Political and economic decisions: acceleration of globalisation

🔗 International, political and economic organisations and national governments have promoted policies that have helped globalisation take place

International and Global Organisations

International and Global Organisations

	International Monetary Fund (IMF)	World Bank	The World Trade Organization (WTO)
What they do		Based in DC Lends money on a global scale. Also gives direct grants to developing countries	Based in Switzerland
Role in globalisation	Promotes global economic & financial stability Encourages developing countries to accept FDI and open up their economies to free trade	Lends money to the developing world to fund economic development & ↓ poverty Has helped developing countries develop links in the global economy	Reduces trade barriers between countries Facilitates free trade through a series of global agreements
Evaluation	The rules & regulations are seen as controversial ↳ Especially in relation to the financial conditions imposed on the borrowing governments	Distributed $64 bn in loans and grants But WB also imposes strict conditions on its loans and grants All of the WB presidents have been US citizens	Failed to stop the world's richest nations from subsidising their own food producers ↳ This protectionism is harmful to farmers in developing countries who want to trade on a level playing field

National Governments

Trade Blocs

🔗 Governments have also promoted the growth of trade blocs

To trade freely with neighbours or more distant allies, agreements have been drawn up allowing state boundaries to be crossed freely by flows of goods and money

EU	A trade bloc with intergovernmental agreement on trade within the group of 28 countries and common tariffs on goods from outside the bloc. ↳ ↑ political and economic interactions within the bloc and also ↑ the global power of the bloc
ASEAN	An agreement between 10 SE Asian countries to link their production and markets to create equal economic development and a competitive region integrated with the global economy. ↳ Part of the agreement is for easy flows of people, goods and finance between the countries • attracted a lot of FDI

Tariffs

🔗 Removal of internal tariffs within the block brings many benefits for companies:

• Removing barriers to intra-community trade, markets for firms grow
• Firms that have a comparative advantage in the production of a particular product or service should prosper as they do not have to pay tariffs like their counterparts
• Enlarged market ↑ demand, raising the volume of production and ∴ lowering manufacturing costs per unit

•                                                                               Tariffs*
  

FDI

↳ Foreign direct investment Types of FDI:

Offshoring	Some TNCs build their own new production facilities in offshore low-wage economies
Foreign mergers	Two firms in different countries join forces to create a single entity
Foreign acquisitions	When a TNC launches a takeover of a company in another country
Transfer pricing	Some TNCs have sometimes channels profits through a subsidiary company in a low-tax country

Policies

• Free Market Liberalisation Belief that government intervention in markets impedes economic development

As overall wealth ↑, trickle down will take place from the richest members of society to the poorest

Privatisation

Allows the privatisation of the national services and infrastructure

Running such services is expensive ∴ by allowing privatisation, it saves money for the governments

Privatisation

Encouraging Business Start Ups

Methods include lowering business taxes allowing businesses to make more profit

SEZs

Large areas of land reserved for economic purposes near major transport hubs

↳ The national government exempts businesses within these zones from taxes