Globalisation (AQA A Level Economics)
Revision Note
Written by: Lorraine
Reviewed by: Steve Vorster
The Causes of Globalisation
Globalisation refers to the increasing interdependence of world economies as a result of the growing scale of cross-border trade of commodities and services, flow of international capital and wide and rapid spread of technologies
In 2000, the value of global trade was approximately $6.45 trillion. By 2020, this figure was at $19 trillion
Numerous factors have contributed to the rapid increase in the pace of globalisation but perhaps two of the most significant are the improvements in containerised shipping and the innovation in communication technology
Causes of Globalisation
Cause | Explanation |
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Economies of scale |
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Technology |
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The growth of the WTO |
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Multinational corporations |
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Geopolitical changes |
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Deregulation |
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The Main Characteristics of Globalisation
Globalisation has been increasing for thousands of years - it is not a new phenomenon
Improvements in technology and the speed of global connections have exponentially increased the level of interdependence between nations in the past 50 years
Consumers now source products globally, recognising global brands wherever they travel
The Four Main Characteristics of Globalisation
Increasing foreign ownership of companies | Increasing movement of labour & technology across borders |
Free trade in goods/services | Easy flows of capital (finance) across borders |
The Consequences of Globalisation
Both less-developed and more-developed economies have benefited from globalisation
As firms grow in size, they benefit from economies of scale, causing costs to fall and consumers benefit in the form of lower prices
However, tax avoidance has become easier for global firms as they often exploit loopholes across different countries
Consequences of globalisation for less-economically developed countries
Reduction in absolute poverty: Globalisation facilitates the flow of taxes from multinational corporations (MNC's) to host countries, enabling investment in vital public services such as healthcare, education, and infrastructure. This improves economic development
Employment opportunities: Increased involvement in global markets can generate jobs and higher incomes, potentially triggering a multiplier effect that stimulates overall economic growth. However, concerns arise regarding MNCs' exploitation of low-wage labour and poor working conditions in some instances, such as sweatshops
Depletion of natural resources: Some MNC's may exploit legal loopholes like transfer pricing and engage in corrupt practices, leading to the depletion of natural resources in developing countries. This phenomenon has been likened to a form of 'new colonialism'
Increased power of monopolies: Large firms can dictate prices and production levels across various regions. They may manipulate governments and gain access to raw materials through bribery and corruption
Consequences of globalisation for more-economically developed countries
Increased trade: Trade favours more economically developed countries. They export more manufactured goods at much higher prices and import cheaper raw materials from poorer countries
Increased capital flow: The profits earned by MNCs are often repatriated to their home country
The Role of Multinational Corporations in Globalisation
Multinational Corporation (MNCs) is a company that has business operations in at least one country other than its home country
E.g. Starbucks headquarters are in Washington, USA but they have 32,000 stores in 80 countries
The Role of Multinational Corporations in Globalisation
Factor | Explanation |
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Cross-border trade |
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Technology Flow |
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Labour Mobility |
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Capital Flow |
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