is the trade/GDP measure?
(Exports+imports)/GDP
Simple measure
What is the KOF Globalisation index?
Measure 43 economic, social and political dimensions.
Suffers from shortcomings in the subjectivity if indices.
What is the measure of global price convergence?
Focussed on the extent that prices of goods and services are similar across countries. The more prices converge, the better the globalisation
What created the first wave of globalisation?
The rise of the Atlantic Economy in the mid-19th century
What was the impetus for the global trade in the Atlantic economy?
Significant improvements in transport and communications.
Therefore there was better information about business opportunities abroad.
Also meant there was better labour and capital mobility
How did the first wave of globalisation end?
Rapidly widening gap in wages and economic growth between the transatlantic economies and the rest of the world. This led to increasing domestic pressure for protectionist policies.
Globalisation debate: pros
- more than a billion people have been moved out of absolute poverty in last 3 decades
- better selection and cheaper prices
Globalisation debate: cons
- perpetrates inequality rather than reducing it
- outsourcing can lead to significant economic harm
- cultural erosion
