4.1.1 - Globalisation

4.1.1 - Globalisation

1. Characteristics

   • growing interdependence of countries and the rapid rate of change it brings about
   • increasing integration of the world’s local, regional and national economies into a single international market
   • movement towards free trade of goods and services, free movement of labour and capital and free interchange of technology and intellectual capital

2. Factors contributing to Globalisation

   • Improvements in transport infrastructure and operations
     • quick, reliable, cheap methods to distribute goods and services
   • Improvements in IT and communications
     • companies can operate across the globe
   • Trade liberalisation and reduced protectionism
     • cheaper and more feasible to trade
     • break down of Soviet Union and opening of China allows more areas for trade
   • International Financial Markets
     • provided the ability to raise money and move money around the world
   • TNCS
     • Transnational Corporations
       • acting to increase their own profit as they want to take advantage of low labour costs

3. Impact of Globalisation

   • Consumers
     • more choice
     • lower prices, countries get comparative advantage, trade, take advantage of lower regulations
       • HOWEVER, can be rise in prices since incomes are rising so higher demand for goods and services
   • Workers
     • large scale job losses in the western world in manufacturing sectors as firms have outsourced
     • Increased migration, also increases AD, depend on each other for labour shortages
   • Producers
     • Wider Market Access
       • reduces risk since a collapse of the market in one company will have a smaller impact on the business
     • Exploit comparative adv, lower wages
   • Economic Growth
     • Increases investment, injection into economy, +ve multiplier, incentive to make S.S.P improvements
     • share expertise
     • Increase output, comparative adv
     • HOWEVER, may cause political instability, could support something undemocratic
   • Government
     • Higher taxes from TNCs, HOWEVER could be tax avoidance and TNCs have power to bride and lobby govs
   • Environment
     • Increased demand for raw materials, bad for environment and more emissions from trade
       • HOWEVER, more trade so share expertise and tackle climate change