2.4 (Life in a Global Economy) Flashcards
(35 cards)
2.4.1 What is globalisation?
+ what is it driven by?
- what does it impact?
process by which the world is becoming increasingly interconnected as a result of increased trade & cultural exchange
+ trade, investment finance & communication and transport technology
- environment, culture, economic systems, poverty & human wellbeing
What is hyperglobalisation?
+ what is slowbalisation?
- what is an example of initiatives which have increased globalisation?
intensified & accelerated level of globalisation
+ slow down in the pace of globalisation
- China’s historical Silk Road which allowed China & Europe to trade
- China’s Belt & Road initiative which aims to establish trade route connections
What is the first of the three main characteristics of globalisation?
+ what impact has this had?
- example of FDI
1) Increased investment flows
- Foreign Direct Investment (FDI): when businesses set up production or distribution facilities in other countries (can be organic e.g factory building or inorganic e.g M & As)
+ can help to achieve growth in both developing & developed nations
+ China has benefitted greatly from this due to offshoring
+ global financial markets do increase the risk of financial crisis spreading though
- Nissan has invested 2.5 billion in Sunderland due to government incentives & its industrial heritage. This drew other firms to the area e.g component suppliers
What is the second of the three main characteristics of globalisation?
2) World trade rising as a proportion of world GDP
- this allows countries to specialise in producing goods in which they have an advantage
- proportion is rising but may grow more slowly in the future
What is the third of the three main characteristics of globalisation?
+ what impact has this had on the economy?
- what impact has this had on businesses?
3) Increased migration
- people may move to a different area or nation for better job opportunities
+ immigrants are usually proactive & ambitious so may start their own businesses or get higher qualifications
+ they tend to be highly educated so can use their skills to fill job shortages
+ more strain on public services
- they can reduce operating costs by offshoring & outsourcing
What are the 5 factors contributing to globalisation?
1) Trade liberalisation
2) Capital market liberalisation
3) The Cold War & political change
4) Reduced cost of transportation & communication
5) Increased significance of transnational companies
What is trade liberalisation?
+ what are some advantages & disadvantages of this?
(who is currently a major threat to this?)
the process of reducing or removing barriers to international trade such as tariffs of quotas to promote free trade & global economic integration (WTO agreements have allowed this)
+ promotes international specialisation & increases world output
+ promotes efficient use of resources
+ allows for competition, innovation & low prices
+ diverse range of products & services
- increased competition for domestic goods
- may lead to exploitation of workers
- environmental damage
- less government control over trade
(Trump)
What is capital market liberalisation?
+ what impact has this had?
Governments used to discourage or prevent international capital flows. However, they relaxed their regulations after it became clear that free trade fostered growth.
+ allows for the spreading of risk & potentially profitable investments
+ makes economies more interdependent
How has the Cold War & political change contributed to globalisation?
- what effects has this had?
1) Due to the collapse of the Soviet Union, international trade developed.
- Economic growth improved standards of living
- Russia now requires revenues from its oil & gas exports to finance its imports
2) China’s communist government began collaborating with foreign businesses and governments in 1980.
- Businesses benefited from access to new technologies & productivity rose
- Export-led economic growth meant standards of living increased
How has reduced costs of transport and communication contributed to globalisation?
+ examples
It has allowed for simpler movement of resources:
- information is much more free-flowing
- cheaper & simpler to trade goods
- offshoring (setting up production abroad) & outsourcing (shifting production to other businesses) has become easier
- businesses can react quickly to changes in dynamic markets & seize opportunities
+ e.g containerisation & technological advances such as the Internet
What are multinational companies?
(examples?)
+ why do they have increased significance?
Those that spread across countries; sell their goods in various economies & produce their goods in various nations
(e.g Coca-Cola & Unilever)
+ they now have immense size giving them power & influence
+ some see them as a threat to consumer power & choice as many small businesses struggle to compete as they cannot benefit from the same economies of scale
What are some pros of globalisation?
+ encourages division of labour & economies of scale
+ increased competition can reduce prices & encourage innovation
+ has helped to reduce poverty
+ freer movement of labour
+ sharing of ideas, tech etc= dynamic efficiency
+ increased opportunity for developing countries
What are some cons of globalisation?
- rising inequality
- environmental threats
- macroeconomic fragility
- trade imbalances
- higher structural unemployment
- less cultural diversity
- dominant global brands
- poor behaviour of some multinationals e.g exploitation & tax avoidance
2.4.2 What is economic growth?
- what is economic development?
+ what are the 4 main indicators of growth?
monetary value of a country in terms of the size of its economy
- quality of a country in terms of how established & advanced its society & welfare is
+ GDP per capita
+ literacy
+ health
+ Humans Development Index (HDI)
What is GDP per capita?
- what is Gross National Income (GNI)?
+ what is Gross National Product (GNP)?
A measure of a country’s economic output per person
- Shows the size of an economy, the rate at which it changes shows growth (or decline)
(GDP/population)
- the total amount of money earned by a nation’s people and businesses both inside and outside the country’s borders
+ value of all goods and services made by a country’s residents or businesses both domestically and abroad
What are some limitations of GDP as a measure of economic development?
- does not care if activity is useful or destructive
- includes no social costs
- doesn’t count non-monetised economic activities
- differences in income distribution
- international price differences (Purchasing Power Parity needed)
- hidden economies
- differences in hours worked
How can literacy be used as a measure of economic development?
+ examples of high and low literacy rates
- literacy rates indicate the quality of the education system
- can show volume of population with basic skills, the more highly skilled a workforce is the more productive it is
+ Finland & Norway have 100% literacy
+ Afghanistan & Niger have below 30% literacy
How can health be used as a measure of economic development?
+ example of a country with good health
- health statistics show the health system in an economy. The healthier the workforce the more productive it will be
- healthier people are generally happier too
- more developed economies will have more developed healthcare systems to support the ill, especially those who may not be able to afford it
+ Japan has the lowest obesity rate & highest life expectancy worldwide
What is the Human Development Index (HDI)?
+ what are the 4 criteria used?
An index used to rank a country based on their development in three key areas: education, health & living standards. 0= less developed & 1= more developed
+ mean years of schooling
+ expected years of schooling
+ life expectancy at birth
+ Gross National Income per capita
What are some limitations/ criticisms of HDI as a measure of economic development?
- doesn’t reflect equality
- higher GNI does not indicate welfare as it depends how this is spent
- HDI scores differ depending on region
- economic welfare depends on several other factors e.g threat of war & pollution levels
- quality of education & life not considered
- may not respond to short-term changes
- doesn’t account for the environment
- doesn’t tell us about unemployment levels
What are some alternative measures of economic development?
1) Gross Country Index
- measures what each country contributes to the common good of humanity & what it takes away relative to its size
2) Social Progress Index
- includes measures in health, safety, technology, education & rights
3) Gross National Happiness Index
- measures four pillars of good governance, socio-economic development, cultural preservation & environmental conservation
What are developed economies?
+ examples
characterised by sustained economic growth, a stable and secure environment, and a high standard of living
+ UK, USA, Japan & Germany
What are some characteristics of developed economies?
- low levels of economic growth
- high levels of GDP
- high import levels of raw & primary goods
- tend to be democratic w low levels of corruption
- low child mortality & birth rates
- nationwide & often free public services
- lower levels of environmental damage
- focus on high tech or quaternary services
What are emerging economies?
+ examples
developing nations undergoing significant economic growth and integration into the global market
+ Brazil, China, India & Russia
