Explain how globalisation has led to variations in the standard of living and contrasts in the level of development between nations that make up the global economy.
In your answer you will need to make a specific reference to the role played by trading groups, agreements or blocs.
Globalization refers to the increased integration of economies on a global scale. This can be categorized by the increase in investment, trade and communication between economies globally. Globalisation has impacted some individual economies positively whilst others negatively. The impacts have been seen on both a global scale and a domestic scale through various features of the global economy. Inequality can be measures through instruments such as the Human Development Index (HDI), Gross Domestic Product (GDP), and Gross National Income (GNI). Purchasing Power Parity (PPP) can be used to investigate the inequality of currency worth between countries nationally.
Economic resources (Factor endowments)
The resources a singular country has access to is one of the main influences in whether a country is able to integrate or not into the era of globalization, this is because generally the resources available, determines the status of the economy. The following are factors that may have influence over economy.
Labor supply and quality
Access to capital
Natural resources and Access to capital will be investigated through Indonesia and Australia. Although Indonesia is relatively rich in resources compared to some developing countries, they also suffer highly from natural disasters such as flooding, draught, tsunamis and earthquakes, which has had an impact on resources. The country has also suffered from exploitation of both labor and resources from TNC’s and larger international corporations. The rapid industrialization in Indonesia is also seeing an increase in carbon emissions, and increased pollution of the area, resulting with only 43% of the population having access to drinking water, however there is an increase in growth prospects in Indonesia with it now being classified as an emerging market. This increasing growth has also seen a growth in HDI from a HDI of 0.609 in 2000 to a current HDI of 0.684, which has seen a closer gap in inequality between developed and developing, however there is still present inequality within Indonesia itself. This is due to the distribution of income, and the lack of protocals the government withholds to deal with these issues. Indonesia has also benefited from the average growth rate of 8.5% in East Asia, with China being central to this growth. This has increase has increased Indonesia’s exports to countries such as China allowing for growth to further continue. Australia however is very rich in minerals, and has seen benefit from the constant demand for minerals from Asia and especially China which has experienced rapid growth. Australia’s sturdy banking sector, and continuous growth has seen both foreign investment, and also local investment, has seen a greater ability for businesses and entrepreneurs to attract capital, providing greater amount of jobs in Australia.
Institutional Factors Institution factors ranges from political stability, legal structures, central bank, independence, extent of corruption, strength of social institutions and the government’s domestic and external economic policies. Main factors include:
Political and Economic Institutions
Government Policies & Responses
Countries with high HDI, such as Australia, tend to have market-based economies with significant government intervention and investment in human development. East Asian economies that have opened up their markets to trade in goods, services, finance and technology have faired best; an example of this can be seen through Indonesia. At a policy level Indonesia has faced struggles of…