Increased integration and interdependence between countries coming together in a global economy
Globalisation
- Eroding national boundaries, international developments, international organizations having and increasing impact on economic performance
- Trades in G + S US$8.5 trillion to US$16.0 trillion 1990-2002. Averaging 7% growth per year.
- Financial flows reaching US$24.5 trillion in 2003. Deregulation of financial markets. Increased volatility and speculation.
- Investment growth. FDI grew seven fold between 1990-2000. Fell to US$560 billion in 2003 due to economic slowdown. Reflecting interdependence between developing and developed.
- TNC's doubled from 37,000 to 60,000. Expansion of other features extending beyond national boundaries.
- Advocates - best opportunity for growth, specialization, allocative efficiency, greater access to technology, labour and increased living standards
- Critics - Widening gap between rich and poor, distorts distribution of income and wealth, environmental costs, richer nations and NIC's are favored, while developing and transition economies are neglected
Trade
- Increased trade flows with growth in trading blocs and agreements. Increased specialization and efficiency. Increase growth and GWP. Growth in global trade expected to remain over 7%.
- FTA with China in July 2005 TFC industry. Lift tariffs, may cause structural unemployment, benefit specialist/brand name textile market
- If trade growth in Africa, Asia and Latin America is lifted by 1%, it will lift 128 million out of poverty
- WTO Doha November 2001 - cut protection US$700 billion, raise GWP by US$2.8 trillion by 2015 - failed to meet January 1 2005 deadline. WTO Hong Kong November 2005.
- Poorer nations' share of world trade has declined
Financial and investment flows
- Deregulation, improve access to overseas finance to fund domestic investment, negative effect on CAD, increased volatility and speculation
- Increased FDI - six times greater than levels in 1980's, 77% of flows received by developed nations in 2002. Accelerates growth and innovation.
- Growth of capital flows, increased speculation and volatility, Asian financial crisis in late 1990's, short term financial flow increased with exchange traded derivatives reaching US$24.5 trillion in 2003. Negative impact on CAD and growth.
Economic Performance and Living Standards
- Increased competition, technology, innovation, specialization in efficient industries, increased global growth
- Sub-Saharan African transition economies experiencing stagnant/negative rates of growth. NIC's in Asia Pacific average growth of 7.3% 1990-2002.
- Absolute poverty is decreased with increased growth and better living standards
- Countries unable to attract FDI are worse off as the income gap widens. Emergence of the "global elite" with majority of poorer nations left behind as resources and labour are directed to the richer productive nations. 2.8 billion living on less than US$2 a day.
Government Policies
- Economic management - market oriented economic policy to increase international competitiveness. Australian economy adopting floating exchange rate in December 1983 as a shift towards market forces. Less Government intervention opening up economy. Implementing of macroeconomic policy for the long term supply rather than macro short term demand which will effect inflation and markets.
- Transition economies adopting these policies have suffered from severe economic problems
Environmental Problems
- Greater global environmental awareness - global policies conventions to enforce environmental compliance. Ratification of the Kyoto protocol achieving multilateral progress.
- Environmental degradation through industry practices, exploitation of environment for economic growth
- WTO restricting ability of countries to put environmental protections as they are trade barriers. Doha discussing possible proposals.
