CHAPTER 4 - GLOBALIZATION (ECONOMICS CLASS 10)

1. What is globalization?

Globalization is the word used to describe the growing interdependence of the world's economies, cultures, and populations, brought about by cross-border trade in goods and services, technology, and flows of investment, people, and information. Globalisation also means the integration between countries through foreign trade and foreign investments by multinational corporations (MNCs) 

2. In what ways is a MNC different from other companies?

An MNC owns and operates production across various countries of the world while other companies do not. Foreign trade and foreign investment are essential features of an MNC while they are not in the case of other companies.

3. Trade routes connecting India and south Asia to markets both in East and West-

Silk Road-The Silk Road is the world's most famous trade route, starting from China, passing through Anatolia and Asia and reaching Europe. ... 

The Tea Horse Road- 

From the 6th century to the 20th century, people in Sichuan and Yunnan provinces travelled by foot and horseback with pack horses to exchange tea for horses with people in Tibet - and thus the pathway was called the Tea Horse Road. Chinese tea and Tibetan horses were long traded on the legendary Tea Horse Road, a harsh 2,250km trail stretching from China's Sichuan Province to Tibet's capital city of Lhasa

4. Functions of foreign trade?

Foreign trade creates an opportunity for the producers to reach beyond the domestic markets, i.e., markets of their own countries. Producers can sell their produce not only in markets located within the country but can also compete in markets located in other countries of the world. Similarly, for the buyers, import of goods produced in another country is one way of expanding the choice of goods beyond what is domestically produced. Foreign trade thus results in connecting the markets or integration of markets in different countries. 

5. Investment VS Foreign investment

The money that is spent to buy assets such as land, building, machines and other equipment is called investment. Investment made by MNCs is called foreign investment.

6. Main channels connecting countries in the past and present

Trade and trade routes were the main channels connecting countries in the past. The silk route and tea horse route were examples of trade. In today’s time beside trade, capital, technology, people and services-flow is also taking place all over the world. Today the world is connected in a way where production also takes place across different countries

7. How do MNC’s function? Role of MNC’s in Globalisation.

Any investment is made with the hope that these assets will earn profits. At times, MNCs set up production jointly with some of the local companies of these countries. The benefit to the local company of such joint production is two-fold. First, MNCs can provide money for additional investments, like buying new machines for faster production. Second, MNCs might bring with them the latest technology for production. But the most common route for MNC investments is to buy up local companies and then to expand production. MNCs with huge wealth can quite easily do so. To take an example, Cargill Foods, a very large American MNC, has bought over smaller Indian companies such as Parakh Foods. Cargill is now the largest producer of edible oil in India, with a capacity to make 5 million pouches daily. There’s another way in which MNCs control production. Large MNCs in developed countries place orders for production with small producers. Garments, footwear, sports items are examples of industries where production is carried out by a large number of small producers around the world. The products are supplied to the MNCs, which then sell these under their own brand names to the customers. These large MNCs have tremendous power to determine price, quality, delivery, and labour conditions for these distant producers. MNCs are exerting a strong influence on production at these distant locations. As a result, production in these widely dispersed locations is getting interlinked. 

8. What is a trade barrier?

Trade barriers are government policies which place restrictions on international trade. Trade barriers can either make trade more difficult and expensive (tariff barriers) or prevent trade completely (e.g. trade embargo)Tax on imports is an example of trade barrier. It is called a barrier because some restriction has been set up. Governments can use trade barriers to increase or decrease (regulate) foreign trade and to decide what kinds of goods and how much of each, should come into the country.

9. What is liberalization?

Removing barriers or restrictions set by the government is what is known as liberalisation. With liberalisation of trade, businesses are allowed to make decisions freely about what they wish to import or export. The government imposes much less restrictions than before and is therefore said to be more liberal. 

10. Fair globalization: While globalisation has benefited well-off consumers and also producers with skill, education and wealth, many small producers and workers have suffered as a result of the rising competition. Fair globalisation would create opportunities for all, and also ensure that the benefits of globalisation are shared better. 

11. Impact of globalization:

In general, globalization decreases the cost of manufacturing. This means that companies can offer goods at a lower price to consumers. The average cost of goods is a key aspect that contributes to increases in the standard of living. Consumers also have access to a wider variety of goods.

Globalization also have its side effects to the developed nations. These include some factors which are jobs insecurity, fluctuation in prices, fluctuation in currency, capital flows and so on.