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 economic effects of globalisation?

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. Globalisation spreads technology and knowledge internationally, boosting productivity. However, it can increase income inequality within countries as some workers and regions benefit more than others. Globalisation may also increase economic volatility as countries become more exposed to global economic shocks. Overall, globalisation creates winners and losers, requiring government policies to manage adjustment costs.

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 corporations (MNCs) are major drivers of globalisation by integrating production across countries through global value chains. MNCs locate different production stages in different countries based on comparative advantage, creating complex international supply chains. They facilitate international transfer of technology, management practices, and capital. MNCs account for over two-thirds of global trade (including intra-firm trade between subsidiaries) and are responsible for most foreign direct investment flows.