Theme 4: Globalisation
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- Created by: tannykarimi
- Created on: 23-11-17 10:10
Characteristics of Globalisation
- Globalisation is the integration of the world's local, regional and national economies into a single, international market.
- It involves the free trade of goods and services, the free movement of capital and labour and the free interchange of technology and intellectual capital.
- As Globalisation spreads, there is more trade between nations and more transfers of capital including Foreign Direct Investment.
- More migration and more countires particpate in global trade, such as China and India.
- Furthermore, there are higher levels of investment.
- Countries have become more interdependent.
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Factors contributing to Globalisation in the last
1) TRADE IN GOODS
- Developing countries have acquiref the capital and knowledge to manufacture goods.
- Efficient forms of transport, easier and cheaper to transfer goods across international borders.
- Developing countries have advantage of cheap labour so MNCs take advantage of this.
2) TRADE IN SERVICES
- For example: trade of tourism, call centre services has increased from developing countries to developed countries.
3) Trade Liberalisation
- Growing strength and influence of organisations such as WTO, which advocates free trade, has contributed to the decline in trade barriers.
4) MNCs
- MNCs are organisations which own or control the production of goods and services in multiple countries.
- MNCs used marketing techniques to become global and by growing, they have been able to take advantage of economies of scale.
5) INTERNATIONAL FINANCIAL FIRMS
- Flow of capital and FDI across international borders has increased.
- Foreign ownership of firms has increased, more investment in factories abroad.
6) COMMUNICATIONS AND IT
- The spread of IT has made it easier and cheaper to communicate, making the world more interconnected.
- Better transport links and transfer of information.
7) CONTAINERISATION
- Goods that are distributed in standard sized containers so is easier to load and cheaper to distribute.
- Cheaper to ship goods across the world so prices fall, making the market more competitive.
- However, MNCs might exploit this and thus create more profits.
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Impact of globalisation on...
1) INDIVIDUAL COUNTRIES
- Trade imbalances between countries, for example: the US runs a trade deficit whilst China runs on a surplus.
- Imbalancres and inqualities.
- Within individual countries, income and weath inequalities occur if the benefit and costs of globalisation are not spread evenly, e.g: China's rural population compared to the urban population.
2) GOVERNMENTS
- Some governments might lose sovreignty due to the increase in international treaties.
- If countries become members of organisations, they will have to abide by their rules.
3) PRODUCERS AND CONSUMERS
- Consumers and producers can earn benefits of specialisation and economies of scale as firms become larger.
- Firms operate in more competitve environment, which encourages them to lower their average costs and become more efficient.
- Producers can also lower their average costs by switching to places with cheap labour.
- Globalisation = increase in world GDP which increases consumer living standards.
4) WORKERS
- Workers can take advantage of job opportunities across the globe rather than their home countries.
- However, there may be structural unemployment, for example: the mining industry in the UK when production moved abroad.
- When production shifts to lower cost labour countries, may be damaging as the workers may be exploited with bad workings conditions and poor pay.
- However, could be aruged that better pay than jobs such as agriculture.
5) THE ENVIRONMENT
- Increased living standards, however this leads to increased pollution as a reuslt of more car usage and industrialisation.
- Deforestation, water scarcity and land degradation.
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