Globalisation

• Globalisation


  A process of increasing integration and interdependence of world economies as a result of international trade
• • In 2000 the value of global trade was $6.45 trillion
  • In 2020 it was $19 trillion
• Causes of globalisation

  • Economies of scale (development of containerised shipping)
  • Technology (innovations in communication technology)
  • The growth of WTO (WTO taking part in more negotiations on trade liberalisation)
  • Multinationals (rapid growth)
  • Geopolitical changes (read below..)
  • Deregulation (resulted in expansion of global financial services)
• The end of the Cold War between Russia and the US opened up the opportunities for former communist countries in the global supply of labour e.g. 800 000 people migrated from East Germany to West Germany between 1990 and 1991
• Characteristics of globalisation

  • Increasing foreign ownership of companies
  • Increasing movement of labour across borders
  • Free trade in goods and services
  • Easy flow of capital across borders
• Pros for globalisation in weaker economies

  • Reduction in absolute poverty (increased tax revenue from MNCs can be invested in the economy)
  • Employment opportunities (generates jobs and higher incomes, stimulation economic growth)
• Cons of globalisation for weaker economies

  • Exploitation of low-wage labour and poor working conditions
  • Depletion of natural resourses (exploitations of legal loopholes e.g. transfer pricing)
  • Increased power of monopolies (have power over government)
  • Worsened cultural diversity
• Advantages of globalisation for stronger economies

  • Increased trade (export at higher prices and import cheaper raw material)
  • Increased capital flow (profits from MNCs)
• Role of MNCs

  • Cross-border trade (greater choice of goods)
  • Technology innovations
  • Labour mobility
  • Capital flow (through FDI)