Globalisation
The increased integration of different economies
Causes of globalisation
- Improvement in transport
- Containerisation (reduces cost of transportation costs through increased efficiency) - economies of scale
- Trade liberalisation
- Increase in technology
Characteristics of globalisation
- Higher levels of labour migration
- Increased specialisation
- Greater international trade (TNC)
- Easy flow of capital
Example of FDI
When the multimillionaire Indian cotton company TATA wanted to expand by investing in more capital like harvesters to pick more cotton they sued their financial capital to buy the harvesters but after a while they were making so much do they invested it elsewhere
- In 2008, TATA paid the UK £1.7b to buy the British car company jaguar this is called FDI
FDI
An Investment made by a firm in one country into a firm in another country to gain ownership over the foreign firm
Consequences of globalisation on more developed countries
- Increased trade
- Increased capital flow from MNCs
Consequences of trade on less developed country
- Reduction in absolute poverty - increase in living standards
- Employment opportunities
- Depletion of natural resources
How can globalisation lead to over dependence
- The more countries specialise, the more their economies depend on the goods and services they specialise in
Eg: when Saudi Arabia specialised in oil and stopped producing agricultural goods ( 50% of their GDP) - if they run out of oil they will lose their income
MNCs
a business that operates in more than one country (TNCs)
Role of multinational corporations in globalisation
- Technology flow
- Labour mobility
- Capital flow
- Cross border trade
Example of MNCs
Starbucks headquarters are in Washington ,USA but they have 32,000 stores across 80 countries
Benefits of MNCs on economy
- Employment
- Wages
- Capital flow so more tax rev
Drawbacks of MNCs on economies
- May pay lowest possible wages to recruit staff of of there’s labour surplus
- Workers may be treated unethically
- tax rev may not rise
Impact of globalisation on consumers
- wider choice
- lower prices due to increase in supply
How does globalisation cause STRUCTURAL UNEMPLOYMENT
Comparative adv and trade liberalisation has led to increased specialisation - so many manufacturing jobs transferred to developing countries
How has globalisation had a bad effect on the environment
increased global warming - as globalisation increased international trade so more transport is needed to move goods around, which has led to massive increases in CO2 emissions
What does an increase in trade to GDP ratio mean
the higher a countries trade to GDP ratio is the more reliant they are on intentional trade
