Globalisation Flashcards
(14 cards)
developed vs developing vs emerging countries
developed: richer, industrialised countries with high GDP per capita. UK, Japan, AUS
Developing: rely on agriculture and labour intensive industries, lower GDP per capitas and living standards. Angola, Colombia
Emerging countries: not yet developed but further along than other developing countries. BRICS (Brazil, Russia, India, China, South Africa)
what is globalisation?
the increasing integration of economies internationally
main characteristics of globalisation?
increased interconnectedness and interdependence between nations:
- free movement of capital and labour across international boundaries
- free trade in goods and services between countries
- the availability of technology and intellectual capital to be used on an international scale
cultural and political globalisation + examples
- international bodies lead to a convergence of political decisions, so more joint decisions made and more international cooperation eg. the United Nations
- cultural globalisation is the spread of ideas, values and cultural expressions eg spread of Mcdonald’s and yoga across the world. Often driven by social media.
other examples of globalisation
- increase in financial capital flows between countries
- integration of production, diff parts of product made in diff countries
- increase in foreign ownership of firms
- companies producing their products abroad eg India provides software development for EU companies
What are MNCs + their role in globalisation + examples
Multinational corporations are key feature of globalisation
- they function in at least one other country aside from theirs
- Nissan (japan) and KFC (kentucky)
- they often divide operations and locate production processes in countries with lower costs this is called offshoring
what factors attract MNCs to invest in a country? + examples
- availability of cheap labour and raw materials
- good transport links
- access to different markets
- pro-foreign investment government policies eg Ireland has low corporation tax at just 12.5%
what are some causes of globalisation + examples
- trade liberalisation: reduction or removal of tariffs or protectionism. Often negotiated using WTO
- reduction in real costs and time needed for transportation of goods making it cheaper to import/export. eg development of larger cargo ships
- improvements in communications tech eg internet makes communication needed for international trade easier/cheaper
- MNCs and increased FDI, eg large amounts of capital invested in China from overseas totalling $160bn in 2023. they also cause increased interconnectedness eg trade
- firms expanding overseas to exploit economies of scale
- governments wanting benefits of increased trades will incentivise FDI eg Ireland 12.5% corporation tax
- opening of new markets to trade and investment eg following collapse of Soviet Union, communist countries like Russia went from closed economies to more trade. China joining the WTO and opening up to trade in 2001 had massive impacts on globalisation
- growth in international trading blocs eg EU countries
Costs of Globalisation
- causing the price of some goods and services to rise: increased world incomes causing increased demand but supply can’t always meet this so price ^^
- can lead to economic dependency and therefore instability in economies eg if US economy goes into recession and reduces imports, EU countries may go into recession too
- increased world trade has led to imbalances in BOP some countries eg USA have large deficit and some eg China have large surpluses. These are unsustainable and cause calls for more protectionism
- domestic firms may be outcompeted by foreign firms and go out of business
globalisation has big impact on environment:
- environmental degradation resulted from globalisation eg increased fossil fuels burned from international transportation
- carbon emissions rise from rising production levels of manufactured goods to meet global demand
- deforestation
Benefits of Globalisation
- trade encourages countries to specialise in the things they’re best at producing: increases output
- globalisation can allow countries to produce things where they have comparative advantage, which improves efficiency and allocation of resources
- Producers benefit from EOS and lower production costs because markets become bigger w globalisation.
- Lower production costs also passed onto consumers in the form of lower prices
- Globalisation provides consumers with more choice of g/s
- World GDP has risen as a result of globalisation due to many factors - for example, increased efficiency so increased output
- increased output means increased employment, absolute poverty falls and living standards are improved
- increased growth and employment are macro objectives
- lower prices due to increased competition
- increased awareness and quicker response to foreign disasters and global issues (eg deforestation) + consequences
positives of MNCs
- FDI creates new jobs, brings new skills and wealth to economy eg developed countries also benefit, especially the UK which receives a lot be able to expand businesses by exporting goods to diff branches of that MNC abroad
- MNC can benefit from EOS, so more efficient, ie they can produce more cheaply
- raise living standards by providing employment
negatives of MNCs
- some argue they exploit workers in developing countries: paying them low wages
- they can force local firms out of business (local firms might not access similar EOS, so less competitive)
- MNCs can relocated rapidly and cause mass unemployment. Eg General Motors in 2018 shut down operations in Canada, causing 2,500 to lose their jobs.
- can use their power to reduce choice and raise prices
- can influence government policies to their advantage, unfair to locals and can hurt the domestic economy
- eg governments reducing corporate tax levels to attract/keep MNCs in the country
- they can withdraw profits from the og country and place them elsewhere with low tax rates, so the former cant gain the tax revenue
P+N consequences for developing/ emerging countries
negative:
- most profits of MNCs return to their home countries, does not help the host country
- Skilled workers often leave developing/emerging countries to work in more developed ones. Reduces country’s potential for economic growth
- Local/domestic companies may suffer if they’re competing with MNCs
- MNCs may exploit (lower wages) the work force if it is mainly low skilled workers
positive:
- creates jobs, reducing u/e. MNCs may create skilled, well paid jobs in dev/emerg countries and may offer more reliable income than sporadic jobs.
- MNCs bring more efficient methods and tech, these have positive effects for their productivity and economy
- increased investment in dev/emerg economies eg through FDI
P+N consequences for developed countries
negative:
- cheap overseas production of goods led to severe reduction in certain industries. Causes structural unemployment eg. cheap clothes from Bangladesh contributed to: Manchester dominated world wotton production but by 80s industry had vanished
- such collapses lead to de-industrialisation, impacts economies eg fall in exports
- increased level of imports from increased trade have negative effects on country’s BOP
positive:
- gives greater access to cheap raw materials and intermediate goods from other countries. can be used in domestic production for exports or domestic sales
- MNCs gain access to cheap labour, so lower supply costs and then lower prices for developed countries consumers
