Globalisation Flashcards
(17 cards)
What is globalisation?
The increase in interdependence between countries, reflected in an increasing level of cross-border trade and investment and migration
What is de-globalisation?
The decrease in interdependence between countries
- a reversal of the process of globalisation
What is slower globalisation?
A slowdown in the speed of globalisation
- ‘slowbalisation’
Some causes of globalisation?
• Containerisation and falling transport, freight and travel costs
• Increasing influence of powerful corporations (MNCs/TNCs)
• Lower trade barriers/trade liberalisation
• Increasing size and number of trading blocs
• More FDI flows between countries
• Greater labour migration and the emergence of a global labour force
• Rapid spread of technologies, manufacturing systems and management
techniques (knowledge transfers)
• Faster communication and information flows and the emergence of new
markets, especially global media presence
• Improvements in infrastructure
• Geopolitical change
• New emerging markets
Benefits of globalisation?
• Economies of scale
- Globalisation encourages both producers and consumers to reap benefits from division of labour; greater productive efficiency
• More cost-reducing innovation
- More competitive markets reduces the level of monopoly profits and can incentivise businesses to innovate
• Lower consumer prices/better quality
- Greater competition can drive down prices for consumers and may increase range and quality of goods available (increased consumer surplus)
• Faster economic growth
- Leads to higher per capita incomes and reduced extreme poverty in many lower income countries.
• Freer movement of labour
- Helps to relieve skilled labour shortages & diversifies the workforce, promoting knowledge, technology & management practice transfers boosting innovation
• Increased awareness of the long-term global economic challenges from climate change and the impact of wealth & income inequality
What are MNC’s?
Multi- or trans- national companies (MNCs or TNCs): companies that
operate in more than one country.
Costs of Globalisation?
• Rising inequality
- the gains from globalisation are unequal leading to growing political and social tensions when inequality of income and wealth increases; relative poverty may increase
• Environmental costs
- threats to the global commons including irreversible damage to ecosystems, land degradation, deforestation, loss of bio-diversity and water scarcity
• Macroeconomic fragility
- in an inter-connected world, external shocks in one region can rapidly spread to other centres (this is known as systemic risk)
• Trade imbalances
- increasing trade imbalances (both surpluses and
deficits) lead to protectionist tensions, more import tariffs and quotas and a move towards managed exchange rates – this can then lead to de-globalisation and slower growth Jobs: Workers may suffer structural unemployment from out-sourcing of manufacturing to lower-cost countries and a rise in the share of imports in GDP
• Tax avoidance
- many large MNCs can find ways of avoiding corporation tax and other taxes; the rich can also avoid tac using tax havens,
reducing the tax revenue of governments
• Brain drains
- a more mobile global workforce means some countries
suffer from emigration, losing their most productive workers.
Causes of de-globalisation?
• Protectionism
- measures such as tariffs, quotas, and trade barriers may be used to shield domestic industries from foreign competition.
• Economic Shocks
- Economic downturns/recessions can lead countries to reduce their reliance on global trade, supply chains and investment.
• Changing Trade Agreements
- countries might renegotiate or withdraw from trade agreements that were previously promoting globalisation e.g. Brexit
• Environmental Concerns
concerns about climate change might lead to prioritisation of local production to reduce the carbon footprint associated with long-distance trade.
• Health Crises
- global health crises, such as pandemics, disrupt travel, trade, and supply chains.
• Economic Nationalism
- governments might adopt policies to protect domestic industries and jobs, even if it means reducing international trade
Benefits of globalisation on developed countries?
• Increased access to foreign
markets
• Attraction of foreign investment
• Improved productivity and
innovation
Costs of globalisation on developed countries?
• Job displacement/structural
unemployment
• Rise in income inequality
• Environmental degradation
What are some systemic risks of negative global shocks?
• pandemics
• financial crises,
• currency crises
• natural disasters
• extreme weather
• geo-political shocks
• risks from terrorism,
commodity price volatility
• unexpected changes in
global interest rates
Benefits of globalisation on developing countries?
• Increased access to global
markets
• Increase in foreign investment
• Increased access to knowledge
and technology
Costs of globalisation on developing countries?
• Economic dependence such as
primary product dependency
• Exploitation of labour and issues
with emigration
• Enironmental degradation
What is the Global Value Chain? (GVC)
the interconnected network of activities involved in the production and delivery of goods and services that are performed by multiple firms, operating in different countries.
• In a GVC, different stages of production, such as design, research
and development, manufacturing, marketing, and distribution,
are performed by different firms in different countries, with each
firm adding value to the final product or service.
• The total trade value of parts and components for smartphones reached nearly $490 billion in 2019 (WTO)
Benefits of MNC’s in a country?
• Employment opportunities created by MNC where they operate, contributing to lower unemployment rates.
• MNCs bring investment, technology and expertise, which can stimulate economic growth and development.
• MNCs can facilitate innovation, knowledge and skills transfer to local workers, enhancing productivity and competitiveness.
• MNCs generate tax revenue for governments through corporate taxes, potentially boosting public finances
Costs of MNC’s in a country?
• MNCs may also displace local businesses, leading to job losses in certain sectors or regions.
• Countries hosting MNCs may become dependent on foreign investment, risking loss of control over key sectors of the economy.
• MNCs may exploit cheap labour in host countries, leading to suppressed wages and poor working conditions for local workers.
• Some MNCs engage in aggressive tax planning strategies to minimize their tax liabilities (tax avoidance), which can reduce the tax revenue collected by host countries
How do MNC’s affect globalisation?
• Many MNCs have re-located manufacturing to countries with relatively lower unit labour costs in order to increase their supernormal profits and equity returns for shareholders
• Some MNCs are reshoring manufacturing as labour costs rise in many emerging countries.
• The pandemic caused some firms to shorten their manufacturing
supply chains and ‘de-globalise’
