Globalisation

Globalisation

1. Definition: The increasing integration of economies internationally

   • Characteristics of Globalisation
     • 1. Free movement of capital and labour across international borders
     • 2. Free trade in G+S between countries
     • 3. Technology and knowledge to be used on an international scale
     • Cultural Globalisation - e.g. spread of things like McDonalds and other brands
     • Political decisions may be joint between countries e.g. EU
     • Increased integration of production - different parts of a product being made elsewhere
     • Increase in foreign ownership of firms - FDI
     • De-industrialisation of developed countries, and industrialisation of developing countries
     • More international division of labour - e.g. firms use developing countries labour due to cheaper costs

2. Causes contributing to Globalisation

   • Trade Liberalisation - Removal/reduction of tariffs and restrictions on international trade (reducing protectionism).
   • World Trade Organisation (WTO) has brought about an increase in global product standards, so consumers have more confidence in imported goods
   • Reduction in real cost and time of transportation means its cheaper to import and export. e.g. due to development of larger cargo ships
   • Improvement in communication such as the internet makes communication for international trade easier and cheaper
   • MNC's and other firms wanting to increase profits may invest in a developing country where labour is cheaper (FDI).
   • Government may provide incentives to try and get foreign firms to invest in their country
   • Growth in international trading blocs
   • More international specialisation - if countries specialise in making the products they're best at making, they will encourage international trade (comparative advantage).
   • Firms expanding overseas to exploit economies of scale

3. Multi-national corporations: Firms that exist in more than one country

   • Factors which affect MNCs to invest:
     • Cheap labour and raw materials
     • Good transport links
     • Access to different markets