Globalisation

What is globalisation?

Globalisation is the expansion of world trade of goods and services that leads to countries being more interdependent with eachother

What is interdpendence?

Countries relying on eachother for goods, services, and raw materials

What are the 5 causes for globalisation?

1. Global liberalisation

2. Rise in trading blocs

3. Rise of multinational corporations

4. Rise of technology

5. A greater increase in the mobility of labour and capital

What is global liberalisation and how does this cause globalisation?

1. A decrease in the number of trade barriers as they are replaced with free trade agreements.

2. An example is the World Trade Organisation(WTO). The WTO allows countries to trade with eachother without experiencing tariffs, quotas, and embargos,thus, allowing countries to be more integrated with eachother, thereby increasing globalisation.

What are trading blocs and how do they cause globalisation?

1. Trading blocs occur when countries become increasingly integrated with eachother.

2. This is when countries that regulary trade with eachother sign memberships and agreements, allowing them to trade freely without paying any tariffs.

What are examples of trading blocs?

1. The European Union has deepened because of countries becoming increasingly integrated with eachother

2. NAFTA, North American Free Trade Agreement, is an example of a trading bloc

What are multinational corporations and how have they caused globalisation?

1. Multinational corporations are businesses that are based across different countries and continents.

2. The dispersion of business activity across the world results in more integeration between countries

How has a rise in technology increased globalisation

1. A rise in technology has allowed countries to be more integrated with eachother.

2. This is because a rise in technology allowed transportation to develop, allowing goods and services to be transported across countries and continents more freely

3. A rise in technology has also allowed businesses to expand and operate globally due to the development of software technology.

4. The introduction of the internet has allowed workers of businesses ,who live in different parts of the world, to connect and communicate with eachother more freely.

Provide examples of how the mobility of labour has been made possible

1. The Customs Union of the European Union(EU) has allowed the free movement of goods, services, labour, and capital between EU countries.

2. In the 1950s, the UK Government encouraged workers from former colonies- Caribbean, India, Pakistan, and Bangladesh- to move to the UK for job opportunities in transport and industry, regarding textile and steel.

How has the mobility of labour and capital increased globalisation?

The movement of labour and capital across countries has allowed them to be more integrated with eachother, thereby increasing globalisation

What are the advantages of globalisation?

1. Lower prices for consumers

2. Higher quality of goods and services, and a greater choice of products, for consumers

3. Lower unemployment

4. Multinational companies benefiting from economies of scale

5. Increased mobility of labour and capital

Explain how consumers are exposed to lower prices through globalisation

1. There is greater competition between multinational companies because they are selling their products to many countries

2. This means these businesses have to maintain lower costs of production to remain in competition for longer periods of time

3. As these firms experience lower costs of production, they can sell their goods and services at lower prices to consumers because they can still maintain profit. This is because profit = revenue - costs

Explain how consumers are exposed to a higher quality of goods and services through globalisation

1. Through globalisation, countries become more integrated and interdependent

2. This, therefore, allows countries to import goods and services more easily, thereby exposing consumers to higher quality of foreign products.

3. Moreover, this has also allowed consumers to have a greater choice of products because the marginal propensity to import foreign goods and services has become more viable

Explain how lower unemployment is achieved through globalisation

1. Multinational companies would have a larger market that they are producing to because they are based across different countries and continents.

2. This means that they have a greater consumer demand, resulting in them producing a greater output.

3. This encourages these businesses need to hire more workers to increase their productive potential to complete a greater number of sales.

How is lower unemployment a benefit to workers?

1. This allows workers to have a greater level of displosable income

2. This increases their spending power, allowing them to increase their expenditure on goods and services

Explain how multinational companies experience economies of scale through globalisation

1. Multinational companies would have a greater consumer demand because they are operating globally, across different countries and continents.

2. This means that these firms have to produce a greater number of goods and services, forcing them to work more cost-effectively. This will mean that their total costs of production will increase, however, these high costs will spread out over the large scale of ouput, allowing their total average costs to decrease.

How do firms and consumers benefit from economies of scale?

1. Firms will experience lower (total) average costs of production.

2. This will allow firms to retain more profits. Firms can use these profits to invest in research and development, allowing them to produce higher quality goods and services for consumers to purchase.

Explain how the increased mobility of labour and capital is achieved through globalisation

1. Globalisation has allowed countries to become more integrated and interdependent with eachother through trade blocs and global liberalisation(for example).

2. This has allowed workers to move between different countries, which is advantageous for them because they will have an opportunity to live in these nations.

3. Firms can also move between different countries. This is positive for a nation because it can attract a particular multinational company, allowing this firm to set up in the country, increasing employment. This is a form of foreign direct investment

Provide an example of how the mobility of labour and capital has increased

The Treaty of Rome was signed by 6 European countries (in 1957) that allowed the free movement of goods, services, labour, and capital between these 6 European nations.

What are the disadvantages of globalisation?

1. Rising inequality

2. Structural unemployment

3. Environmental impacts

4. Trade imbalance

5. Cultural diversity

Explain how rising inequality has been caused through globalisation

1. Due to the exponential rise of globalisation, since the 1990s and 1980s, the income disparity between the poor and the rich widened.

2. This is because the profits gained by globalisation has not been distributed evenly across the world population.

3. This might be due to the fact that the representatives of multinational companies own a larger proportion of the factors of production, allowing them to gain a greater number of profits through globalisation.

4. Statistically, the top 1% of earners in the world own 55% of the world's wealth

Explain how structural unemployment has occured through globalisation

1. In the economically developed countries, globalisation has caused high levels of structural unemployment.

2. This is because the national mininum wage in these developed countries, such as the UK, is higher than less developed countries.

3. This has caused the secondary sectors in these developed countries to decline due to the higher costs of production as firms have to pay higher wage costs

Explain how environmental impacts have been caused through globalisation

1. Politicians and leaders of nations have been more preoccupied on economic growth than the environmental impacts that result from it.

2. This is because these officials have allowed multinational companies to enter their country, through globalisation, to increase employment rates- a form of foreign direct investment(FDI).

3. However, these firms have consumed a larger quanity of raw materials, whilst also causing air, noise, and plastic pollution through their production. Moreoever, multinational companies have been accused of damaging the environment by releasing toxic waste into seas and oceans.

4. Furthermore, as multinational companies continue to develop further in industrial activity, larger volumes of greenhouse gases like carbon dioxide, methane, and water vapour are being released into the atmosphere, stimulating the enhanced greenhouse effect.

5. Ultimately, globalisation has caused environmental impacts to the globe through increased economic growth. This is a negative externality to the world population.

Explain how trade imbalance is caused through globalisation

1. The more economically developed countries, like China, depend on exports for their economic growth, through trading.

2. However, if this avenue of economic growth is disrupted due to external macroeconomic shocks, such as the financial crisis of 2008, these developed countries will suffer economic decline and recessions that follow.

3. This is due to countries being more integrated and interdependent with eachother, causing these nations to be more vulnerable to the effects of external macroeconomic shocks.

Explain how the lack of cultural diversity is caused by globalisation

1. Through globalisation, countries have become more intergrated and interdependent with eachother.

2. This has resulted in certain nations trying to mimic and copy the cultures of other countries, reducing their cultural diversity and uniqueness.

3. Moreover, through globalisation, more workers were able to travel across different countries and continents, which has stimulted electoral pushback in various countries, such as the election of Donald J Trump in 2016 as the 45th President of the USA.