Globalisation - Developed & developing countries - Chapter 16

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  • Created by: sammilaw
  • Created on: 23-02-16 19:49
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  • Globalisation
    • Chapter 16
    • Developed countries:
      • Availability of cheap labour overseas i.e. cheap raw materials
        • Reduces inflationary pressures
          • Allowing lower interest rates
      • Movement of manufacturing sector = cleaner environments
        • E: If developing countries can produce for cheaper= misallocation of resources if the developed countries did not move to the service sector
        • Structural unemployment
      • Wider choice of goods
      • Allows domestic firms to export to a larger market
      • Increased competitiveness = more efficient
        • Lower price for goods
          • Higher real incomes
            • Higher standard of living
      • Local businesses out of business i.e. tailors
      • Larger output = EOS
    • Developing countries:
      • Increased levels of trade
        • More integrated into the world economy
          • Foreign trade multiplier effect i.e. less unemployment and poverty
      • Demand for products are determined by developed countries
        • Recession = fall in demand
      • Exploitation by MNCs i.e. poverty wage
        • Worsening income inequalities due to lack of tax redistributive systems
      • Tariffs protect developing countries' comparative advantage from being exploited
      • Protectionist policies in developed countries prevents producers accessing export markets
      • Volume & volatility of capital flows
        • Increased risk of banking or currency crises. Esp. for those with weak financial institutions
      • Competition for foreign investment = "race to the bottom"
        • Worsened environment etc.
      • Loss of cultural uniqueness

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