Globalisation

next lesson previous lesson

Courses Info

Exam Boards: Edexcel, AQA, WJEC, CIE, OCR Level: AS/A LEVELS/IB/IAL

Globalisation

Globalisation refers to countries becoming more closely integrated economically, socially and culturally.

Characteristics of globalisation

Increased trade as a proportion of world GDP
Increased foreign direct investment (FDI)
Increased capital flows between countries.
Increased movement of people between countries

What are capital flows?

Capital flows refer to the inflow and outflow of money between countries from investments.

What is Foreign Direct Investment (FDI)?

Foreign direct investment (FDI) is an investment made by a business from one country in business interests in another country by establishing business operations or acquiring business assets in another country.

What are the Causes of Globalisation?

A reduction in world trade barriers (trade liberalisation)
A decrease in transport cost
An increase in trading blocs around the world
A decrease in the cost of communication
Increase in the growth of transnational (TNC’s) companies around the world
China opened its economy up to the rest of the world.

Factors contributing to Globalisation (in the last 50 years)

Improvements in technology, IT, and communication – this allows companies to operate efficiently globally and allows for easy communication worldwide
Improvements in transport – this makes it easier for employees to travel for work
Improvements in operation – allows for quick, reliable and cheap methods of production
TNCs – these have contributed to globalisation as they are able to take advantage of low labour costs and increase their profits
Financial Markets – financial markets have become international, making it easier to raise money and move money across the world, facilitating international trade

What are the benefits of globalisation?

Increased living standards
Increase in specialisation and comparative advantage
Lower prices and more choice of goods
Increased real GDP
Lower production costs
Increase in economies of scale
Increase or decrease in inequality
Increase in tax revenues
Technology transfer between countries
Increased sharing of managerial skills

What are the disadvantages of globalisation?

Promotion of exploitation of workers as health and safety standard is not always the same in developing countries
Negative environmental impacts due to increased world trade
External shocks could cause potential global instability due to the interconnectedness of countries around the world
Negative impact on the balance of payments

AQA Spec – Additional Content

The role of Multinational Corporations in Globalisation

These are organisations which own or have control over the production of goods / services in various different countries

They exercise economies of scale and have used marketing to their advantage to become recognised globally, as well as incur lower production costs

They can also benefit from containerisation which allows goods to be distributed into smaller sized containers, making it easier and cheaper to load. It also makes the market more competitive as prices fall

Question

Assess the view that the benefits of globalisation outweigh the negatives for a developing country of your choice? (20 Marks)

___________________________________________________________________________________________________________

WJEC Spec – Additional Content

Impacts of Globalisation

Countries

Globalisation can cause trade imbalances between countries – for e.g the US has a large trade deficit with China
There could be discrepancies between the access in which countries have to health, education and markets could
Countries may also experience income / wealth inequalities if the benefits and costs of globalisation are not spready fairly
Global brands can influence a spread of culture

Producers / Consumers

Producers / Consumers can reap the benefits from Economies of Scales and Specialisation
Firms are likely to incur lower average costs – suggesting they can charge consumers with lower prices – as they operate in a competitive environment
Technological advancements mean firms can employ innovative production methods and create new products efficiently
There has been an increase in world GDP levels due to globalisation, increasing living standards and reducing poverty

Government

An increase in international treaties may reduce the Government’s sovereignty

Workers

There may be more job opportunities globally
Structural Unemployment may occur as the use of technology implies less workers are needed to perform tasks
MNCs could be exploiting their workers by providing them with poor working conditions

The Environment

Increased pollution is harmful for the environment and can worsen living conditions in the future if not handled

Quick Fire Questions

1. Define ‘Globalisation’ (2 marks)

2. Identify four characteristics of Globalisation (4 marks)

3. Identify and explain six advantages of Globalisation (12 marks)

4. Identify and explain four disadvantages of Globalisation (8 marks)

5. Identify and explain five factors contributing to Globalisation over the last 50 years (10 marks)

Next Revision Topics:

A Level Economics Past Papers

Author: Tushar Depala

Economics Tutor

View Profile Hire Tushar Depala