Beruflich Dokumente
Kultur Dokumente
Economic
Integration
The
Global
Economy
Today
we
live
in
a
global
economy
–
where
the
economies
of
individual
countries
are
linked
to
each
other
and
changes
in
a
single
economy
can
have
ripple
effects
on
others.
In
the
past
two
decades,
the
term
globalisation
has
become
a
dominant
economic,
political
and
social
theme.
Globalisation
refers
to
the
integration
between
different
countries
and
economies
and
the
increased
impact
of
international
influences
on
all
aspects
of
life
and
economic
activity.
Speculators
are
investors
who
buy
or
sell
financial
assets
with
the
aim
of
making
profits
from
short-‐
term
price
movements.
They
are
often
critics
for
creating
excessive
volatility
in
financial
markets.
FOREX
Markets
are
networks
of
buyers
and
sellers
exchanging
one
currency
for
another
in
order
to
facilitate
flows
of
finance
between
countries.
Sahil
Bhandula
2014
Economics
HBHS
Investment
and
Transnational
Corporations
Q One
measure
of
the
globalisation
of
investment
is
the
expansion
of
foreign
direct
investment
(FDI).
Q There
has
been
a
dramatic
increase
in
FDI
flows
over
the
past
three
decades
–
FDI
flows
are
strongly
influenced
by
the
level
of
economic
activity.
Q FDI
is
directed
towards
nations
with
greater
industrial
capacity
and
larger
consumer
markets.
Q Since
2010,
developing
economies
received
more
FDI
flows
than
developed
economies
Q Developing
economies
such
as
China,
Brazil,
India
and
Mexico
continue
to
be
the
dominant
source
of
FDI
funds
–
largest
recipients
of
investment.
Q Transnational
Corporations
(TNCs)
play
a
vital
role
in
global
investment
flows
–
they
bring
foreign
investment,
new
technologies,
skills
and
knowledge.
Q A
significant
cause
of
the
growth
of
international
investment
is
the
increased
level
of
international
mergers
and
takeovers.
Q However,
majority
of
investment
still
comes
from
domestic
sources
–
FDI’s
account
for
less
than
20%
of
total
investment,
while
80%
of
investment
comes
from
within
national
economies.
Foreign
Direct
Investment
(FDI)
refers
to
the
movement
of
funds
between
economies
for
the
purpose
of
establishing
a
new
company
or
buying
a
substantial
proportion
of
shares
in
an
existing
company
(10
per
cent
or
more).
FDI
is
generally
considered
to
be
long-‐term
investment
and
the
investor
normally
intends
to
play
a
role
in
the
management
of
the
business.
Transnational
Corporations
are
global
companies
that
dominate
global
product
and
factor
markets.
TNCs
have
production
facilities
in
at
least
two
countries
and
are
owned
by
residents
of
at
least
two
countries.
Technology,
Transport
and
Communication
Technological
developments
facilitate
the
integration
of
economies:
Q Developments
in
freight
technology
Q International
communications
through
high-‐speed
broadband
Q Facilitating
finances
around
the
world
through
computers
Q Mobile
telecommunications
and
the
internet
help
TNC’s
Q Advances
in
transportation
(e.g.
railway
and
aircrafts)
International
Division
of
Labour
and
Migration
Q More
people
than
ever
before
are
moving
to
different
countries
to
take
advantage
of
the
better
work
opportunities
that
other
countries
offer.
Q Highly
skilled
workers
are
attracted
towards
the
richest
economies
such
as
the
United
States
and
the
largest
European
economies.
Q Low
skilled
labour
is
also
in
demand
in
advanced
economies
to
do
certain
types
of
jobs.
Q These
trends
in
migration
reflect
an
international
division
of
labour,
in
part
because
of
the
migration
of
workers
to
countries
where
jobs
are
plentiful
or
better
paid,
and
also
because
of
the
shift
of
business
between
economies,
in
search
of
the
most
efficient
and
cost-‐effective
labour.
International
division
of
labour
is
how
the
tasks
in
the
production
process
are
allocated
to
different
people
in
different
countries
around
the
world.
International
business
cycle
refers
to
fluctuations
in
the
level
of
economic
activity
in
the
global
economy
over
time.
Factors
that
strengthen
the
international
business
Factors
that
weaken
the
international
business
cycle
cycle
Trade
flows
Interest
rates
Investment
flows
Government
fiscal
policies
Transnational
corporations
Exchange
rates
Financial
flows
Structural
factors
Financial
market
and
confidence
Regional
factors
Global
interest
rate
levels
Commodity
prices
International
organisations
Regional
Business
Cycles
Regional
business
cycles
are
the
fluctuations
in
the
level
of
economic
activity
in
a
geographical
region
of
the
global
economy
over
time.
Sahil
Bhandula
2014
Economics
HBHS
Trade,
Financial
Flows
and
Foreign
Investment
Free
Trade
Free
trade
can
be
defined
as
a
situation
where
governments
impose
no
artificial
barriers
to
trade
that
restrict
the
free
exchange
of
goods
and
services
between
countries
with
the
aim
of
shielding
domestic
producers
from
foreign
competitors.
Free
trade
is
based
on
the
economic
concept
of
comparative
advantage.
Comparative
advantage
is
the
economic
principle
that
nations
should
Opportunity
cost
represents
the
specialise
in
the
areas
of
production
in
alternative
use
of
resources.
Often
which
they
have
the
lowest
opportunity
referred
to
as
the
‘real’
cost,
it
cost
and
trade
with
other
nations,
so
as
represents
the
cost
of
satisfying
one
to
maximise
both
nations’
standards
of
want
over
an
alternative
want.
living.
Advantages
of
Free
Trade
Disadvantages
of
Free
Trade
Trade
allows
countries
to
obtain
goods
and
An
increase
in
short
term
unemployment
may
services
that
they
cannot
produce
themselves,
or
occur
as
some
domestic
businesses
may
find
it
in
sufficient
quantities
to
satisfy
domestic
hard
to
compete
with
imports
demand
Free
trade
allows
countries
to
specialise
in
the
It
may
be
more
difficult
to
establish
new
production
of
the
goods
and
services
in
which
businesses
and
new
industries
if
they
are
not
they
are
most
efficient
protected
from
large
foreign
competitors
Free
trade
encourages
the
efficient
allocation
of
Production
surpluses
from
some
countries
may
resources
be
‘dumped’
on
the
domestic
market
A
greater
tendency
for
specialisation
leads
to
Free
trade
may
encourage
environmentally
economies
of
scale,
which
will
lower
average
irresponsible
production
methods
because
costs
of
production
and
increase
efficiency
and
producers
in
some
nations
may
produce
goods
at
productivity
even
further
a
lower
cost
International
competitiveness
will
improve
as
domestic
businesses
face
greater
competitive
pressures
from
foreign
producers,
and
governments
will
encourage
domestic
industrial
efficiency
Free
trade
encourages
innovation
and
the
spread
of
new
technology
and
production
processes
throughout
the
world
Free
trade
leads
to
higher
living
standards
as
a
result
of
lower
prices,
increased
production
of
goods
and
services
and
increased
consumer
choice
Sahil
Bhandula
2014
Economics
HBHS
Where
an
economy
can
produce
everything
at
a
lower
cost,
compared
to
another
country
it
enjoys
an
absolute
advantage.
Trade
works,
however,
where
countries
can
sell
to
each
other
the
things
that
they
make
the
cheapest
e.g.
Australia
sells
minerals,
China
sells
clothing.
Where
countries
are
producing
similar
products,
however,
and
no
clear
advantage
is
evident,
comparative
advantage
(least
opportunity
cost)
may
be
the
decider
over
which
trade
should
occur.
Assuming
that
both
countries
can
produce
these
quantities
with
the
same
resource
pool
they
may
specialise
in
those
products
that
deliver
greatest
comparative
efficiency
gained
via
economies
of
scale.
Australia 30 10
Japan
20
30
In
this
example
given:
• With
all
of
their
resources
Australia
can
produce
either
30
tonnes
of
clothing
or
10
cars.
• On
the
other
hand,
Japan
can
produce
20
tonnes
of
clothing
or
30
cars.
!
• For
Australia
the
opportunity
cost
of
one
tonne
of
clothing
is
!
of
a
car
!
• For
Japan
the
opportunity
cost
of
one
tonne
of
clothing
is
1 !
cars
• For Australia the opportunity cost of one car is 3 tonnes of clothing
!
On
comparative
advantage
terms
it
is
cheaper
for
Australia
(!
of
a
car)
to
produce
clothes
than
Japan
!
(1 !
cars)
so
Australia
should
specialise
in
clothing.
Similarly
Japan
should
specialise
in
cars,
because
it
!
enjoys
a
lower
opportunity
cost
(!
tonnes
of
clothing
compared
to
3
tonnes
of
clothing)
and
has
a
comparative
advantage.
Sahil
Bhandula
2014
Economics
HBHS
Role
of
International
Organisations
World
Trade
Organisation
(WTO)
World
Trade
Q The
role
of
the
WTO
is
to
implement
and
Organisation
advance
global
trade
agreements
and
to
resolve
dispute
between
economies.
Q The
WTO’s
membership
has
over
150
International
OECD
Monetary
countries
Fund
Q The
WTO’s
major
focus
in
recent
years
has
been
the
Doha
Round
which
wishes
to
address:
1) Reducing
agriculture
protection
United
2) Lowering
tariffs
on
manufactured
goods
Nations
World
Bank
3) Reducing
restrictions
on
trade
in
services
United
Nations
Q The
United
Nations
has
an
agenda
that
is
broader
than
any
other
organisation,
covering
the
global
economy,
international
security,
the
environment,
poverty
and
development,
international
law
and
global
health
issues.
Sahil
Bhandula
2014
Economics
HBHS
Influence
of
Government
Economic
Forums
The
aim
of
economic
government
forums
is
to
enable
heads
of
state,
along
with
their
treasurers
and
central
bank
governors
to
discuss
global
economic
issues,
with
particular
attention
to
economic
stability
and
growth.
Group
of
Eight
Nations
(G8)
Group
of
Twenty
Nations
(G20)
Q US,
UK,
France,
Germany,
Canada,
Q Leading
forum
for
coordinating
the
Japan,
Italy
and
Russia
global
response
to
avert
a
depression.
Q Effectively
operated
as
the
economic
council
of
the
world’s
wealthiest
Q The
G20
agreed
to
coordinate
fiscal
nations,
meeting
annually
to
discuss
stimulus
around
the
world,
as
well
as
conditions
in
the
global
economy.
improving
supervision
of
the
global
financial
system
and
international
Q Its
agenda
has
often
included
general
financial
institutions.
political
issues
and
current
priorities
such
as
climate
change,
global
poverty
and
security.
Trading
Blocs,
Monetary
Unions
and
Free
Trade
Agreements
Q Countries
have
formed
agreements
and
trading
alliances
to
ensure
that
they
are
in
the
best
position
to
gain
from
growing
trade
opportunities
and
also
to
avoid
being
excluded
from
emerging
trading
blocs.
Q Trade
agreements
can
be
multilateral,
bilateral,
or
global.
Trade
bloc
occurs
when
a
number
of
countries
join
together
in
a
formal
preferential
trading
agreement
to
the
exclusion
of
other
countries.
Q Free
trade
agreements
(or
preferential
trade
agreements)
are
formal
agreements
between
countries
designed
to
break
down
barriers
to
trade
between
those
nations.
Trade Agreements
BILATERAL
AGREEMENTS
Bilateral
agreements
are
between
two
nations.
Advantages
Q Usually
easier
to
negotiate
than
multilateral
agreements
Q Reductions
in
trade
barriers
=
extent
of
market
access
for
exporters
and
potential
growth
in
trade
and
investment
flows
Q Common
agreements
on
conduct
of
international
trade
Q Strengthen
economic
relationships
Disadvantages
Q Their
ability
to
reduce
trade
barriers
is
not
as
broad
Q Too
much
competition
Examples
Australia
has
bilateral
agreements
with:
Q NZ
Q Singapore
Q Thailand
Q United
States
Q Chile
Reasons
for
Protection
Infant
Industry
Argument:
Q New
industries/businesses
find
establishment
difficult
with
increased
initial
costs
and
problems
Q The
protection
argument
is
that
these
businesses
need
extra
assistance
to
aid
them
in
their
establishment
Q They
need
to
be
shielded
from
competitors
in
the
short
run
to
enable
them
to
build
capacity,
establish
markets
and
achieve
economies
of
scale
so
that
they
can
compete
in
the
global
economy
Q Protection
should
last
for
a
short
time
to
act
as
an
incentive
to
promote
efficiency
and
organise
cost
structures
Prevention
of
Dumping:
Q Dumping
occurs
when
foreign
businesses
sell
their
goods
in
another
market
at
below
cost
price
in
order
to:
a) Dispose
of
a
surplus
b) Establish
market
control
Q Due
to
the
practice
of
dumping,
local
businesses
often
fail
and
unemployment
results
Q The
only
gain
from
dumping
is
that
it
results
in
lower
prices
for
consumers
in
the
short
term
–
however
once
the
local
competition
is
eliminated
the
foreign
producer
raises
prices
again
Protection
of
Domestic
Employment:
Q By
protecting
Australia
from
cheap
foreign
goods
–
the
demand
for
local
goods
will
be
greater
and
this
will
create
more
domestic
employment.
Q This
argument
not
supported
because
protection
will
tend
to
distort
the
allocation
of
resources
in
an
economy
away
from
areas
of
more
efficient
production
towards
areas
of
less
efficient
production.
This
will
lead
to
higher
levels
of
unemployment
and
lower
growth
rates.
Defence:
Q Some
nations
argue
that
they
need
to
protect
industries
which
are
related
to
the
defence
of
the
country
Q A
nation
would
not
wish
to
become
reliant
on
other
nations
for
providing
its
defence
equipment
Q Yet,
this
argument
misses
the
main
problem
of
inefficient
allocation
of
global
resources
Other
Arguments
for
Protection
Q Cheap
foreign
labour:
it
is
important
to
protect
the
nation
against
goods
which
are
produced
by
cheap
foreign
labour
Q Protection
can
exist
against
nations
which
exploit
the
environment
Sahil
Bhandula
2014
Economics
HBHS
Methods
of
Protection
Tariffs
Export
Incentives
Quotas
Methods
Local
Content
Subsidies
Rules
Tariffs:
Q Tariffs
are
taxes
on
imports
Q Tariffs
raise
the
price
of
the
import
and
make
it
more
expensive
and
therefore
less
attractive
than
the
domestically
produced
good
PWORLD
=
World
Price
à
QS1
=
Quantity
Supplied
(Domestically),
QC1
=
Quantity
Demanded,
PTARIFF
=
World
Price
with
Tariff
à
QS2
=
Quantity
Supplied
(Domestically),
QC2
=
Quantity
Demanded
At
PTARIFF
the
gap
between
the
quantity
supplied
and
the
quantity
demanded,
which
is
filled
by
imports,
has
been
decreased.
Economic
Effects
of
a
Tariff
Q Domestic
producers
supply
a
greater
quantity
of
the
good,
therefore
stimulates
domestic
production
and
employment
Q More
domestic
resources
are
attracted
to
the
protected
industry
=
reallocation
of
resources
towards
less
efficient
producers
Q Consumers
pay
a
higher
price
and
receive
fewer
goods
Q The
tariff
raises
revenue
for
the
government
Q In
response
to
tariffs
on
imports,
other
countries
may
impose
tariffs
on
the
goods
that
are
exported
to
them
i.e.
retaliation
effect.
Sahil
Bhandula
2014
Economics
HBHS
Quotas
Q An
import
quanta
restricts
the
amount
of
a
good
which
can
be
imported
into
a
nation
Q Quotas
guarantee
domestic
producers
a
share
of
the
market
-‐ The
curve
SS
and
DD
represent
domestic
supply
and
demand
-‐ 0P
is
the
price
at
which
the
imported
goods
would
sell
if
there
was
no
quota
imposed.
At
this
price
consumers
demand
0Q1,
domestic
producers
supply
0Q,
and
the
quantity
imported
would
be
QQ1
-‐ If
the
government
imposed
a
quota
restricting
imports
to
Q2Q3,
this
would
have
the
effect
of
raising
the
price
of
imported
goods
to
0P1.
This
price
would
allow
domestic
supply
to
expand
to
0Q2
Economic
Effects
of
a
Quota
Q Domestic
producers
supply
a
greater
quality
of
the
good,
therefore
the
tariff
stimulates
domestic
production
and
employment
in
the
protected
industry.
Q More
resources
in
that
economy
are
attracted
to
the
protected
industry
=
reallocation
of
resources
from
other
sectors
of
the
economy.
Q Consumers
pay
a
higher
price
and
receive
fewer
goods.
Q Unlike
tariffs,
quotas
do
not
directly
generate
revenue
for
the
government.
Q As
with
tariffs,
the
imposition
of
a
quota
on
imports
can
invite
retaliation
from
the
country
whose
exports
may
be
reduced
because
of
the
quota.
Subsidies
Q Subsidies
involve
government
assistance
to
domestic
producers
to:
a) Decrease
costs
and
prices
b) Increase
output
of
goods
Subsidies
are
cash
payments
from
the
government
to
businesses
to
encourage
production
of
a
good
or
service
and
influence
the
allocation
of
resources
in
an
economy.
Subsidies
involve
financial
assistance
to
domestic
producers,
which
enables
them
to
reduce
their
selling
price
and
compete
more
easily
with
imported
goods.
Sahil
Bhandula
2014
Economics
HBHS
Globalisation
and
Economic
Development
Differences
Between
Economic
Growth
and
Economic
Development
Economic
growth
refers
to
a
sustained
increase
in
a
country’s
productive
capacity
over
time.
This
is
measured
by
(real)
GDP
growth.
However,
it
is
important
to
look
further
than
measures
of
income
and
economic
growth
when
assessing
living
standards.
Economic
development
is
a
broader
concept
than
economic
growth
that
attempts
to
measure
improvements
in
well-‐being
or
welfare
and
other
quality-‐of-‐life
indicators
like
health
standards
and
education
levels
which
are
not
given
a
financial
value.
The
most
popular
method
for
comparing
living
standards
between
different
economies
is
income
(Gross
National
Income)
because
it
measures
the
ability
of
a
nation’s
citizens
to
satisfy
their
material
wants.
GNI
is
the
sum
of
value
added
by
all
resident
producers
in
an
economy
plus
receipts
of
primary
income
from
foreign
sources.
However,
the
exchange
rate
is
a
limitation
to
comparing
GNI’s
as
a
whole,
and
therefore
economists
usually
make
an
adjustment
using
what
is
known
as
purchasing
power
parity
(PPP)
before
comparing
GNI
levels
between
countries.
Purchasing
Power
Parity
(PPP)
is
a
theory
that
states
that
exchange
rates
should
adjust
to
equalise
the
price
of
identical
goods
and
services
in
different
economies
throughout
the
world.
Human
Development
Index
The
main
alternative
measure
to
GNI
is
the
Human
Development
Index
(HDI),
devised
by
the
United
Nations
Development
Program
(UNDP)
to
measure
economic
development.
It
takes
into
account:
• Life
expectancy
at
birth.
This
is
indicative
of
the
health
and
nutrition
standards
in
a
country.
High
levels
of
longevity
are
critical
for
the
country's
economic
and
social
well-‐being.
• Levels
of
educational
attainment.
Education
is
important
for
the
development
of
the
skills
of
the
workforce
and
the
future
development
potential
of
an
economy.
The
HDI
measures
adult
literacy
and
the
ratio
of
people
in,
or
having
completed,
primary,
secondary
and
tertiary
education.
• GNI
per
capita,
which
measures
the
sum
of
gross
value
added
by
all
resident
producers
in
the
economy,
on
a
purchasing
power
parity
basis.
This
is
used
as
a
measure
of
a
decent
standard
of
living
and
is
an
essential
determinant
of
the
access
that
people
have
to
goods
and
services.
The
HDI
is
a
score
between
0
for
nations
with
no
human
development
and
1
for
maximum
human
development.
The
2007/08
Human
Development
Report
gave
Iceland
the
highest
HDI
at
0.968
and
Sierra
Leone
the
lowest
at
0.336.
Australia
ranks
third
after
Iceland
and
Norway,
with
an
HDI
of
0.962.
Sahil
Bhandula
2014
Economics
HBHS
Developing
Economies,
Emerging
Economies
and
Advanced
Economies
Countries
are
generally
categorised
into
groups
because,
although
all
countries
face
unique
circumstances
at
any
point
in
time,
they
tend
to
confront
similar
issues
according
to
their
stage
of
economic
development.
The
main
categories
that
economists
use
are:
• Developing
Economies:
Developing
economies
experience
low
living
standards,
low
education
levels
and
generally
have
agriculture
based
economies
with
poor
infrastructure
and
economic
and
political
institutions.
• Emerging
Economies:
Emerging
economies
are
in
the
process
of
industrialisation
and
experiencing
sustained
high
levels
of
economic
growth.
• Advanced
Economies:
Advanced
economies
refer
to
high
income,
industrialised
or
developed
economies.
The
group
includes
34
economies
across
North
America,
Europe
and
the
Asia-‐
Pacific.
Reasons
for
Differences
Between
Nations/Causes
of
Inequality
in
Global
Economy
Global
Factors
Domestic
Factors
• Global
trade
system
Economic
Resources
• Global
financial
architecture
• Natural
resources
• Global
aid
and
assistance
• Labour
supply
and
quality
• Global
technology
flows
• Access
to
capital
and
indebtedness
• Entrepreneurial
culture
Institutional
Factors
• Political
and
economic
institutions
• Economic
policies
• Government
responses
to
globalisation
Institutional
factors
Institutional
factors
-‐
ranging
from
political
stability,
legal
structures,
central
bank
independence,
extent
of
corruption,
strength
of
social
institutions
and
the
government's
domestic
and
external
economic
policies
-‐
can
affect
the
ability
of
a
nation
to
achieve
economic
development.
• Political
and
economic
institutions:
Institutional
factors
in
individual
countries
can
have
a
dramatic
influence
on
the
economic
environment
for
businesses,
investors
and
consumers,
and
thus
have
implications
for
a
nation's
level
of
economic
development.
• Political
instability,
corruption
and
a
lack
of
law
enforcement
by
government
agencies
tend
to
undermine
the
confidence
of
investors,
who
will
be
reluctant
to
take
risks
if
their
business
interests
are
threatened
by
an
inadequate
structure
for
resolving
legal
disputes,
corruption
or
other
institutional
problems.
Developed
economies
have,
in
general,
lower
levels
of
corruption
than
developing
and
transitional
economies.
• Government
responses
to
globalisation:
Government
responses
to
globalisation
can
have
a
substantial
influence
on
a
nation's
ability
to
achieve
economic
development.
Policies
relating
to
trade,
financial
flows,
investment
flows,
transnational
corporations
and
the
country's
participation
in
regional
and
global
economic
organisations
will
influence
an
economy's
ability
to
take
advantage
of
the
benefits
of
integration,
such
as
economic
restructuring,
efficiency,
access
to
foreign
capital
and
technology
and
access
to
overseas
goods
markets.