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Economics Unit 4 > Globalisation > Flashcards

Flashcards in Globalisation Deck (13):
1

Globalisation

Is the process by which production and market in different countries are becoming increasingly independent due to the dynamics of trade in goods, services and flows of capital and technology. It is not a new phenomenon but the continuation of development that have ben in train for considerable time

2

Characteristics of globalisation

- Greater trade in goods and services
- Increase in transfers of capital including the expansion of FDI by Trans-National companies and the rising influence of sovereign wealth funds
- Development in Global brands
- Spatial division of labour
- High levels of labour migration within and between countries
- New Nations joining the world trading system
- e.g. China and India joined 1991, Russia joined in 2012
- Fast changing shift in the balance of economic and financial power
- Increase spending on innovation, investment and infrastructure across large parts of the world
- Increased competition for newly industrialised countries

3

Causes of Globalisation

-Improved communication
- Reduced transport Costs
- Trade Liberalisation
- Increased Competition from newly industrialised countries

4

Improved Communication

- Information for buyers and sellers
- buyers (firms and consumers) can find out about producers overseas in a way they couldn't before

- Telecommunication for services
- e.g. Telecom, call lines, call services, satellites
- Satellites reduce the costs of calls
- enables call centres and date processing counties to open e.g. India

- Production overseas
-Firms (e.g. UK) can email designs and specifications (C.A.P) abroad to be manufactured

5

Reduced Transport Costs

- Containerisation
- can build a boat twice as big, but it costs less. Economies of scale as it is a larger boat. Cheaper container. Low labour cost

- Patio Stone
- Cheaper labour to mine and get the slate. There is no environmental regulation in developing countries. It is best to import from China then Wales as it is cheaper. There is less to worry about (red tape) and the externalities can be ignored

6

Trade Liberalisation

- Post World War Two
- Countries have reduced tariffs which boosts trade
- Cheaper to transport West to East, otherwise ships are very empty e.g. Chicken parts
- Very high weight to value - showing shipping costs are low

7

Increased Competition From Newly Industrialised Countries

E.g. China has the infrastructure, technology, capital, skilled labour that it didn't have 40 years ago so it is possible to put protection there

8

Benefits of Globalisation

- More goods - variety of options available
- Cheaper goods and services - benefits both rich and poor ( the poor the most)
- globalisation has increased competitiveness for expensive goods
-managers are now running multi-national companies which mean bigger profits
- higher salaries benefit the rich

9

Costs of Globalisation

Lost of manufacturing jobs in the UK - hits the poor
-skilled workers competing with workers in China
- their jobs can easily be offshore = decreases wages of the poor

10

Before Globalisation it used to be...

" When America sneezes, the UK catches a cold" but now it is "When China sneezes, the UK catches a cold"

11

Why is it "When China sneezes, the UK catches a cold"

External Shocks

12

Consequences of Globalisation

- Increased dependency of economies on the output of other economies so problems if war/conflict e.g. Russia supplies energy to the Ukraine
- Greater Consumer Choice
- Lower prices through specialisation according to comparative advantage
- Increasing environmental destruction and negative externalities
- 'Footlose' companies (which causes unemployment as they move from place to place)
- Possible loss of culture/ national identities e.g. Adoption of American Style culture

13

Other issues of globalisation

- Some argue that it is not a new phenomenon and we have been in a continual process of globalisation since the time of the first human - supported by the fact that the rate of increase in exports has not really changed recently

- De-industrialisation in developed countries, combined with a global search for new sources of energy ( especially oil/gas reserves) and growth of economies such as China and India has left many 'western' countries concerned about their future and their future power in the global economy

- Trading blocs are seen as a contributor to globalisation, with their emphasises on creating trade within their boundaries and also an inhibitor to globalisation, since they divert trade away from economies not within their boundaries

- Loss of manufacturing jobs in the UK - hits the poor the hardest
- skilled workers are competing with workers in China
- Jobs can easily be offshore which leads to a decrease of wages of the poor