4.1.1 - Globalisation

Question 1

what is globalisation ?

Answer 1

process of greater integration and inter connectedness between countries

Question 2

what did the IMF define globalisation as ?

Answer 2

“The process through which an increasingly free flow of ideas, people, goods, services and capital leads to the integration of economies and societies.”

Question 3

what does globalisation include ?

Answer 3

1. growth of international trade
2. trade liberalisation
3. enhanced mobility of labour and capital
4. increased outsourcing
5. falling transport costs
6. growth of size and influence of MNCs

Question 4

factor of globalisation - trade agreements

Answer 4

WTO has assisted in the reduction of trade barriers and there has been a greater proliferation (growth) of trade agreements across the world.

Question 5

factor of globalisation - reduced tariffs and protectionism

Answer 5

some protectionist measures remain in place, yet a large number of countries with great global economic influence have lowered protectionist measures.

Question 6

factor of globalisation - expansion of global trading blocs

Answer 6

the growth of trading blocs (e.g. EU, NAFTA) have reduced national barriers and promoted more trade and integration

Question 7

factor of globalisation - improved technology

Answer 7

this has revolutionised communications, lowered labour costs, and enabled businesses to access new foreign markets.
improvements in IT + communication allow companies to operate globally.

Question 8

factor of globalisation - improvements in transport infrastructure

Answer 8

these are quick, reliable, and cheap methods to allow production to be separated around the world

Question 9

factor of globalisation - trade liberalisation

Answer 9

as well as reduced protectionism, this has made it cheaper and more feasible to trade as it’s been occurring since 1945.
the breakdown of the Soviet bloc and opening of China has shown a whole area of the world for business to expand into.

Question 10

factor of globalisation - international financial markets

Answer 10

these have provided the ability to raise money and move money around the world, necessary for international trade.
there has been signifiant relaxation on the rules surrounding the movement of capital, which can move either freely, or at very low costs and quickly across the globe.

Question 11

factor of globalisation - TNCs

Answer 11

these are large companies operating around the world.
this has led to globalisation by acting to increase their own profits as they want to take advantage of low labour costs.
they sell and produce their goods around the world and have the power to lobby governments.

Question 12

impact of globalisation - consumers

Answer 12

• have more choice since there’s a greater range of goods available worldwide, not just UK local goods.
• can lead to lower prices, as firms take advantage of comparative advantage (producing at a lower opportunity cost), and produce in countries with lower costs.
• in other cases, it can lead to rising prices since incomes are rising so there is higher demand for goods and services.
• many consumers worry about the loss of culture.

Question 13

impact of globalisation - workers

Answer 13

• there have been large scale job losses in the West in manufacturing sectors as these jobs have been moved to countries such as China and Poland (low cost).
• increased migration may affect workers by lowering wages, but migrants can also provide important skills and an increase in AD which increases the number of jobs.
• international competition and led to a fall in wages (or reduced growth) for low skilled workers in developed countries, whilst increased those in developing countries.
• the wages for high skilled workers increase as there is more demand for them, increasing quality.
• TNCs provide training for workers and can create new jobs.
• those working in sweatshops (factory with low wages) will see poor conditions and low wages, but this is better than alternatives.

Question 14

impact of globalisation - producers

Answer 14

• firms are able to source products from more countries and sell them in more countries, reducing risk since a collapse in the market in one country will have a smaller impact on the business.
• they can employ low skilled workers more cheaply in developing countries and can exploit comparative advantage and have larger markets, increasing profits.
• firms who are unable to compete internationally will lose out.

Question 15

impact of globalisation - government

Answer 15

• can receive higher taxes (since TNCs pay tax and so do the people they employ). however, they could lose out through tax avoidance.
• TNCs have the power to bribe and lobby governments, leading to corruption.
• if the government uses the correct policies, they can maximise gains and minimise losses.

Question 16

impact of globalisation - environment

Answer 16

• increase in world production has led to increase in demand for raw materials, which is bad for the environment.
• increased trade and production leads to more emissions.
• however, globalisation means the world can work together to tackle climate change and share ideas and technology.

Question 17

impact of globalisation - economic growth

Answer 17

• globalisation increases investment within countries (especially from TNCs investment), showing an injection into the economy, which will have a larger impact (due to the multiplier). this creates an incentive for countries to move supply side improvements and encourage TNCs to operate in their countries.
• TNCs can bring world class management techniques and technology, which can have knock on benefits to all industries, as these techniques are available for them too.
• trade will increase output since it allows exploitation of comparative advantage.
• however, the power of TNCs can cause political instability as it may support unpopular regimes, but that benefit them.
• comparative cost advantages will change over time and so companies may leave the country when it no longer offers an advantage and cause structural unemployment and reduced growth.

Question 18

synoptic point

Answer 18

it has clear micro economic effects.
it has impacts on consumers and producers and can lead to negative externalities for the environment.
it also contributes to the increasing contest ability (competition) of markets.

Question 19

5 benefits of globalisation

Answer 19

1. lower prices and greater choice
2. economies of scale
3. increased global investment
4. free movement of labour
5. reduces global inequality

Question 20

4 costs of globalisation

Answer 20

1. structural unemployment
2. environmental costs
3. tax competition and avoidance
4. less cultural diversity