Globalisation

• Globalisation refers to the process in which national economies have become increasingly integrated and interdependent (more reliant on each other).
• Causes of globalisation are:

  • Trade liberalisation (reducing barriers to entry)
  • Growth of MNCs (Multinational corporations), corporations can operate in more than one countries at a time.
  • Technology advancements, greater mobility of capital and labour.
• The World Trade Organisation is an organisation set up to promote free trade between its members. It was established in 1995.
• WTO aims to reduce tariff barriers by setting targets for reducing them over time. This means that goods will be cheaper to import into member states as they face lower taxes.
• Advantages of globalisation are:

  • Bigger market, lower prices, more international competition
  • Better access to raw materials, lower costs of production, more output, better innovation and investment.
  • Greater employment, greater tax revenues, greater economic growth.
  • Capital mobility.
• Disadvantages of globalisation are:

  • Growing inequality, top 1% hold more wealth, risks of extreme poverty
  • Higher competition, higher structural unemployment, no safety net
  • Environmental costs, lack of sustainability, resources degrading
  • Trade imbalances, reliant on export led growth
  • External shocks having a greater impact, risks of global recessions
• Key characteristics of globalisation:

  • Short term movements of money (hot money inflows)
  • Foreign direct investment (long term)
  • Global supply chains (labour migration)
  • Trade liberalisation: Encouraged by the World Trade Organisation
• Multinational corporations refer to when large companies move their manufacturing to countries with relatively lower unit labour costs and regulations and taxes.
• Multinational corporations are significant because over 2/3 of global trade is conducted within multinational enterprises and they employ around 60 million people worldwide.
• Subsidiaries refer to trade between the came company and multinational company. This is when a company is controlled by another company.
• Global value chains refer to the interconnected activities involved in the production and delivery of goods and services. Each firm adds value to the final product.
• De-globalisation refers to when countries become less integrated with the global economy. There is a reduction in the flow of goods and services across international borders.
• Causes of deglobalisation:

  • Protectionism: Tariffs and quotas to shield domestic industries
  • Economic shocks: Focuses more on domestic priorities
  • Environmental concerns: Climate change, carbon footprint.