Chapter 1: international eco integration Flashcards
(42 cards)
define globalisation
Globalisation refers to the increasing interactions and integration between people and economies in terms of trade, communication and movement of people; and the increased impact of international influences on economic activity and all aspects of life.
what are the major indicators of integration between economies
- international trade in G&S
- international financial flows
- international investment flows
- technology, transport and communication
- the movement of workers between countries
what is the trend in anti-globalisation
an anti-globalisation movement has emerged in several countries in recent years based on perceptions that it reduces national sovereignty (power) and exacerbates inequality
why has slowbalisation emerged
‘Slowbalisation’ emerged due to lower growth in trade volumes, increased restrictions on trade, a slowdown in investment flows and rising geopolitical tensions
what are some factors contributing to the slowdown in trade and investment
- renewed use of protective trade barriers due to escalating geopolitical tensions
- ‘Friendshoring’
- ‘Reshoring’
- Slower growth in GWP
- The war in Ukraine
what does it mean trade tends to be more volatile than output
during economic downturns, growth of global trade tends to contract fastener than GWP
Ie swing in trade is larger than swings in GWP
why do countries import
increasingly chosen to import some goods and services rather than producing them themselves as traditional barriers (cost, time regulations) have been removed or reduced
- Transportation technology have made this more efficient at lower cost
when do econommies benefit from trade flows
- the G&S they produce efficiently are in demand (or short supply) –> more export revenue
- their major trade partners experience periods of stronger economic growth
why is finance the most globalised sector
money moves between countries faster than goods and services or people
how did International financial flows grow substantially following financial deregulation worldwide
controls were lifted on:
- Foreign currency markets
- Flows of foreign capital - allow other countries to make investments in other countries
- Banking interest rates
- Overseas investments in share markets
deifne Foreign exchange markets
networks of buyers and sellers exchanging one currency for another to facilitate flows of finance between countries
what features of financial deregulation have facilitated the growth of forex markets (how has deregulation by gov
grown forex markets)
- easing of capital controls ie measures by gov to control the flow of capital into and out of the country
- shift from exchange rates to governments allowing the value of their currency to be determined through the forces of supply and demand
who are the main drivers of global financial flows
speculators and currency traders who shift billions of dollars in and out of financial markets worldwide to undertake short-term investments in financial assets
what is the main benefit of greater global financial flows
they enable countries to obtain funds that are used to finance their domestic investment
- firms in countries with low national savings levels dont have the funds to undertake large-scale capital investments if closed off from global financial flows
- eg. AUS benefited from the use of foreign capital to overcome a persistent savings-investment gap
what are the significant negative economic impacts of changes in global financial flows
- speculative behaviour can create significant volatility in the forex markets and domestic financial markets (ie quick changes)
- herd mentality (once trend established, it continues)
- caused several large currency falls and financial crises
- effects can be devastating for individual economies which lose the confidence of international investors
what is one way of distinguishing b/w growth of global finance and global investment
finance is the short-term, speculative shifts of money and investments are the longer-term flows of money to buy or establish businesses
what is one measure of the globalisation of investment
the expansion of foreign direct investment
define FDI
the movement of funds between economies to establish a new business or buy a substantial proportion of shares in an existing economy (10% or more)
- long term investment
define Transnational corporations (TNCs)
global companies that dominate global product and factor markets
- operate in at least 2 countries
- Having production facilities in other countries
- Carrying out packaging and marketing tasks elsewhere
what do TNCs bring to an economy
- FDI
- new tech
- skills and knowledge
- job opportunities
- profit shifting to tax havens
- remittance of dividends to parent countries
- Exploitation of labour and the natural environment
define cartel
groups of competitors who seek to reduce competition between them by colluding on price and supply
- eg. As TNCs increase in both volume and significance, there has been an increase in cross-border cartels
how do govs encourage TNCs to set up in their country
through supportive supportive policies such as subsidies or tax concessions
list a range of technological developments which have facilitated the integration of economies
- freight technology such as standardised shipping containers, more efficient logistics systems and increased use of automation in warehouses
- Cheaper and more reliable international communications –> better internet
- Computer and communications networks
- Smartphones and mobile internet access
- Advances in transportation
how are technological developments beneficial
- allow more efficient movement of goods, people and information
- become more closely integrated
- driver of growth in trade and investment –> major export opportunity
- increasingly interconnected nature of the global economy
