Globalisation — Flashcards & Quiz

Q1: What is globalisation and what are its main causes?

Globalisation is the increasing integration and interdependence of national economies through trade, investment, technology, and migration. Main causes include advances in transport technology (containerisation, air freight), information and communication technology (internet, mobile), reduction in trade barriers (WTO, FTAs), and growth of multinational corporations. Financial deregulation has also enabled rapid international capital flows. Globalisation has accelerated significantly since the 1980s.

Q2: What are the main features of world trade in goods and services?

Trade in goods (merchandise trade) includes manufactured goods, commodities such as minerals and fuels, and agricultural products; manufactures make up most of merchandise trade. Trade in services includes tourism, education, transport, finance and digital services, and is the fastest-growing part of world trade, at roughly a fifth to a quarter of the total. Trade has grown faster than world output for most of the period since the 1980s, so the ratio of world trade to GWP has risen — a key indicator of global integration — although it has levelled off since the 2008 global financial crisis.

Q3: How are economies classified by development, and why do income and wealth differ between nations?

Advanced economies (e.g. Australia, the US, Japan) have high incomes, large service sectors and high HDI scores. Emerging economies (e.g. China, India, Indonesia, Brazil) are industrialising rapidly and becoming more integrated into world markets. Developing economies (e.g. many in sub-Saharan Africa) have low incomes and often depend on agriculture or commodities. Reasons for differences: levels of physical and human capital, technology, institutions and governance, political stability, geography and resources, population growth, access to markets, and historical factors such as colonisation. Global income and wealth are very unequal: the World Inequality Report 2022 estimated that the richest 10% of the world’s population own about three-quarters of global wealth.

Q4: What are the effects of globalisation on growth, inequality and the environment?

Globalisation increases international trade and investment flows, raising global economic growth and living standards. It enables countries to specialise according to comparative advantage, improving allocative efficiency, and spreads technology and knowledge. However, it can increase income inequality within countries as some workers and regions benefit more than others, and it exposes economies to global shocks. Environmentally, faster growth increases resource use, pollution and greenhouse gas emissions, and production may shift to countries with weaker environmental standards; on the other hand, trade spreads cleaner technologies such as solar panels.

Q1: Globalisation has been driven primarily by technological advances in transport, communications, and information technology.

Answer: TRUE

Technological advances are the primary driver of globalisation. Containerisation revolutionised shipping costs, air freight enabled rapid transport, and the internet enabled instant communication and e-commerce. These technologies drastically reduced the cost and time of international transactions. Policy changes (trade liberalisation, financial deregulation) and institutional developments (WTO, FTAs) have also contributed, but technology made globalisation economically feasible.

Q2: Globalisation has reduced income inequality both between countries and within countries.

Answer: FALSE

Globalisation has reduced income inequality between countries by enabling developing countries like China and India to grow rapidly and catch up with developed countries. However, globalisation has increased income inequality within many countries as highly skilled workers and capital owners benefit more than low-skilled workers facing competition from imports. Within-country inequality has risen in both developed countries (manufacturing job losses) and developing countries (urban-rural divides).

Q3: Multinational corporations operating in multiple countries contribute to increased global economic integration.

Answer: TRUE

Multinational (transnational) corporations are major drivers of globalisation by integrating production across countries through global value chains. They locate different production stages in different countries based on comparative advantage, transfer technology, management practices and capital internationally, and are responsible for most foreign direct investment flows.