Question

What does the "race to the bottom" mean in relation to the global economy?

a) Retailers and manufacturers will go anyplace on earth to find the lowest wages.
b) Retailers and manufacturers will go anyplace on earth to avoid environmental restrictions.
c) Retailers and manufacturers will go anyplace on earth to find lax governmental regulations.
d) All of the above are characteristics related to the "race to the bottom."
e) None of the above is a characteristic related to the "race to the bottom."

Answer 1

The 'race to the bottom' refers to countries lowering environmental standards to attract businesses, leading to global environmental degradation. Real-world factors influencing company locations can be complex, including more than just environmental regulation leniency.

Step-by-step explanation:

The term "race to the bottom" refers to a phenomenon in the global economy where countries competitively lower their environmental standards to attract multinational companies. These companies, motivated by profit, often seek locations with the least stringent regulations to minimize costs and maximize profits. This pursuit can lead to lower global environmental standards as countries try to outcompete each other to become more attractive to business investments, hence the term 'race to the bottom.'

While this scenario seems logical, in reality, many firms consider numerous factors beyond weak environmental regulations when deciding factory locations, including labor and capital costs, proximity to markets and inputs, as well as transportation quality. However, the threat of the 'race to the bottom' poses significant concerns about global environmental degradation and the varying pace at which environmental standards might improve in low-income countries.