4.1.1 Globalisation

Question 1

Globalisation definition?

Answer 1

• The economic integration of different countries through growing freedom of movement across borders of goods, services, capital and people

Question 2

What are the factors contributing to globalisation over the past 50 years?

Answer 2

• Trade liberalisation
• Transport
• Communications technology
• Economic and political transition
• TNCs

Question 3

Trade liberalisation definition?

Answer 3

• The removal/reduction of restrictions on the free exchange of goods and services between nations

e.g. BMW can sell cars to customers in Portugal free from barriers of trade because of EU single market - but transport costs

Question 4

How does trade liberalisation increase globalisation?

Answer 4

• Trade becomes easier through trade liberalisation

e.g. EU single market where firms can sell products anywhere within the EU single market without any restrictions on trade

Question 5

How has transport increased globalisation?

Answer 5

• Lower costs in last 50 years due to technological advancements in aerospace and shipping = Firms can more easily sell goods and services on a global basis
• Rise of commercial aviation = workers can crisscross the globe

(most important shipping advancement is containerisation)

Question 6

How has communications technology increased globalisation?

Answer 6

• TNCs rely on communications technology developed within the last 50 years
• Only possible to operate on global scale with advancements in communications technology
• Quality has improved and costs have fallen significantly

Question 7

TNCs?

AKA MNCs

Answer 7

• Trans-national corporation: a business that is based or registered in one country but does business in other countries

Accounts for ~70% world trade

Question 8

How have economic and political transitions increased globalisation?

Answer 8

• Deng Xiaoping (Chinas president) began a period of economic reform ‘Opening of China’ in the West, opened country to FDI, Chinese economy grew by a huge amount ($150 - $7080 per capita), now 2nd largest economy in the world

December 1978

Question 9

Comparative advantage definition?

Answer 9

• When a country produces a good or service for a lower opportunity cost than other countries

Question 10

Industrialisation definition?

Answer 10

• The development of industries in a country or region on a wide scale

Question 11

Pros of globalisation for countries

Answer 11

• Allows them to specialise and be more productive in goods/services which they have a comparative advantage in (e.g. manufacturing cars in Germany and financial services in UK)
• Strong national firms can develop into successful global ones which boosts employment and raises living standards

Helps to raise living standards as profitability and wages rise

Question 12

Cons of globalisations for countries?

Answer 12

• Overdependent on certain sectors of economy, vulnerable to changes in comparative advantage - Sunderland specialised in shipbuilding then Japan and South Korea developed their own shipbuilding industries that outcompeted UK which lead to closure of shipyards = unemployment = reduced SoL
• Countries increasingly interdependent = macroeconomic conditions in one, has a larger impact on other economies (e.g. recession in one = impact on trading partners)

Question 13

Pros of globalisation for consumers

Answer 13

• Comparative advantage = reduced costs because firms will be more productive and experience EoS = lower prices for consumers
• Increased choice (can choose products all over the world rather than 1 country)

Question 14

Cons of globalisation for consumers

Answer 14

• Difficult to find out how goods imported from around the world are produced (e.g. unsafe working conditions, environmentally unsustainable)

Question 15

Pros of globalisation for governments

Answer 15

• Increased tax revenue from migrants and firms
• Increased international relations
• Changed power dynamics and global politics e.g. China

Question 16

Cons of globalisation for governments

Answer 16

• Structural unemployment from deindustrialisation (UK steel industry)
• Limited ability to raise tax revenue (race to the bottom)

Question 17

Pros of globalisation for producers

Answer 17

• Allows firms to expand far beyond what is possible in one country
• Can develop global supply chains and shift production to most advantageous locations (e.g. manufacturing in China = cheaper labour)
• More choice of suppliers = cheaper and/or higher quality raw materials/components

Question 18

Cons of globalisation for producers

Answer 18

• Exposed to more competition

Question 19

Pros of globalisation for workers

Answer 19

• Increased job opportunities
• TNCs often invest in training = higher skills
• Increased mobility of labour

Question 20

Cons of globalisation for workers

Answer 20

• Have less bargaining power when dealing with TNCs compared to national firms bc they can just offshore labour somewhere else
• Lower skilled workers can lose out as their industries become uncompetitive/lose comparative advantage e.g. manufacturing in UK = falling wages and unemployment

Question 21

Pros of globalisation for the environment

Answer 21

• Specialisation and global dissemination of green technologies could reduce/reverse environmental damage

Question 22

Cons of globalisation for the environment

Answer 22

• Rising industrial activity = increased demand for raw materials = increased mining = environmental destruction
• Deforestation for farming or industrial activity
• Increased transportation due to international trade = rise in greenhouse gas emissions