Globalisation

A2 text p. 310 – p.320

Lesson Objectives

Define and explain the effects and consequences of Inflation

Assess the impact of FDI and MNCs in the globalisation process

Analyse other major flows of capital

A2 text p. 310 – p.320

A2 text p. 310 – p.320

Characteristics

World’s economies have developed closer links through trade, investment and production.

Manifest itself in two ways;

Global Brands – Big Mac Index Global sourcing – Worldwide Production

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EU

One of many ‘trading blocs’

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Factors promoting globalisation

Reduced protection (WTO) http://news.bbc.co.uk/1/hi/business/4510792.stm

Reduced capital movement restrictions

Developments in ICT

Fall in real transport costs

Liberalisation of domestic markets

A2 text p. 310 – p.320

A2 text p. 310 – p.320

Globalisation

Winners Losers

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Effects of Globalisation

Interdependence Global brandsImproved medical suppliesHigher standard of living???Growth in Inequality Exploitation

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A2 text p. 310 – p.320

Deglobalisation?

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MNCs and FDIs Activity p. 314

Multinational corporation operates in many countries. Coca Cola, Ford, Starbucks

MNCs provide foreign direct investment (FDI) which involves capital flows between countries.

A2 text p. 310 – p.320

A2 text p. 310 – p.320

A2 text p. 310 – p.320

What the maps suggestThese maps suggest growing inflows of foreign direct investment in the 1990s.

In 1970 and 1980, large parts of Africa, Latin America and Asia had zero or small inflows of foreign investment. By 1999 large parts of Asia, Africa and

Latin America, as well as all of North America and large parts of Europe, have FDI inflows greater than 1% of GDP.

This expansion of foreign investment into the global South indicates increasing global economic integration. However, much of this expansion may be due to sale of state enterprises, known as privatization, rather than the setting up of new factories (Sutcliffe 2001: 78). And, FDI is heavily concentrated in only a

few, industrializing nations. In 1997 nearly 71% the foreign direct investment in developing countries (the global South) went to just 9 nations, and of that over

30% was invested in China alone (Todaro, 2000: 578).Whether you see expansion of foreign direct investment as positive or negative

may depend on your ideas about social change (see also "For and Against" button below).

A2 text p. 310 – p.320

A2 text p. 310 – p.320

Articles – Positive or Negative?

http://news.bbc.co.uk/1/hi/business/6599693.stm

http://news.bbc.co.uk/1/hi/business/3846439.stm

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FDI good or bad for China?

Pros Cons

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FDI good or bad for China?

Pros Cons

Injection in Circular Flow MNCs may underpay and use capital intensive

Credit balance of payments (Exports +) Less jobs to tax

More tax revenue Outflow of profits may outweigh positive impact on balance of payments (Net Effect Minus)

Improved productivity Environmental costs!

Technology transfer

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Other Financial Flows

‘Hot Money’ Chasing Interest and Exchange rates Disruptive Short termism

Portfolio Investment Chasing shares and bonds Longer term

Foreign Aid Loans Remittances

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Lesson Objectives

Define and explain the effects and consequences of Inflation

Assess the impact of FDI and MNCs in the globalisation process

Analyse other major flows of capital