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  2.  
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  5. Macro Economics
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  7. Unit 7 International Economy

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Summary Globalisation

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Provides the content required for A-Level Economics (AQA). Follows the specification and was compiled using class notes, an AQA textbook, revision guide and content from youtube teachers. Written by a student predicted an A*. Also contains content from PMT notes.

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  • August 8, 2023
  • 6
  • 2022/2023
  • Summary

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GLOBALISATION
Definition: Globalisation describes a process by which national and regional economies,
societies and cultures have been integrated and independent…through the global network
of trade, communication, immigration and transportation

The causes of globalisation
1. International trade
a. Trade in goods
i. Developing countries have acquired the capital and knowledge to
manufacture goods.
ii. The efficient forms of transport make it easier and cheaper to transfer
goods across international borders.
iii. Some developing countries have the cost advantage of cheaper
labour, so MNCs move their production abroad
iv. This causes developed countries to trade with these developing
countries, so they can access the same manufactured goods.
b. Trade in services
i. For example, the trade of tourism, call centre services, and software
production (particularly from India) has increased from developing
countries to developed countries.
c. Trade liberalisation
i. The growing strength of and influence of organisations such as the
World Trade Organisation (WTO) which advocates free trade, has
contributed to the decline in trade barriers such as tariffs and quotas
2. International financial flows
a. For example, the flow of capital and FDI across international borders has
increased.
b. China and Malaysia have financed their growth with capital flows.
c. Also, the foreign ownership of firms has increased. There has been more
investment in factories abroad.
d. The removal of capital controls has facilitated this increase.

3. Political, legal and economic change
a. Several factors have led to increased mobility of capital which has led to
increased international investment
b. Political changes:
i. Include the adoption of policies in some countries such as China’s
adoption of capitalism/ western policies, trade liberalisation etc
ii. Peace treaties emerging from political alliances
iii. However it also includes political tensions with other countries
c. Legal barriers have been reduced:
i. Trade liberalisation, reduction of protectionist measures
ii. Relaxation on the rules of the movement of capital, foreign
investment and foreign ownership of companies
d. Financial systems
i. Growth and liberalisation of international banking rules and financial
systems

, 4. Demographic change, especially migration
a. There has been an increase in the world population
b. An increase in living standards, drives demand for products and services
c. Migration: estimated 200 million migrants in the world today, mainly moving
from developing to developed countries
5. Communications and IT
a. The spread of IT has resulted in it becoming easier and cheaper to
communicate, which has led to the world being more interconnected.
b. There are better transport links and the transfer of information has been
made easier. This is sometimes referred to as the ‘death of distance’.
6. Transportation and containerisation
a. Global transport links have become more extensive and quicker
i. Improvements in and the extent of air travel for both passengers and
freight
ii. Transport costs have fallen as aircrafts have become more efficient
b. Containerisation has led to it becoming cheaper to ship goods around the
world
c. This causes prices to fall, which helps make the market more competitive
i. Containerisation means that goods are distributed in standard size
containers, so it is easier to load and cheaper to distribute using rail
and sea transport
ii. This helps to meet world demand
iii. Cargo can be moved twenty times as fast as before, economies of
scale can be exploited and less labour is required
d. However it is mainly MNC’s which have been able to exploit this, and it could
result in some structural unemployment
7. Growth of MNCs (multinational corporations)
a. MNCs are organisations which own or control the production of goods and
services in multiple countries
b. They have used marketing to become global, and by growing, they have been
able to take advantage of economies of scale, such as risk-bearing economies
of scale
c. The spread of technological knowledge and economies of scale has resulted
in lower costs of production.

Characteristics of globalisation
The characteristics of globalisation are in many cases the same factors that have caused it
 Increased international trade and the reduction of trade barriers (protectionism)
 Increased mobility of capital
 Increased mobility of labour (through migration)
 Growing power of MNCs and global brands

Consequences of globalisation

Benefits Drawbacks
Developing 1. Economic growth 1. Consequences of rapid
countries 2. Shared knowledge and economic growth- inequality,

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