Globalisation

Question 1

Definition of Globalisation

Answer 1

A process by which the world’s economies are becoming more closely integrated

Question 2

Characteristics of globalisation

Answer 2

1. Greater Trade
2. Increase in FDI
3. Growing importance of global / transnational companies (TNCs)
4. Increased movements of financial capital and people between countries
5. Increased international specialisation and division of labour (parts produced in one country and assembled in another)

Question 3

Definition of FDI

Answer 3

Foreign Direct Investment is when countries or businesses invest money in another country or business overseas

Question 4

Why has globalisation happened?

Answer 4

• Fall in transport costs = goods imported / exported more cheaply
• Fall in costs of communications (cost and availability of the Internet)
• Lower trade barriers (e.g. tariffs) since WW2
• Collapse of communism and opening up of China = more countries open to FDI
• TNCs organising trade on a global scale (thanks to a fall in trade barriers and the development of the internet)
• Growth in number and size of trading blocs = more trade within these blocs

Question 5

Impacts of globalisation on countries

Answer 5

• Comparative advantage = countries specialise in making a good = rise in world output = better living standards / = more world trade = increased GDP
• 2008/9 recession = deglobalisation = protectionism = fall in specialism and trade
• much of manufacturing has been transferred to LDCs = fall in demand for unskilled workers in developed countries = fall in wages fro unskilled workers = increased income inequality in developed countries

Question 6

Impacts of globalisation on governments

Answer 6

• increase in GDP = increase in incomes = more tax revenue
  EVA: transfer pricing (when a global company manages its accounting of internal transactions within the company to show highest profits in the country in which corporation tax is the lowest) = fall in corporation tax = less tax revenue

Question 7

Impacts of globalisation on producers

Answer 7

Offshoring / economies of scale = lower production costs

Question 8

Impacts of globalisation on consumers

Answer 8

• wider choice of goods

- lower costs = more consumer surplus

Question 9

Impacts of globalisation on workers

Answer 9

• promoted the exploitation of workers (e.g. child labour)
• driven down wages (esp. of unskilled workers) as a share of GDP
• health / safety laws and regulations are less demanding in LDCs

Question 10

Impacts of globalisation on the environment

Answer 10

• increase of trade = more air travel = environment degradation
• increase of trade = more pollution = global warming