Saturday, 5 March 2011


In these video I discuss the factors that contribute to globalisation e.g. transport costs, advantages and disadvantages of globalisation and I touch on the fact that globalisation is having serious environmental implications.  Please find the transcript below.

Globalisation is the increasing integration of national economies.
Factors that cause globalisation
  • Faster communication and increased amounts of knowledge being shared through improvements in technology
  • International financial markets and free free of capital - this means that money particularly hot money and capital is able to shift between countries by the click of the money and this has encouraged borrowing and lending between countries.
  • Free-market ideology and trade liberalization has meant that former communist countries such as Russia have helped the world become a much more integrated trade system.
  • Over the last 50 years there has been a reduction in trade barriers encouraged by the WTO
  • Trade blocs such as EU, NAFTA, ASEAN etc have formed
  • Cheaper transport costs - there has been a decrease in real terms since 1980
  • Availability of different currencies
  • TNCs - they have helped integrate the world
  • Increased knowledge and information through media
  • Increased amount of demand for cultural products and firms by definition are willing to take advantage of this.
Costs and Benefits of globalisation 

Poverty - number of African countries have seen their debt grow and poverty rise
Increased world output and wealth - specialisation, division of labour, absolute and comparative advantage
Economic shock spreads quicker
Increased consumer welfare
Externalities - pollution etc and comparative advantage means manufactured goods are usually produced in countries with low environmental standards
Government roles are minimized - free market ideology 
Poor countries may have less power than TNCs giving them a chance to exploit them
Peace - less chance of war?
The gap between the richest and poorest is widened 
Although it may create inequalities due to the greater output in the longer run everyone is better off.
Job losses in countries with higher costs of labour

In the 21st century none of the costs of global trading and globalisation appear to be even more worrying that the environmental degradation this can lead to. Our constant traveling and transportation of goods leads to externalities such as pollution which in turn causes acid rain, changes the salinity of waters etc. The increased number of products may reduce price but has lead to litter problems, there is not enough land to convert into landfills and even the ocean has been a victim of this - we have even named an area of the ocean which is so bad;y affected by this - the Great Pacific Garbage Patch. Why should economist care?
At the end of the day the environment is a cost which costs firms and consumers even if we exclude costs such as carbon emissions. Furthermore, without a sustainable environment all that globalisation and economics works for (a perfect world where the gap between the rich and poor is minimal) is rubbish as the environment provides a foundation for economics whether it be through resources or consumers.

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