Globalisation and Economic Development Flashcards
What is the difference between economic growth and development?
Economic Growth; the increase in GDP over time, adjusted for inflation
- it is a quantitative measure of the performance of an economy
Economic Development; the structural changes needed for growth to occur in an economy and to sustain increases in living standards
- it is a qualitative measure of the performance of an economy
What are some key statistics with regard to income/wealth distribution?
Over 50% of those in extreme poverty live in sub-saharan Africa
Over 50% of those in extreme poverty are under 18 years of age
The richest 1% of the world’s population own 44% of the world’s wealth
What is Gross National Income?
Measures the sum of value added by all resident producers in an economy, plus primary income from foreign sources, on a purchasing parity basis
“Inequalities in income influence inequalities in other dimensions of wellbeing” - UN HDI Report 2016
Income represents an individual’s ability to access goods & services, as well as performing autonomous consumption (purchases necessary for survival)
What are three global factors that account for differences between nations?
Global Trade System - developing countries are hurt by high levels of global protection of agriculture
Global Financial Architecture - FDI favours developed nations and a select group of emerging economies, while many developing economies receive short-term ‘portfolio’ investment, which exposes the nation to economic volatility
Global Technology Flows - new technologies can be adapted much more quickly in economies that have better infrastructure and higher rates of education
What are four domestic factors that account for differences between nations?
Natural Resources - economies that have an abundant and reliable supply of cheap natural resources have better opportunities for economic development than those who do not
Labour Supply & Quality - developing countries are characterised by high population growth, low levels of educational attainment and low health standards - all of which reduce the quality of the labour supply
Access to Capital & Technology - low income levels provide few opportunities for savings, and thus investments
High Levels of Inequality - high levels of wealth concentration tend to lead to lower rates of economic growth and development
What are three institutional factors that account for differences between nations?
Political & Economic Institutions - countries with high levels of institutional fragility or violent conflict will usually have lower levels of economic development
Economic Policy - if all major decisions are left to market forces, a country may achieve a high level of economic growth, but will lack progress in health, education and quality of life
Government Responses to Globalisation - policies relating to trade, transnational corporations and IGOs will influence an economy’s ability to take advantage of the benefits of globalisation
How has globalisation influenced economic growth?
Increased opportunity for firms to achieve economies of scale, specialise, and take advantage of lower input costs
Increased technological innovation due to increased competition - this has stimulated productivity levels, especially in developed countries
Globalisations benefits have been distributed unevenly across geographical regions, which has led to emerging and developed economies benefiting more than developing ones
How has globalisation influenced economic development?
Increased income inequality, as global mobility of labour results in the emigration of skilled labour from developing to advanced economies
According to IMF, income inequality increased by by 0.45% over the last 3 decades
The easing of trade restrictions allows for increased market access for exporters, lower overall prices, and greater variety, which can improve living standards
How has globalisation positively and negatively impacted the business cycle?
The benefit of economic integration is that it allows countries to achieve faster rates of economic growth by specialising in certain types of production
During times when world economic growth is higher, individual economies are more likely to benefit
Closer economic integration also leaves economies more exposed to downturns in the international business cycle and to developments in their regions
Examples include the EU debt crisis of the 2010s and the current global recession
