Theme 4: Globalisation

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Characteristics of Globalisation

  • Globalisation is the integration of the world's local, regional and national economies into a single, international market.
  • It involves the free trade of goods and services, the free movement of capital and labour and the free interchange of technology and intellectual capital.
  • As Globalisation spreads, there is more trade between nations and more transfers of capital including Foreign Direct Investment.
  • More migration and more countires particpate in global trade, such as China and India.
  • Furthermore, there are higher levels of investment.
  • Countries have become more interdependent.
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Factors contributing to Globalisation in the last

1) TRADE IN GOODS

  • Developing countries have acquiref the capital and knowledge to manufacture goods.
  • Efficient forms of transport, easier and cheaper to transfer goods across international borders.
  • Developing countries have advantage of cheap labour so MNCs take advantage of this.

2) TRADE IN SERVICES

  • For example: trade of tourism, call centre services has increased from developing countries to developed countries.

3) Trade Liberalisation

  • Growing strength and influence of organisations such as WTO, which advocates free trade, has contributed to the decline in trade barriers.

4) MNCs

  • MNCs are organisations which own or control the production of goods and services in multiple countries.
  • MNCs used marketing techniques to become global and by growing, they have been able to take advantage of economies of scale.

5) INTERNATIONAL FINANCIAL FIRMS

  • Flow of capital and FDI across international borders has increased.
  • Foreign ownership of firms has increased, more investment in factories abroad.

6) COMMUNICATIONS AND IT

  • The spread of IT has made it easier and cheaper to communicate, making the world more interconnected.
  • Better transport links and transfer of information.

7) CONTAINERISATION

  • Goods that are distributed in standard sized containers so is easier to load and cheaper to distribute.
  • Cheaper to ship goods across the world so prices fall, making the market more competitive.
  • However, MNCs might exploit this and thus create more profits.
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Impact of globalisation on...

1) INDIVIDUAL COUNTRIES

  • Trade imbalances between countries, for example: the US runs a trade deficit whilst China runs on a surplus.
  • Imbalancres and inqualities.
  • Within individual countries, income and weath inequalities occur if the benefit and costs of globalisation are not spread evenly, e.g: China's rural population compared to the urban population.

2) GOVERNMENTS

  • Some governments might lose sovreignty due to the increase in international treaties.
  • If countries become members of organisations, they will have to abide by their rules.

3) PRODUCERS AND CONSUMERS

  • Consumers and producers can earn benefits of specialisation and economies of scale as firms become larger.
  • Firms operate in more competitve environment, which encourages them to lower their average costs and become more efficient.
  • Producers can also lower their average costs by switching to places with cheap labour.
  • Globalisation = increase in world GDP which increases consumer living standards.

4) WORKERS

  • Workers can take advantage of job opportunities across the globe rather than their home countries.
  • However, there may be structural unemployment, for example: the mining industry in the UK when production moved abroad.
  • When production shifts to lower cost labour countries, may be damaging as the workers may be exploited with bad workings conditions and poor pay.
  • However, could be aruged that better pay than jobs such as agriculture.

5) THE ENVIRONMENT

  • Increased living standards, however this leads to increased pollution as a reuslt of more car usage and industrialisation.
  • Deforestation, water scarcity and land degradation.
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