Globalisation Flashcards
What is globalisation?
The ever-increasing integration of the world’s local, regional and national economies into a single international market
What is de-globalisation?
Involves countries adopting protectionist policies in order to protect domestic employment = decline in: specialisation, FDI and short run money flows
What is a multinational company (MNC)?
A company with significant product operations in at least 2 countries
What is transfer pricing?
An accounting technique used by transnational corporations for reducing taxes on profits by selling goods at lower prices internally to another part of the company in a low tax country
What is de-industrialisation?
A fall in the contribution made by manufacturing sector to national output, employment and income
What is outsourcing and off-shoring?
Outsourcing = Contracting out of a business process to another party
Off-shoring = Work is done overseas
What is FDI?
Foreign Direct Investment = Investment undertaken in one country by companies based in other countries
What is inward investment?
Where foreign companies invest in domestic economy
What is outward investment?
Where domestic firms invest abroad
What are the characteristics of globalisation?
- Increased trade in g/s
- Expansion of FDI
- Development of global brands
- Global supply chains
What are the factors contributing to globalisation?
- Trade liberalisation - trade barriers and quotas reduced
- Reduced costs of communication
- Decreased cost of transport - containerisation
- Rising transnational activity and skill levels in developing countries
What are the benefits of globalisation?
- Cheap imports - increased living standards, lower costs
- Increased exports - Comparative advantage
- Inward investment/FDI - improve living standards
- Reduce absolute poverty in developing economies
What are the costs of globalisation?
- Increased FDI - goods sold at lower costs and some industries decline
- Increased inequality - more imports increase unemployment, rural areas more affected
- Greater macroeconomic instability
What are the advantages and disadvantages of deglobalisation to households?
Advantages:
- Cheaper imports
- Increased employment
- Reduced absolute poverty
Disadvantages:
- Inequality increases
- Exploitation of workers
What are the advantages/ disadvantages of deglobalisation to countries?
Advantages:
- Reduced trade deficit
- Increased GDP
- Increased efficiency
Disadvantages:
- Increased inequality
- Tax avoidance
- Exploitation of environment
What is FDI?
Long term investment by MNCs or governments in other countries
What are the 3 reasons for FDI?
- Market seeking - when a firm wants to access growing profitable markets
- Resource seeking - when a firm wants to access FoP
- Efficiency seeking - when a firm wants to achieve lower unit costs of production
What are the benefits/cons of FDI?
- Economic growth - AD and AS increase
- Jobs - if employing abroad there may be job displacement
- Tax revenue - higher incomes from higher employment
- Improve current account deficit
