Economics A-Level: Unit 4

4.3.1 Causes and effects of globalisation

1 Characteristics of globalisation

  • Globalisation: the process of greater integration and interconnectedness between countries/economies

a) Increase in trade as a proportion of GDP.

  • Growth in trade as a share of globa GDP over the laat 5- years, it has stabilized over the last 20 years; some dips because of 2008,

b) Increase in importance of transnational companies (TNCs) and foreign direct investment (FDI).

  • Switzerland 2.8 billion invested into KZ (fintech), Netherlands 8.3 billion because of oil and gas (SHell);

c) Increase in migration.

  • :abour beocming more geo mobile; migration mroe happening; more peope are leaving Kazakhstam and less are coming in; brain drain

2 Causes of globalisation

a) Factors contributing to increased globalisation in the last 50 years: • trade liberalisation • increased number and size of trading blocs • political change (breakdown of the Soviet system and opening up of China) • reduced cost of transport and communications • increased significance of TNCs.

  • TIPS: Technology, institutions

  • Technology (death of distance): communication costs have fallen significaantly over time; but not the case for all countries because elecitrivy costs + infrastructure; Fintech (Kaspi very new even compared to west);

    • Tenge Project:

    • Policy Trilemma (evaluation): Free cpaital mobility, moentary automonomy, exchange rate management (china - c, US - B)

    • Limitation/evaluation: reshoring - bringing production back home (TNS); nearshoring - bring production to close poltiical ally; (e.g. costs of tranporting by US companies from chian has increased so US comapnies reshoring)

    • Creative distuction: desrtpu certain area of the eovnomy but create more opporunities (thoery is that it has net gain for the economy) (e.g. industrial revolution)

  • Institutions:

    • E.g. WTO, NATO, EU

    1. Rediced barried → lower tarrifs & quotas → goods cheaper to import/export (e.g. WTO

  • .

    • Limitation: Rodrik trilemma - hyper globalization, national soveriengty, democratic politics

    • Far right parties in the EU are becoming more popular → popularity of institutions

    • Evaluation points: US/China trade war

b) FDI by TNCs: • reasons for FDI • the impact of FDI on recipient countries.

3 Effects of globalisation

a) Possible benefits of globalisation: • increased economic growth • increased tax revenue • economies of scale • lower prices and higher consumer surplus • more choice • higher living standards.

b) Possible costs of globalisation: • displaced workers • exploitation of workers • environmental impact of increased trade • loss of tax revenue from transfer pricing • increased income inequality within countries • the influence of TNCs on domestic economic policy.

Free notes: