Globalisation for LEDCs

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Positives of Globalisation for LDCs

Globalisation has had a mixed impact on less-developed countries (LDCs). Here are some positive impacts:

Foreign direct investment (FDI)

Globalisation leads to higher FDI flows; which increases aggregate demand (AD) and this leads to higher real GDP (positive multiplier, creates employment, income, tax receipts).
The flow FDI and multinational corporation (MNC) operations can also lead to the transfer of skills and technology, shifting the LRAS curve and PPF for that country outwards.
- The impact of obtaining cheap technology that has been built from other countries, rather than using scarce resources domestically, could be significant for LDCs.

Examples of Foreign Direct Investment

In 2017, China became the largest FDI investor in Africa.
- China has purchased mineral mines in Congo, Ethiopia has received investment in its dams and roads.
- In 2017, Kenya launched its own $3.8 billion China-funded train line linking Nairobi to Mombasa. The Chinese built a dam in Zambia.
This kind of FDI is vital for LDCs to boost their infrastructure, improve geographic mobility (in the case of trains) and efficiency.

More export markets

Globalisation has allowed for countries with a small domestic market to export their products abroad and so benefit from foreign demand.
Globalisation allows for export-led growth and an export-led positive multiplier.

Access to finance

According to the Harrod-Domar model, one of the main constraints on economic growth and development is a lack of investment.
A key reason for a lack of investment is a lack of access to finance.
Globalisation has allowed financial markets to become more global which now means LEDCs have access to a much wider choice of finance from investors from abroad.
- E.g. LEDC firms and governments can issue international bonds to raise money.
- Kenya's $3.8bn train line was funded largely by Chinese funds.

Technology transfers

LDCs benefit particularly from technology transfers (and goods such as medical drugs) because these can be bought from abroad much more cheaply than they can be produced domestically.

Negative Effects of Globalisation for LDCs

Globalisation has had a mixed impact on less-developed countries (LDCs). Here are some negative effects:

Dumping

Some LDCs may fall victim to dumping. This is where developed countries sell products at below cost onto LDC markets.
Over half of the anti-dumping cases brought to World Trade Organisation (WTO) are from LDCs complaining about more-developed countries (MDCs).

Brain drain

Brain drain describes the phenomenon of skilled workers moving abroad in search of higher wages - it is a particular problem for LDCs.
Brain drain in the short term could be costly to LDCs who may be losing their key workers in healthcare or education, which could have disastrous consequences for future long term economic growth; although, in the long-term remittances could add to GDP.

Poor conditions for workers

In a bid to attract the big MNCs, who will create jobs in their economy, governments may compete.
Having lower health and safety standards for workers, lower corporate tax rates, easier labour laws can bring jobs to a country, but increase hazards for workers in the workplace.
- E.g. Primark paid over $10m to victims of a factory collapse in Bangladesh; over 100 people died.
However, MNCs may create jobs for workers who would earn less or be unemployed otherwise.

Environmental concerns

MNCs often extract natural resources in less developed nations.
These countries may have less regulations or lower environmental standards.
This can result in environmental degradation and negative externalities in the country.

1Microeconomics

1.1Competitive Markets: Demand & Suply

1.1.1Markets & Demand

1.1.2Diminishing Marginal Returns

1.1.3Supply

1.1.4Market Equilibrium

1.1.5Price Mechanism

1.1.6Consumer & Producer Surplus

1.1.7IB Multiple Choice - Demand

1.1.8IB Multiple Choice - Supply

1.2Elasticity

1.2.1Elasticities of Demand

1.2.2Factors Affecting Price Elasticity of Demand

1.2.3Elasticity of Supply

1.2.4Price Elasticity of Supply

1.2.5IB Multiple Choice - Price Elasticity of Demand

1.2.6IB Multiple Choice - Price Elasticity of Supply

1.2.7IB Multiple Choice - Other Elasticities

1.3Government Intervention

1.3.1Indirect Taxes & Subsidies

1.3.2Application Question - Taxing Prices or Quantities

1.3.3Subsidies & Price Controls

1.3.4Deadweight Loss & Government Intervention

1.3.5Elasticity & Tax Incidence

1.3.6IB Multiple Choice - Government Intervention

1.4Market Failure

1.4.1Types of Market Failure

1.4.2Introduction to Externalities

1.4.3Negative Externalities

1.4.4Policy for Negative Externalities

1.4.5Positive Externalities

1.4.6The Deadweight Welfare Loss of Externalities

1.4.7Case Study - The Externalities of Education

1.4.8Public Goods & the Free-Rider Problem

1.4.9Asymmetric Information

1.4.10End of Topic Test - Market Failure

1.4.11Application Questions - Market Failure

1.5HL: Theory of the Firm & Market Structures

1.5.1Theory of the Firm & Market Structures

2Macroeconomics

2.1The Level of Overall Economic Activity

2.1.1The Circular Flow of Income

2.1.2Defining GDP

2.1.3Limitations of GDP

2.1.4IB Multiple Choice - Economic Indicators

2.1.5Business Cycles

2.1.6Output Gaps

2.2Aggregate Demand & Aggregate Supply

2.2.1The Aggregate Demand Curve

2.2.2Components of Aggregate Demand

2.2.3Shape of the Aggregate Demand Curve

2.2.4Shifts in Aggregate Demand

2.2.5IB Multiple Choice - Aggregate Demand

2.2.6Short & Long-Run Aggregate Supply

2.2.7Alternative Models of LRAS

2.2.8Equilibrium in the AD-AS Model

2.2.9Output Gaps & the AD-AS Model

2.3Macroeconomic Objectives

2.3.1Introduction to Unemployment

2.3.2Limitations of Unemployment

2.3.3Types of Unemployment

2.3.4Causes & Impact of Unemployment

2.3.5Defining Inflation

2.3.6Measuring Inflation

2.3.7Use of Index Numbers

2.3.8The Consumer Price Index

2.3.9Consequences of Inflation

2.3.10Causes of Inflation

2.3.11Inflation & Unemployment Tradeoff

2.3.12The Short-Run Phillips Curve

2.3.13The Long-Run Phillips Curve

2.4Economic Growth, Poverty & Inequality

2.4.1Measuring Economic Growth

2.4.2Determinants of Productivity

2.4.3Economic Growth & Productivity

2.4.4Absolute & Relative Poverty

2.4.5Inequality

2.4.6Inequality 2

2.4.7Lorenz Curve

2.4.8Government Policy on Poverty

2.4.9End of Topic Test - Poverty & Inequality

2.4.10Application - Inequality & Poverty

2.5Fiscal Policy

2.5.1Introduction to Fiscal Policy

2.5.2Fiscal Policy and AD-AS Model

2.5.3Fiscal Policy Lags

2.5.4Automatic Stabilizers

2.5.5IB Multiple Choice - Fiscal Policy

2.6Monetary Policy

2.6.1Objectives of Monetary Policy

2.6.2Monetary Policy Implementation

2.6.3Monetary Policy & AD-AS Model

2.6.4Monetary Policy Lags & Pitfalls

2.7Supply-Side Policies

2.7.1Supply-Side Policies

2.7.2Supply-Side Policies 2

3The Global Economy

3.1International Trade

3.1.1Globalisation

3.1.2Globalisation for LEDCs

3.1.3Globalisation for MEDCs

3.1.4Comparative Advantage & Trade

3.1.5Protectionism

3.1.6Arguments for Protectionism

3.1.7Arguments Against Protectionism

3.1.8End of Topic Test - Globalisation & Trade

3.1.9Case Study - Globalisation & Trade

3.2Exchange Rates

3.2.1Floating Exchange Rates

3.2.2Fixed Exchange Rate

3.2.3Effect of a Stronger & Weaker Dollar

3.3The Balance of Payments

3.3.1Balance of Payments

3.3.2Balance of Payments 2

3.3.3FDI & Reducing a BoP Deficit

3.4Economic Integration

3.4.1Customs Unions & WTO

3.4.2Merged Currency

3.5Terms of Trade

3.5.1Absolute & Comparative Advantage

3.5.2Gains from Trade

3.5.3Terms of Trade

3.5.4IB Multiple Choice - Comparative Advantage & Trade

3.6Economic Development

3.6.1Factors Influencing Growth & Development

3.6.2International Institutions

3.6.3Measures of Development

3.6.4Barriers to Development

3.6.5Case Study - The Bottom Billion

3.6.6End of Topic Test - Emerging & Developing

3.7The Role of Domestic & International Factors

3.7.1Interventionist Strategies

3.7.2Development Strategies

3.7.3Development Promotion Policies

3.7.4End of Topic Test - Growth & Global Development

3.7.5Application Questions -Growth & Global Development

3.8The Role of International Trade

3.8.1International Institutions

3.8.2End of Topic Test - Globalisation & Trade

3.9The Role of Foreign Aid

3.9.1Aid

3.9.2Limitations of Aid

3.9.3Support for Aid

3.9.4Application Questions - Developing Countries

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