Transcript Economics_Globalisat..

(from last time) HW – part 2
Awareness of trends in the UK economy since year 2000
Please prepare an annotated graph of US and UK economic performance for discussion next time: (will allocate
student per topic in the lesson).
Site www.tradingeconomics.com has all of the above (click on forecast or market – we will go through this)
• Unemployment Rate
• GDP Growth Rate (Gross Domestic Product – the value of all goods and services in the Economy over a given
time period)
• Government Debt to GDP (A Ratio showing how indebted the Government is, relative to the value of a
Countries economic activity)
• Balance of Trade (Net flows of the value of all imports and exports of goods and services in relation to the
UK)
• Population
• Exchange rates of the British Pound against US Dollar and Euro (GBP/USD and GBP/EUR)
Macroeconomics: Theme 2 - The UK Economy - performance
and policies
Opening Activity
A: Short presentation of graphs by authors
B: Working through in the groups below compare your
graphs - find similarities / differences in the timing of
major events shown on your graphs across markets. (ie
Comparing Unemployment (“UE”) and Short Term
Interest Rates (“STIR”) -> did rising UE precede/follow
lower STIR, any ideas why?) – please get a paper copy
Learning Objective: Have an appreciation and
understanding of recent UK economic history
Comparison Groups
Session
Group A
Group B
Group C
1
GDP
GDP Growth Rate
Gov.Debt to GDP
Interest Rate
Oil Price
Unemployment
Population
GBP/USD
GBP/EUR
Balance of Trade
2
Gov. Debt to GDP
Balance of Trade
Unemployment
Interest Rate
Population
GDP
GBP/USD
GBP/EUR
GDP Growth Rate
Oil Price
3
Population
Balance of Trade
Oil Price
Unemployment
GDP Growth Rate
GDP
The UK economy - performance and policies
Interest Rate
GBP/USD
GBP/EUR
Gov.Debt to GDP
3
Opening Activity – Globalisation Revision
Globalisation What is it? What causes it? What are its impacts?
Macroeconomics: Theme 4 - A Global Perspective
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Definition of globalisation
‘The ability to produce any goods (or service)
anywhere in the world, using raw materials,
components, capital and technology from
anywhere, sell the resulting output anywhere,
and place the profits anywhere.’
Impacts of globalisation and global companies
on
• individual countries
• governments
• producers and consumers
• workers
• the environment
Showbie TRACF
Globalisation – Developing Countries
• Inward investment of TNC (Transnational or Multinational Corporations
“MNCs”) into developing world (ie McDonalds, 30k restaurants in 119
countries)
• Increased employment and foreign exchange can be used by developing
countries to build infrastructure, schools and hospitals
• Globalisation has also significantly increased Foreign Direct Investment (“FDI”)
between TNC’s in MEDC’s due to gradual erosion of protectionist trade
barriers, supported by work of WTO
• Demands of TNCs in developing countries may have positive externalities such
as provision of constant power supplies within the country and infrastructure
benefits
• Transfer of western management skills and working practices may provide a
more efficient work culture (at the expense of destroying the local culture)
• Western standards, values & technology have the potential to be
distruptors in a developing economy (the phone camera put Kodak out of
business; promotion by merit might be unknown in a tribal society)
http://www.economist.com/node/21542796
Macroeconomics: Theme 4 - A Global Perspective
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Developed Countries
• Developed countries are main beneficiaries of Globalisation
with cheaper goods for consumers, wider choice and more
plentiful access to raw materials and LDC markets
• Profits from firms owned by TNCs located in LDCs tend to be
repatriated to the MEDC where the TNC is based
• Developed countries have more political power than LDCs who
may rely on Developed counties for aid – hence trade
agreements are likely to be skewed in favour of developed
countries
• Extent of “trickledown effect” may depend on how effective
TNCs are at retaining all profits
• Developed countries benefit from migration of skilled persons
from developing countries (who then lose vital skills)
• Partnerships and cooperation becomes more common
between Developed and Developing Nations (perhaps with
benefits in terms of better international relations)
Macroeconomics: Theme 4 - A Global Perspective
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Producers (manufacturing/services) &
Consumers
• Producers based in developing countries benefit from cheap
raw materials and labour – and potentially access to a growth
market
• Governments in developing countries are likely to be more
supportive of inward investment from TNCs
• TNC’s in developing countries likely to “crowd out” local
competition due to economies of scale in cost and purchasing
power
• Consumers in both developing/developed countries have a far
wider range of goods available (“consumer sovereignty”)
• Goods produced using cheap LDC labour are much cheaper –
hence great benefit to consumers
• Consumer awareness of issues in LDCs (ie Fairtrade products,
support for Tsunami victims etc.)
• Increased awareness of Global Issues: Deforestation, Global
Warming; Sustainable Development; Women’s Rights
Macroeconomics: Theme 4 - A Global Perspective
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Environment
• An absence of enforced international laws in LDCs means TNC’s
may exploit opportunities to produce and pollute in developing
countries.
• Typical actions in developing countries include pollution of
the environment, poor safety controls, poor working
conditions
• Cultural pollution:
• Inward investment can “crowd out” local economies and
companies, traditions and languages (ie replacing horses
with tractors can destroy the local economy based on
raising, feeding and selling horses)
• Danger that LDCs become clones of (capitalist) North and
West (Ie Hotel in Peru will serve same food as Hotel in
Egypt)
• Hollywood films dominate cultural landscape – when was
last time cinema showed a film made in China? (despite
China having a large film industry)
Macroeconomics: Theme 4 - A Global Perspective
https://www.theguardian.com/globaldevelopment/2013/dec/14/toxic-ewasteillegal-dumping-developing-countries
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Workers in developing/developed world
Developing World
• Potential for exploitation in developing world as working
conditions are likely to be far worse/no trade unions permitted
etc.
• Transfer of skills from MEDC to LDC, especially in industries with
a high labour cost component (usually manufacturing)
• Conversely inward investment may bring much needed
employment opportunities and the opportunity to migrate to
MEDC
Developed World
• Wages may fall and competition for entry level jobs rise in
developing countries as a result of increased migration of labour
from LDCs to MEDCs.
• Transfer of skills from MEDC to LDC, especially in industries with
a high labour cost component
• Conversely inward investment may bring much needed
employment opportunities and the opportunity to migrate to
MEDC
Macroeconomics: Theme 4 - A Global Perspective
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Governments in developing/developed world
Developing World:
• Potential for increased taxation income
• Enhanced Links to developed country governments / better international relations / more focussed aid
• Potential for transfer of western ideas (Democracy, Human Rights, Education)
• More money / higher GDP growth = more potential for
 corruption,
 government destabilisation / internal strife (ie Niger Delta)
https://en.wikipedia.org/wiki/Conflict_in_the_Niger_Delta
 Environmental damage (especially if TNC’s “lobby” developing nations)
Developed World:
• Potential for loss of taxation from job losses (and potentially TNC profits) exported
to developing world
• Benefits to the western consumer ( = the electorate) from cheaper goods
• Danger of dependency / economic security on developing world for manufactured
goods
• Potential for greater threat of epidemics from developing world due to better
transport links
• Security issues from unconstrained migration from developing world
Macroeconomics: Theme 4 - A Global Perspective
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Debate
Showbie TRACF
Links…
• http://www.tutor2u.net/economics/reference/globalisationevaluating-benefits-and-costs
• https://www.youtube.com/watch?NR=1&v=wGULEb3rYeg&feature=e
ndscreen
Macroeconomics: Theme 4 - A Global Perspective
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