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Globalisation. - Coggle Diagram
Globalisation.
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Impact on Consumers.
Incomes- Consumers can only buy goods and services if they have incomes. Overall, globalisation has raised incomes around the world. Consumers are therefore able to buy more goods. However not every consumer has gained. A worker is south wales who has lost his job because production has moved to China is likely to be worse off.
Prices- The relative price of goods and services is changing. Globalisation is leading to a fall in price of some goods and services because production is being switched from high cost locations to low cost locations.
Consumer choice- The availability of goods and services has considerably increased with globalisation leading to greater consumer choice.
Causes of Globalisation.
Globalisation is caused by a complex mix of factors, none of which on their own can account for the process of globalisation. Many of the current factors are interlinked. some of these factors are:
Trade in goods- For rich, developed countries, goods are increasingly being manufactured abroad, many for the first time in developing countries such as China and India. This trade is occurring because of developing countries are acquiring the capital equipment and the Know-how to produce manufactured goods; There are efficient modes of transport to get goods to markets; and developing countries have a cost advantage in the form of very cheap labour.
Trade in services- Trade in services is growing. For instance, growth in tourism is taking large numbers of visitors abroad. Call centres for customers in developed countries are being located in developing countries. India has become a world leader in writing software and then selling these skills to companies in developed countries.
Trade liberalisation- Trade in goods and services is growing partly because of the trade liberalisation. In the 1930's, international trade collapsed as the world went intro the great depression and individual countries misguidedly tried to boost domestic demand by adopting fierce protectionist policies.
Multinational Companies- Multinational Companies have grown in number and size. In some industries, like car manufacturing or the oil industry, this is because only large multinational companies have the economies of scale and technological knowledge to make products that are both cheap and technologically advanced.
Foreign ownership of firms- Foreign ownership of ships is increasing. Many large multinational companies, for example, have invested in factories and companies in China.
Communications and IT- Developments in communications and IT have shrunk the time needed for economic agents to communicate with each other. In industries such as software production, programmers are effectively no matter where they are located.
Impact on workers.
Employment and unemployment- Globalisation has seen both winners and losers in terms of employment and unemployment. For example, the transfer of much manufacturing from western Europe and the USA to countries such as China and Poland has led to large scale losses of jobs in these sectors in the developed world whilst there has been an increase in employment in the developing countries.
Migration- Increased migration is a characteristic of globalisation. Many migrants are forced to move from their homes because of war and persecution. However many economic migrants, moving because they think they can enjoy a better standard of living for themselves and their families in a new country.
Wages- In a perfect labour market where all the workers are homogeneous, all workers will earn the same wage rate. Globalisation is shifting workers to different locations around the world.
Multinationals- Multinationals create jobs wherever they set up operations. They are sometimes criticised for only creating low level jobs for local employees whilst importing more highly skilled labour from abroad.
Impact on Producers-
Specialisation and economic dependency- Globalisation comes about through increased specialisation and trade. Economic agents, including firms, are increasingly dependent upon each other.
Costs and markets- Globalisation allows firms to source products from a wider variety of countries and firms. The wider the supplier network, the lower is likely to be the price at which a firm can buy.
Footloose capitalism- Firms which operate in several countries have the power to move production from country to country, creating and destroying jobs and prosperity in their wake.
Tax avoidance- Firms which operate in several countries have the possibility to engage in tax avoidance.