7.1.3

Globalisation for MEDCs

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Positives of Globalisation for More Developed Economies

As with LDCs, more-developed countries (MDCs) have undergone changes as globalisation continues.

Illustrative background for Export-led growthIllustrative background for Export-led growth ?? "content

Export-led growth

  • Globalisation allows countries to develop further through export-led growth and an export-led positive multiplier.
    • For example, South Korea developed over many years via an export-led growth model.
Illustrative background for Increased competition and choiceIllustrative background for Increased competition and choice ?? "content

Increased competition and choice

  • More contestability (lowering barriers to entry and exit) such as deregulation allows for:
    • More access to foreign goods and services.
    • More competition.
    • Lowering price further.
  • Globalisation means increased choice for consumers (e.g. plasma TV from Japan and BMW from Germany).
Illustrative background for Better supply of labourIllustrative background for Better supply of labour ?? "content

Better supply of labour

  • Free flows of labour mean that labour shortages can be filled and wage inflation can be suppressed by creating a greater pool of labour for firms to choose from.
  • MDCs are usually the beneficiaries of 'brain drain' from LDCs.

Negatives of Globalisation for More Developed Countries

As with LDCs, more-developed countries (MDCs) have undergone changes as globalisation continues.

Illustrative background for Structural/regional unemploymentIllustrative background for Structural/regional unemployment ?? "content

Structural/regional unemployment

  • Domestic firms could be out-competed by competitors in LDCs with lower costs and close down. Because labour is a derived demand, this could lead to regional unemployment.
    • E.g. the 'Rust Belt' in the USA suffered from losing its main industry of car manufacturing.
Illustrative background for Vulnerability to shocksIllustrative background for Vulnerability to shocks ?? "content

Vulnerability to shocks

  • By becoming more interdependent, the risk of contagion (an external event somewhere else in the world coming back to affect you) rises.
  • Contagion makes a country more vulnerable to economic problems elsewhere.
    • E.g. economic problems spreading through the Eurozone countries after the events of the financial crisis in 2008.
Illustrative background for Exchange rate volatilityIllustrative background for Exchange rate volatility ?? "content

Exchange rate volatility

  • Volatile speculative flows of hot money are a feature of globalisation. Changes in interest rates can cause investors to take their money out of a currency in seconds.
  • Frequent changes in exchange rates are hard to manage as an importer and an exporter.
    • In 2011, the Swiss Franc changed in value vs the Euro by 30% in one day.
    • Between 2014 and 2016, the Brazilian Real fell 50% vs Sterling.
  • Exchange rate volatility can make it difficult for MNCs to plan.

Jump to other topics

1Introduction to Markets

2Market Failure

3The UK Macroeconomy

4The UK Economy - Policies

5Business Behaviour

6Market Structures

7A Global Perspective

8Finance & Inequality

9Examples of Global Policy

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