Globalisation Flashcards
What are the causes of globalisation
-Trade liberalisation
-Trading blocs
-Growth of multinational corporations(MNCs)
-Containerisation
-Technological advancement
-Improvement in transport (Mobility of labour and capital )
What is globalisation
Globalisation is the increased integration of different economies around the world
What are the 5 characteristics of globalisation
1) increased international movement of labour
2) increased international movement of financial capital
3) increased specialisation
4) increased international trade
5) increased trade to GDP ratios
What is increased international movement of labour?
When people move to live in different countries to work. For example when an IT technician moves from the UK to the US to join a new software company they move their labour from the UK to the US.
What is foreign direct investment (FDI)?
FDI is an investment made by a firm in one country into a firm in another country to gain control over the foreign firm.
An example would be the company Tata from India buying Jaguar
What is one of the main ways financial capital moves across countries?
Foreign Direct investment (FDI)
When a country can produce more of a good than another country, what advantage does it have?
When a country can produce more of a good than another country it has an absolute advantage in the production of that good.
If a country can produce a good at a lower opportunity cost what advantage does it have?
It has a comparative advantage in the production of that good.
What is a (TNC) TransNational Corporation?
When a firm operates in 2 or more countries
What is increased international trade
When goods and services are exported and imported
International trade is driven by…
80% of transnational corporations
What does GDP tell us?
GDP tells us how much is produced in an economy over a period of time.
What is Trade-To-GDP ratio?
Trade-To-GDP ratio show how high the value of international trade is compared to the size of a countries economy. The higher the ratio, the more important international trade is to their economy, which means they become more dependent on international trade.
What happens if there are improvements in transport in, which is a cause of globalisation
Increases international movement of labour, which is a characteristic of globalisation
What happens if there are technological advancements in globalisation which is a cause of globalisation?
It will increase international movement of capital, which is a characteristic of globalisation.
What is containerisation?
Containerisation is the system of transporting goods.
What is a trade barrier?
A trade barrier is a restraint set by a government or country on an import of a foreign goods. The most common example of a trade barrier would be tariffs which is a tax you have to pay when importing a good.
What happens if a country reduces or removes the barriers of tariffs?
cost of importing foreign goods decreases which means consumers can import more, meaning the demand for imports will increase, leading to an increase in international trade
What is trade liberalisation?
The reduction or removal of trade barriers, which leads to an increase in international trade, which is a characteristic of globalisation
What are the 6 areas that are affected by globalisation
-individual countries
-government
-consumers
-producers
-workers
-the environment
What are the impacts of globalisation on individual countries?
A good impact would be an increase in living standards. Increase in world output would increase the Real world GDP which will increase living standards.
1950 = 75% of world in extreme poverty
Decreased to 10%
A bad impact of globalisation would be over dependence because the more a country specialise, the more dependent they become
Eg Saudi oil and gas sector is 50% of RGDP
Definition of RGDP
Real GDP is the amount of goods and services produced in an economy in a year
What are the impacts of globalisation on governments?
One positive impact of globalisation on governments would be increased tax revenues. One example would be as countries increase trades with each other, the government generates extra tax revenue through trade tariffs. Increased tax revenue can be used upon gov spending which have positive externalities such as education.
US raised $37.8 in 2016 such as renewable energy where in NC spent £235 million so firms invest in renewable energy
One negative impact would be that globalisation enables transfer pricing, resulting in tax avoidance. For example Large TransNational Corporations (TNCs) can avoid billions in tax as they have many small companies in other countries which may have lower corporation tax.
What are the impacts of globalisation on producers?
One positive impact would be lower production costs.
But this is a disadvantage for smaller businesses as globalisation allows TNCs to create high barriers to entry, making it harder for small businesses to enter the market. An example would be that McDonalds have restaurants in 119 countries, and the more restaurants McDonald opens, the higher quantity of BigMacs sold, as the quantity of BigMac sold increases, McDonalds benefit from larger economies of scale.
