4.1.1 Pros and cons of Globalisation

Created by: mayarose26
Created on: 17-05-17 12:09


	4.1.1 Pros and cons of Globalisation
	Advantages Firms gain access to cheaper raw materials -> lowers CoP Consumers gain access to cheaper goods/services Relocation of MNCs to emerging economies -> provides jobs Efficiency gains (PE from specialisation and AE from goods being avaiable to more people) Econ. growth in LEDCs from FDI (creates jobs=> outward PPF shift and also leads to an increase in national income => increase in tax revenue => increase in gov spending => increase in AD => growth) FDI permits net investment in capital stock Infrastructure improvement => greater quality of living Higher profits for firms FDI can plug the savings gap Technology transfer from LEDCs to MEDCs => leapfrogging	Disadvantages Environmental concerns/ '******' of natural resources Possible trade wars (Infant Industry Argument) Structural unemployment Dutch disease DEoS Overeliance on FDI MNCs=> global loss of cultural diversity MNCs create barriers to entry MNCs are sometimes more powerful than governments Tax rates pushed down to attract FDI => lower tax revenue MNCs often repatriate profits => minimising multiplier effect Property rights of people in LEDCs may be transgressed by MNCs MNCs may employ workers from home country for high-skilled jobs Effect on inequality?
	Evaluation In terms of long-term development for emerging economies. globalisation has mostly a positive impact, as FDI, which can plug the savings gap, allows these countries to accumulate the capital stock required to increase output and improve production processes. Globalisation allows nations to specialise where they have comparative advantage, thus increasing choice for consumers worldwide. However, it can become problematic when economies rely solely on exports for growth, as an increase in global protectionism and trade wars (which is argued for by the Infant Industry Argument), would lead to a rapid decline in growth for those export-led economies.

4.1.1 Pros and cons of Globalisation

Advantages

Firms gain access to cheaper raw materials -> lowers CoP
Consumers gain access to cheaper goods/services
Relocation of MNCs to emerging economies -> provides jobs
Efficiency gains (PE from specialisation and AE from goods being avaiable to more people)
Econ. growth in LEDCs from FDI (creates jobs=> outward PPF shift and also leads to an increase in national income => increase in tax revenue => increase in gov spending => increase in AD => growth)
FDI permits net investment in capital stock
Infrastructure improvement => greater quality of living
Higher profits for firms
FDI can plug the savings gap
Technology transfer from LEDCs to MEDCs => leapfrogging

Disadvantages

Environmental concerns/ '******' of natural resources
Possible trade wars (Infant Industry Argument)
Structural unemployment
Dutch disease
DEoS
Overeliance on FDI
MNCs=> global loss of cultural diversity
MNCs create barriers to entry
MNCs are sometimes more powerful than governments
Tax rates pushed down to attract FDI => lower tax revenue
MNCs often repatriate profits => minimising multiplier effect
Property rights of people in LEDCs may be transgressed by MNCs
MNCs may employ workers from home country for high-skilled jobs
Effect on inequality?

Evaluation

In terms of long-term development for emerging economies. globalisation has mostly a positive impact, as FDI, which can plug the savings gap, allows these countries to accumulate the capital stock required to increase output and improve production processes. Globalisation allows nations to specialise where they have comparative advantage, thus increasing choice for consumers worldwide. However, it can become problematic when economies rely solely on exports for growth, as an increase in global protectionism and trade wars (which is argued for by the Infant Industry Argument), would lead to a rapid decline in growth for those export-led economies.

Get Revising

4.1.1 Pros and cons of Globalisation