4.1 - Globalisation

Question 1

Define globalisation

Answer 1

The process of increasing the integration of the world’s local, regional, and national economies into a single international market. ( Increases economic interdependency).

Question 2

Globalisation is characterised by increasing economic flows of …

Answer 2

1. International trade
2. Information
3. labour migration
4. financial capital
5. Foreign direct investment
6. Production through global supply chains
7. Interchange of technology and intellectual capital

Question 3

Describe International trade as a characteristic of globalisation.

Answer 3

Free trade of goods and services across national boundaries.

Question 4

What is production through global supply chains?

Answer 4

Global production of a good involving a network of countries.

Question 5

What are the impacts of globalisation on consumers?

Answer 5

+ Increase in consumer choice ( wider range of G/S due to a global market)

+ lower prices ( firms are able to lower production costs by exploiting comparative advantages, they can produce in countries with lower costs, eg: labour costs)

• Could lead to demand pull inflation as a result of rising incomes/more employment opportunities.
• loss of culture

Question 6

What are the impacts of globalisation on workers?

Answer 6

+ More employment opportunities

• Large scale job losses due to an increase in global competitiveness (Eg: western manufacturing sectors are are unable to compete with china)
• Increased migration leads to lower wages due to an increase in supply of workers

+ Immigrants provide new skills > innovation > increases firm productivity > investment increases > AD shifts out

• International competition leads to a fall in wages for low skilled workers in developed countries (however increases those in developing)
• Wages for high skilled workers increases due to more demand for their work
  > increase in income inequality

+ Transnational corporations provide training & new job opportunities

• Workers lack rights in places like sweat shops

Question 7

What is a transnational corporation?

Answer 7

Corporations that have a global reach, operating in a number of countries.

Question 8

What are the impacts of globalisation on producers?

Answer 8

+ Reduces risk because firms are able to source products from more countries and sell to more countries - makes them less reliant thus reducing risk as a collapse of market in one country will have a smaller impact on the impact.

+ larger market
> increases profits.

+ Lower costs of production by exploiting comparative advantage ( Eg: employing lower skilled workers is much cheaper in developing countries - due to less worker rights , min wage etc…)
> increases profits

• Increase in competition means that firms unable to compete internationally will lose out.

Question 9

What are the impacts of globalisation on governments?

Answer 9

• Reduced control over their economies due to their international trade agreements, and global market forces

+ increase in tax revenue ( Transnational corporations pay corporate tax + more people in employment to pay income tax)

• Increase in tax avoidance
• Firms may move offshore if corporation taxes become too high
• Government corruption as a result of Tncs having power to lobby governments

Question 10

What are the impacts of globalisation on the environment ?

Answer 10

• Increase in world production leads to an increase in demand for raw materials
  > increased resource extraction + pollution
  > environmental degradation
• Increase trade + increased production = more carbon emissions > pollution

+ Growing emphasis on sustainability & responsible business practices to mitigate environmental harm

Question 11

What are the impacts of globalisation on individual countries?

Answer 11

+ Stimulates economics growth by increasing trade, foreign investment, consumption
> shift AD out

• Increase in income inequality

Question 12

What factors have led to an increase in globalisation in the last 50 years?

Answer 12

1) Technological advances
2) Trade liberalisations
3) Economic liberalisation
4) Transport infrastructure - Eg: containerisation
5) Financial intergration
6) Multinational corporations
7) Political stability

Question 13

Explain how advancements in technology have led to an increase in globalisation in the last 50 years.

Answer 13

• Development of information technology ( internet, mobile communications)
• has significantly reduced communication and transportation costs
• this facilitates global business corporations.

Question 14

Explain how trade liberalisations have led to an increase in globalisation in the last 50 years.

Answer 14

• Removal of trade barriers through
• international agreements > Eg: general agreement on tariffs and trade, GATT.
  > Eg: The world trade organisation, WTO.
• has promoted international trade

Question 15

Explain how economic liberalisation has led to an increase in globalisation in the last 50 years.

Answer 15

• Many countries have adopted market-orientated economic policies
  > Eg: deregulation
  > Eg: privatisation
• this encourages foreign investment and trade.

Question 16

Explain how transport infrastructure has led to an increase in globalisation in the last 50 years.

Answer 16

• Improvements in transport infrastructure
  > Eg: containerisation
• Expansion in shipping routes
• have increased trade by making transportation of goods cheaper and more efficient.

Question 17

Explain how financial integration has led to an increase in globalisation in the last 50 years.

Answer 17

• Liberalisation of financial markets and ease of cross border capital flows has connected economies internationally.

Question 18

Explain how multinational corporations have increased globalisation in the last 50 years.

Answer 18

• Expansion of multinational corporations into new markets and establishment of global production networks
• have furthered globalisation

Question 19

Explain how political stability has led to globalisation in the last 50 years.

Answer 19

• Greater political stability in many regions reduces the risk of doing business abroad.
• encourages globalisation

Question 20

What characteristics of containerisation have made transport infrastructure more efficient?

Answer 20

• containers are standardised (globally recognised/compatible)
• secure
• cheap
  > lowered transport costs encouraging international trade.