4.3.1 What are the causes and effects of globalisation? Part I

Detailed notes following the requirements of the specification. This is just Part I which focuses on the causes of gobalisation. I have taken the information from a mixture of resources, including the Edexcel A2 Economics textbook by Peter Smith, the Tutor2U site and my own knowledge

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Preview of 4.3.1 What are the causes and effects of globalisation? Part I

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4.3.1 what are the causes and effects of
globalization?
What is globalisation?
Ann Krueger, the first deputy-managing director of the IMF, defined globalization as `a
phenomenon by which economic agents in any give part of the world are much more
affected by events elsewhere in the world'
Globalisation refers to the closer integration of world economies.
Factors contributing to globalisation:
I. Advances in technology within communication and transport industries. With
communication systems and transport becoming more advanced, international
trade has been made a possibility
II. Deregulation of international markets has led to firms being able
III. Marketing of goods and services has been revolutionized with the spread of the
internet and e-commerce
IV. Trade liberalization, the breaking down of artificial barriers to the flows of goods,
services, capital, knowledge and people has liberlised trade to the point that
market have become incredibly interdependent.
V. Increased significance of transnational companies.
Technological Advancements:
Technological advancements in communication systems and transport have allowed firms to
make the distribution and production of their goods and services more efficient. This has
contributed to globalisation through increasing the size of labour markets that are available

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Transport
I. Improvements in transportation has enabled firms to fragment their production
processes to take advantage of varying cost condition in different parts of the
world.
For example, it is now possible to site labour-intensive parts of a production process in
parts of the world where labour is relatively plentiful, and thus relatively cheap this is
one way in which multinational corporation arise, in some cases operating across a wide
range of countries. This leads to one of the major disadvantages of globalisation,
exploitation.…read more

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Reduction of trade barriers
Since the Second World War, there has been successive reduction on trade barreris, first
under the auspices of the General Agreement on Tariffs and Trade (GATT), and later under
the World Trade Organisation (WTO) which replaced the GATT.
Additionally, there has been a trend towards the establishment of free trade areas and
customs unions in various parts of the world, with the European Union being just one
example, the European Union is a customs union.…read more

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Hand in hand with developments being made by organisations such as the World Trade
Organisation, there have also been movements made towards removing restrictions on the
movement of financial capital between countries. Add to the fact that most countries have
removed capital controls, operating globally has been made easier.
By facilitating the process of international trade, such developments have encouraged firms
to become more active in trade, and thus have added to the impetus towards globalisation.…read more

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