4.1.1 Globalisation

• Globalisation


  Countries becoming integrated and interdependent
• Integration


  Two or more nations increasing their economic ties and aligning policies
• Interdependence


  Increased reliance on trade, countries are no longer self-sufficient
• Types of Integration


  -Free trade

  -Free movement of labour

  -Free movement of capital

  -Free interchange of tech and intellectual capital
• Causes of Globalisation


  -Containerisation

  -Technological change

  -Growth of TNCs

  -International Finance Flows

  -Government policy

  -Trading blocs/ agreements

  -Increased labour mobility

  -Improved transport
• Containerisation


  Goods are shipped in bulk in containers which reduces the cost per unit for transportation and increases efficiency
• Technological Change


  Innovation in telecommunications eg. the internet have reduced the cost of communication
• TNCS

  Transnational Corporations operate in multiple countries to benefit from economies of scale to lower costs and increase profit
• International Finance Flows


  Increased flow of capital, FDI, foreign investment and ownership rapidly increases economic growth
• Government Policy


  Removal of protectionist policies, open borders and lower tariffs allow for more trade
• Trade Agreements/ Blocs


  The WTO assisted in the reduction/ removal of trade barriers and the creation of trade agreements. Trading blocs like the EU and NAFTA have reduced trade barriers.
• Labour Mobility


  Workers are more willing to move across national borders
• Transportation


  Improvements in rail, road, sea and air travel have made trade faster and cheaper
• Impact of Globalisation on Consumers

  -Increased consumer choice of G&s, but some are homogenised

  -Prices fall as production moves to low-cost region, but some prices rise due to high demand

  -Real incomes go further as prices fall, but people lose jobs as production moves to different countries
• Impact of Globalisation on Workers


  -Growth in employment in emerging economies, but increased structural unemployment in developed economies

  -People move from poor to rich countries and can fill jobs, leading to social tension. People leaving developing countries can cause brain drain, but they may send remittances

  -Increased international competitiveness has suppressed wages for low-skilled workers, but wages are rising now

  -TNCs create new jobs, but have poor pay and working conditions
• Impact of Globalisation on Producers


  -Specialisation means countries can trade their surpluses and firms have less risk as they can access more resources and markets, but dependency causes risk, especially with problems in the supply chain

  -Firms become more profitable, there is more competition due to low costs and firms can sell to more markets to increase revenue, but competition increases production costs, but prices have to fall

  -Dominant global brands prevent local producers from entering the market
• Impact of Globalisation on Governments


  -Tax avoidance by TNCs

  -Trade-off between citizens' well-being and attracting TNCs as they exploit workers

  -TNCs bribe government officials which can lead to lower incomes
• Impact of Globalisation on the Environment


  -Increased pollution due to the use of fossil fuels in transportation

  -Tragedy of the commons

  -Irreversible damage to ecosystems, land degradation, deforestation, loss of biodiversity and permanent water shortages