ibusweek1-3 - LISA YANG IBUS20002 Business in the Global Economy GLOBALIZATION Drivers of globalisation 1 Emergence of supranational institutions at

ibusweek1-3 - LISA YANG IBUS20002 Business in the Global...

This preview shows page 1 - 2 out of 4 pages.

LISA YANG IBUS20002 Business in the Global EconomyGLOBALIZATION Drivers of globalisation 1.Emergence of supranational institutions at regional / global level 2.Liberalisation of trade and foreign investment 3.Technological changes: the world has ‘become smaller’ 4.Mass media e.g. satellite TV and Internet BENEFITS DETRACTORS Efficiency gains Trade enhances division of labour as businesses and countries specialize in areas of comparative advantage Opportunities arise for producers and consumers to reap the benefits of economies of scale Increased competition and reduction in monopoly profits incentivises businesses to seek cost-reducing innovations and improvements in what they sell Economic growth Gains in efficiency should bring about animprovement in economic growth and higher per capita incomesThe OECDGrowth Project found that a 10%-point increase in trade exposure for a country was associated with a 4% rise in income per capita over time Significant progress has been made in China and India and notably in a number of a sub-Saharan African countries whose annual growth of real GDP has often exceeded 10% Underpinning this growth isjob creation, knowledge spillovers and infusion of foreign capital and technology Poverty reduction Every 1% increase in GDP per head reduces poverty by around 1.7% China accounts for 75% of the world’s total decline in extreme poverty over the last 30 years from 84% in 1980 to about 10% now World Bank economists David Dollar and Aart Kraay: since 1980, globalization has contributed to a reduction in poverty and global income inequality. in "globalizing" countries in the developing world, income per person grew three-and-a-half times faster than in "non-globalizing" countries, during the 1990s. In general, they noted, "higher growth rates in globalizing developing Illegal, dangerous and unethical e.g. drugs, human trafficking, organs and counterfeit goods Ease in communication, monitoring and transacting Ease of transit Movement of freight and people Permeability of borders within regional blocs (EU, NAFTA) Growing demand Rising income levels, urbanisation Growing supply Criminal organisations taking advantage of opportunities from trade/FDI; terrorism networks benefiting from transnational drug crime Conflict-affected or fragile countries with weak governance/rule of law are key sources Contagion spread of a crisis from one country to another 1997 Asian Financial Crisis, Subprime mortgage crisis, Greek Bond Crisis and European sovereign debt crisis Financial globalisation not a new phenomenon but today’s depth and breadth are unprecedented Decreasing capital controls by governments and increasing capital mobility given growing participation of more countries Information technology diminishing the importance of geography Countries with weak fundamentals and very open economies are prone to market imperfections and volatile capital flows
Background image
Image of page 2

You've reached the end of your free preview.

Want to read all 4 pages?

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture