LS1 - Globalisation

Question 1

What is globalisation?

Answer 1

Process of interaction and integration among people, companies and govt worldwide.
Results in whole world becoming a ‘single’ economy
More interdependence between countries

Question 2

Factors contributing to globalisation

Answer 2

• Trade liberalisation - removal/reduction of restrictions on the free exchange of goods and services between nations, making trade easier
• Transport - advancements have made transporting goods and services more easier and efficient - can seel more goods and services across the world
• Communications - quality of communications have improved greatly, making it easier for companies to operate globally, with employees across the globe
• Economic and political transitions - China opened up its economy to foreign trade in 1979; Socviet Union fell in 1991, forming new states that have mostly succeded as market eocnomies
• TNC - size and number of global companies has increased - these factors contributed to companies being able to operate worldwide

Question 3

Impact of Globalisation (Countries)

Answer 3

• Allows countries to be more specialised and more productive in goods and services in which they have a comparative advantage (lower opp cost than other countries), raises living standards, incomes, profits
• Strong national firms –> strong global firms - boost profits, employment, living standards
• Countries can become overdependent on certain sectors of their economy, vulnerable to changes in comp adv over time - lots of unemployment (structural), reduced living standards
• Countries beocme more interdependent on other countries - as they trade with each other more, if there are issues with the other country B, goods and services in country A will be impacted

Question 4

Impact of Globalisation (Consumers)

Answer 4

• Allows countries to specialise in industries w with comp adv, reducing costs, as firms become more productive, and experience economies of scale - cheaper prices for consumers
• Increased choice for consumers - consumers can buy goods and services form all over the globe

Question 5

Impact of Globalisation (Governments)

Answer 5

• Can limit tax revenue - if country A increases corporation tax, TNC will move to country B, with lower corporation tax, redcucing tax rev for country A
• Possibility of increased administrative procedures - could introduce trade barriers

Question 6

Impact of Globalisation (Producers)

Answer 6

• Exposed to more competition form all across the world, domestic firms could struggle, go out of business due to increased comp from foreign firms
• Allows firms to expand internationally
• Develop global supply chains, shift production to most advantageous location
• More choice with suppliers - cheaper labour/raw materials

Question 7

Impact of Globalisation (Workers)

Answer 7

• Harder for workers to achieve pay rises - as TNCs could just move production to other country with cheaper labour - Offshoring
• High skilled workers with comp adv tend to do well in globalisation - higher wages, better QoL
• Low skilled workers suffer, as their industries become more uncompetitive

Question 8

Impact of Globalisation (Environment)

Answer 8

• Increases env destruction, contributes to greenhouse gas emissions - global warming
• Increased demand for finite resources and raw mats - increased mining or deforestation/clearing of forests
• Increased transportation - increase in greenhouse gas emissions (shipping creates 2/3% of world total gg emissions)