4.1.1 Globalisation

Question 1

what is globalisation?

Answer 1

a process of economies becoming inter-connectedness and inter dependent through global networks of trade,capital flows and techonology

Question 2

key benefit of globalisation?

Answer 2

• allows countries to specialise in producing goods and services where they have a comparative advantage
  ➡️ gain in economic welfare (through lower prices for consumers)
• greater range of choice

Question 3

what are the characteristics of globalisation?

Answer 3

• Increasing foreign direct
  investment
• more global brands (incl from emerging countries)
• deeper specialization of labour
• Higher levels of cross-border labour migration
• increasing connectivity through networks

Question 4

factors contributing to globalisation in the last 50 years?

Answer 4

• containerisation (real prices of air and ocean shipping have decreased)➡️ reducing the unit cost of shipping
• technological advancements ➡️ cuts the cost of transmitting and communicating information (key factor behind trade in knowledge-intensive)
• differences in tax systems (cutting corporate taxes to attract inflows of foreign direct investment (FDI))
• less protectionism (average import tariffs have fallen – but rise in non-tariff barriers such as import quotas, domestic subsidies and tougher regulations)

Question 5

what are transnational corporations?

Answer 5

companies which base their manufacturing, assembly, research and retail operations in a number of different countries ➡️ key factor in globalisation as they often relocate manufacturing to places with lower unit labour costs

Question 6

why is the impact of globalisation different in different countries?

Answer 6

depends on
- how well integrated in the world economy
- if they have the factor resources allowing them to gain from globalisation

Question 7

impact of globalisation to producer?

Answer 7

✅
- more division of labour globally
- harnessing economies of scale
- freer movement of labour between countries (relieving labour
shortages and promoting the sharing of ideas from diverse workforces)
❌
- dominant global brands/monopolies may squeeze out smaller businesses (job loss)

Question 8

impact of globalisation to consumer/workers?

Answer 8

✅
- more competitive markets ➡️ cheaper prices
- driving faster economic growth ➡️ higher per income capita
- has increased awareness of the systemic challenges of climate change and the effects of wealth/income inequality
- better labour protection through improved monitoring by international organisations
❌
- rising inequality/poverty ➡️ the gains from globalisation will be unequal
- structural unemployment as a direct result of the out-sourcing of manufacturing to lower-cost countries

Question 9

impact of globalisation to countries?

Answer 9

✅
- opening of stock markets allows less developed countries to borrow money to help overcome a domestic savings gap
- may prompt improved standard of government
❌
- macroeconomic fragility, external shocks in one region can have knock-on effect
- trade imbalances, increased quotas and tariffs, and, move towards managed exchange rates
➡️

Question 10

impact of globalisation to enviroment?

Answer 10

✅
- makes people more aware of issues
❌
- Threats to the global commons (irreversible damage to ecosystems, land degradation, deforestation, loss
of bio-diversity and severe water scarcity)
- greater exploitation of the environment, (increased production of raw materials, and the impact of trading toxic waste to countries with weaker environmental laws)

Question 11

impact of globalisation to the UK economy?

Answer 11

• expanded choice and higher consumer surplus
• effects on retail prices and the rate of inflation
• impact of UK firms relocating to lower-wage economies
• impact of net inward migration on real wages and on UK government spending/tax revenues
• impact of inward investment into UK on employment
• impact on share prices and profits of UK companies