Globalisation

Globalisation

1. Causes

   • Trade Liberalisation
     • Removing barriers to trade between different countries and encouraging free trade
       • Why has it increased globalisation?
         • Barriers such as import licensing and foreign exchange controls have been lifted.
         • Borders have opened and average tariff levels have fallen.
   • Improvements in transport
     • there has been a fall in transport costs and the costs of shipping have reduced
       • Why has it increased Globalisation?
         • the lower cost of shipping products around the globe helps brings cost of production down which drives down prices in the country of manufacture closer to the price of competitive export markets
   • Increased standards of living
     • high standards of living for example people can live a more luxury lifestyle and this has made the demand for world products increase
   • Devaluation of global financial markets
     • The removal of capital controls in many counties which facilitates foreign direct investment. It has lead to more countries being able to export globally and invest in global operations.

2. Effects

   • Increased dependency of economies on the output of other economies
     • BMW - a recession would affect german as the cars are bought by people around the world. If there was a rescession in the UK then the demand for German Cars would decrease
   • Greater Consumer Choice
     • There is a better selection of goods as globalisation has made it possible for goods to become more widely avaliable
   • Lower prices through specialisation and comparative advantage
     • Countries can produce at a lower oppurtunity cost which reduces prices of goods that can be traded
   • Increased environmental destruction and other negative externalities
     • increase in number of MNC's can lead o polution, destruction of land to build a new factory
   • Investments in MNC's
     • Job creation or exploitation? Apple produce in china as cheap labour which could take advantage.
       • Example - Cobalt mines in congo where labourers treated badly
   • Increased profits for multinationals
     • The source of cheap labour means bigger profits

3. The interdependence of international economies, cultures, and society's.