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Impact of Globalisation
Economic Growth v Economic
Development
• Economic growth measures GDP… how much is
the economy producing.
• Economic development measures standard of
living. eg life expectancy, literacy as well as GDP
• The HDI is often used to measure economic
development
Figure 3.4 on page 49 shows HDI for selected
countries
Development Statistics
• Use the statistics in figure 3.1 to explain the
importance of the US economy to global trade
• Use the statistics in figure 3.2 to describe global
income inequality
• Use figure 3.5 to discuss the trends in global
poverty
Characteristics of Economies
Advanced Economies
Emerging Economies
Least Developed
Economies
Developed Economies are rich
because….
Global factors
Domestic Factors
Global Trade
Quality labour supply
FDI and TNCs
Entrepreneurial culture
Trading blocs and protection
Industrialisation
Technology and communications
Well developed services
Labour Mobility
Access to domestic savings
Access to global finance
Political stability
Market based economies
Structural change
Least Developed Economies are
poor because …
Global Factors
Domestic Factors
Impact of globalisation worksheet on
wiki
International Convergence
• economic systems –free enterprise/ market
based
- economic growth-more like divergence (Asia
7.5%,AIEs 3.4%, Transition –1% over the last 10
years).
Economic Growth, Development
and quality of life
• Globalisation has benefited global economies
and specific sectors within economies- winners
and losers.
• There hasn’t been a dramatic increase in
economic growth over the last 15 years – GWP
has increased by about 3% per annum.
Trade/Investment/TNCs
• Massive increases in trade and investment –still
dominated by AIEs although Asia (particularly
China is of growing significance).
• TNCs are spreading more rapidly into
developing economies creating costs and
benefits.
Distribution of income and wealth
• Globalisation has increased inequality within countries
and between countries - due to the large increases in
living standards in global economies
• Inequality has become even more extreme in
developing countries.
• Absolute and relative poverty continue to be extreme in
South Asia, South America and Africa
Poverty
• Absolute Poverty – income of less than $1US
per day.
• Relative Poverty – determined by individual
poverty lines- Australia poverty is defined as
54% of average income
• The following tables shows relative poverty
East
Asia
1985 1990 1995 2005
60% 35% 25% 17%
Eastern
Europe
8%
8%
South
America
40%
43%
39%
38%
South
Asia
58%
41%
36%
30%
Africa
45%
47%
48%
50%
22.0% 20%
Environmental Consequences
• High income economies are the major
consumers of resources – also the major
producers of negative externalities.
• However, they also have the greatest capacity to
improve the quality of the environment.
• Developing economies often experience
environmental degradation because economic
growth is their major priority
Financial Markets
• Financial markets are far more unstable as a
result of globalisation – exchange rates are
extremely volatile and often smaller economies
are affected by the decisions of only a few
speculators – the Asian financial crisis is a great
example of this problem.
International Business Cycle
• Global trade now has a significant impact on
domestic economies. A slowdown in the USA
will have an impact on Japan and consequently
any economy that depends on US and Japanese
markets.
Domestic Policies
• Domestic Policies must be sensitive to global
economic conditions.
eg. Increasing interest rates will slow the domestic
economy, however it will attract foreign savings
and probably increase the exchange rate.
Washington Consensus
• Page 67