Globalisation

Question 1

Characteristics of Globalisation

Answer 1

Globalisation: Increasing integration of the world’s economies into a single, international market

• Free trade of G&S
• Free movement of capital & labour
• Free interchange of technology & intellectual capital

Question 2

Causes of Globalisation

Answer 2

Trade in Goods: Countries able to manufacture goods, easier & cheaper to transfer across borders
- Cost advantage of cheaper labour in developing economy, MNCs move production abroad, causes trade so they can access same goods

Trade in Services: E.g tourism, call centres, software production has increased from developing countries to developed countries

Trade Liberalisation: Growing influence of organisations (e.g World Trade Organisation (WTO)), advocates free trade, leading to decline in trade barriers.

Multinational Corporations (MNCs): Organisations which control production of G&S in multiple countries, using marketing to become global, able to take advantage of EoS (e.g risk-bearing)
- Spread of tech. knowledge & EoS resulted in lower costs of production.

International Financial Flows: The flow of capital & FDI across international borders has increased
- China & Malaysia financed growth w/ capital flows
- Foreign ownership of firms, more investment in factories abroad, facilitated by removal of capital controls

Communications & IT: Spread of IT resulted in becoming easier & cheaper to communicate, led to world being more interconnected
- Better transport links & transfer of information is easier (‘death of distance’)

Containerisation: Goods distributed in standard sized containers, easier to load, cheaper to distribute using rail & sea
- Helps meet world demand, Cargo moved 20x faster as before, EoS exploited, less labour required
- Cheaper to ship across the world, prices fall, market more competitive
- Only MNCs able to exploit, could result in structural unemployment

Question 3

Consequences of Globalisation
(Countries & Gov)

Answer 3

Individual Countries: Could be trade imbalances between countries
- E.g US runs large current account deficit with China, who has a large current account surplus
- Imbalances & inequalities in consumers’ & countries’ accesses to health, education & markets
- E.g China, rural & urban areas have vastly different levels of income & living standards
- Loss of cultural diversity due to global brands

Governments: Might lose sovereignty due international treaties
- Individual states find it hard to resist the force of them
- Members of organisations have to abide by their rules

Question 4

Consequences of Globalisation
(Producers & Consumers)

Answer 4

Producers & Consumers: Can earn benefits of specialisation & EoS as firms become larger
- More competitive environment, encourages lower costs & more efficiency
- Can switch production to places w/ cheaper labour
- Spread of technology, advanced machines & production methods
- Increase in world GDP, increases living standards, lifts people out of absolute poverty
- Hard to calculate proportion of growth due to globalisation
- Some consumers gain more from globalisation than others, increased inequality
- Wider range of G&S
- Some services become homogenised (e.g hotels)

Question 5

Consequences of Globalisation
(Workers & Environment)

Answer 5

Workers: Take advantage of job opportunities across the globe
- Could be structural unemployment (e.g mining industries in UK, manufacturing abroad cheaper & more efficient)
- Could be argued change was inevitable, globalisation simply sped it up
- On 1 hand, MNCs could be exploiting labour & providing poor working conditions (e.g sweatshops)
- On other hand, might provide higher, more stable income than alternatives (e.g agriculture)

Environment: Industrialisation & increased consumer living standards lead to more pollution, increased production & increased car use
- Consumers might show more concern towards environment as incomes increase
- Negative impacts include deforestation,
water scarcity & land degradation