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Globalization

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Jasprit Rajbans

on 3 July 2013

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Transcript of Globalization

Globalization
The costs of Globalisation
Though globalization may offer benefits such as economic growth and employment, the costs of this process are vast and very daunting.
What is Globalization?
Globalization, from an economic perspective, can be defined as the ever increasing
integration
of the world's local, regional and national economies into a single international market.
By Jasprit & Bethan
Interdependence
As countries are increasingly
dependent on each other
, a
negative economic shock
in one country can quickly spread to other countries.
For example, the credit crunch (2008) which helped fuel a severe downturn in the
global economy
.
Over-specialisation
, such as being over-reliant on producing a
limited range of goods
for the global market, is a further risk associated with globalisation.
A sudden
downturn
in world
demand
for one of these products can plunge an economy into a
recession
.

Inequality and Unemployment
Case study: Coca-Cola
Globalisation,
trans-national company
case study:
Coca-Cola
Coca-Cola is
sold
in
over 200
countries.
Their headquarters are situated in
Atlanta
, Georgia, USA
70%
of its sales are generated
outside of the USA
.
Coca Cola is
manufactured
in
44
different countries.


Environmental Costs
One problem of globalization is that it has increased the use of
non renewable resources
.
It has also contributed to increased
pollution
and
global warming
.
Firms can also
outsource production
to where
environmental standards
are
less strict
.
However, arguably the problem is not so much globalization as a failure to set satisfactory environmental standards.
Inequality & Poverty
Over-standardisation
Tax Competition and Tax avoidance
Multinational companies such as Amazon, Starbucks and Google, can set up offices in countries with low rates of
corporation tax
such as Ireland and Luxembourg, to
cut their production costs
.
This means they pay very
little tax
in the countries where they do most of their business.
Subsequently
governments
have to
increase

other taxes
such as VAT and income tax.
It is also seen as
unfair competition
for
domestic firms
who don’t use same
tax avoidance
measures.
The greater
mobility of capital
, means that countries have sought to encourage
inward investment
by offering the lowest corporation tax.

Income Distribution

Political:
Producing more food may lead to
tension over water
: As lots of water is needed to produce lots of food, some countries with a low rainfall, e.g. Africa face water shortages as food demand increases.
This may cause
tension between countrie
s that use the
same water source
. E.g. Sudan, Egypt and Ethiopia all rely on their water from the River Nile.

Prohibition of strikes:
Some newly industrialized countries do not allow employees to strike over things like pay and working conditions.
Tax Incentives & Tax Free Zones:
Some Newly Industrialized Countries’s offer a tax reduction to TNC’s who move their manufacturing to their countries.

Globalisation and food supply
What was wrong?
Poor working conditions:
Working conditions in the bottling firms can be very harsh and those in tropical countries are without air conditioning facilities.
Cheap labour:
The workers are paid $10 per day.
Environmental costs:
In March 2004 one of Coca-Cola’s LEDC Hosts, faced a depletion of the local ground water table due to the utilisation of natural water by the company. This posed a threat to communities and will increase the chances of drought.
Coca-Cola is a very
powerful
company. They could very easily leave a country with high unemployment: As Coca Cola is a very powerful company, if they are not happy with the economic conditions in the host company they will
pull out
and seek another,
more profitable
country.
When Coca cola do this suddenly, Thousands are left unemployed.
Less Cultural Diversity
Free trade?
Developing countries often
struggle to compete
with developed countries, therefore it is argued free trade
benefits developed

countries
more.
Some countries may need
protection
from free trade (protectionism) in order to
develop
.
By opening them up to free trade due to globalization they may not be in a position to complete and would thus suffer.
Brain drain
Globalisation enables workers to move more
freely
.
Therefore, some countries find it
difficult
to hold onto their
best skilled workers
, who are attracted by higher wages elsewhere.
De-industrialization
As well as globalisation leading to a
loss of jobs
in
domestic markets
Globalisation can also increase the pace of
de-industrialisation
, which is the slow erosion of an economy's
manufacturing base
.
This is because it is much
cheaper
to
manufacture
product in
less developed
countries.
Economic:
Using Chemicals may lead to Farmers getting into
debt
: Using Chemicals to help produce lots of food can be very expensive and might cause Farmers to get in debt.
Local Farmers
may lose out: Buying imported food does not support local farmers, who may find it hard to make a living in a different industry.
Globalisation has led to increased economic and
cultural dominance
.
Though globalisation may have provided more options for some, there is arguably
less cultural diversity
as countries such as America
influence
other countries through the wide scale
provision
of their
western products
.
The
over-standardisation
of products through
global branding
is a common criticism of globalisation.
For example, the majority of the world’s computers use Microsoft’s Windows operating system. The standardising of computer operating systems and platforms creates considerable benefits,
but this leads to a
lack of product diversit
y, as well as presenting
barriers to entry
to
small, local, producers
.
Jobs may be lost because of the
structural changes
arising from globalisation.
Structural changes may lead to
structural unemployment
and may also widen the
gap
between
rich and poor
within a country.
Globalisation generates winners and losers, and for this reason it is likely to
increase inequality
, as
richer nations benefit
more than poorer ones.
There is rising
wage inequalities
in
developed
and
developing nations
.
This is mainly due to the rising demand for
higher skilled labour
in society compared to the lesser demand for lower skilled labour.
This means, more of the workers with a lower level of educations are unemployed.
Another factor which may have influenced inequalities is increased trade with developing countries.
This has resulted in an
immigration of lower skilled labour
into developed countries and therefore, a
widening wage gap
.
Small businesses and
LEDCs
are not capable of updating their
technology
as often as the larger, wealthier countries.
They are
unable to compete
with
multinational firms
and
wealthy nations
, and are thus forced to do business locally, not growing and reaching their full potential.
Rich countries have a much greater access to the
internet
- given that much wealth creation is dependent on the ready availability of
information
, the
poorest developing counties
are at a severe
disadvantage
.
The wealthy companies and countries are able to sell their goods and services to a
global market
, while the poorer countries and businesses are
limited
to their
local markets
.
In the past fifty years, global capitalism has raised the
living standards
of more people higher and faster than the previous five hundred years. It has also driven the
poor further into poverty
.

Foreign multinational companies
are setting up their businesses in developing countries which
takes away business
from the
domestic competitors
.
This drives local companies out of business and people become poorer.
Dumping and foreign aid
- weakens a developing counties' market system not allowing them to
stabilize
themselves, by
flooding
the market the domestic producers are driven out.

People have started to demand a
range of food
all year round, regardless of growing season, which has led to the globalisation of the
food industry
.

Impacts of demanding and producing more food:
Environmental:
Food miles
leads to
Global Warming
: Transporting food by plane and vans produces carbon dioxide. The more food miles travelled the more carbon dioxide produced. The carbon dioxide adds to Global Warming
Environmental side effects
such as
landslides
: To produce more food, some farmers use marginal land, e.g. steep hillsides. The soil in marginal land is thin and is not very resistant to erosion and it is very quickly eroded by farming, which degrades the environment.
Social:
Farmers are
dependent
on prices in the Trade country for their source of
income
: If food prices go down in the Trade Country (e.g. UK), then farmers (e.g. in Egypt) might not earn enough money to make a
living
.

Sources:
A Level Economics for Edexcel: A Level. Student Book

BBC bitesize:
http://www.bbc.co.uk/schools/gcsebitesize/geography/globalisation/globalisation_rev1.shtml

Online revision notes:
http://www.geographybase.co.uk/6%20Globalisation%20Revision%20Notes.pdf

Wiki answers:
http://wiki.answers.com/Q/What_are_the_benefits_and_costs_of_globalization

The guardian:
http://www.guardian.co.uk/commentisfree/2012/jan/29/observer-editorial-global-capitalism-bad

Costs and Benefits of Globalisation - Economics Blog:
http://www.economicshelp.org/blog/81/trade/costs-and-benefits-of-globalisation/

Economics online:
http://www.economicsonline.co.uk/Global_economics/Globalisation_introduction.html

Full transcript