Globalisation

What is globalisation

Globalisation is the increasing interconnectivity of the world in economic, cultural and political terms. We are most interested in the way econmies have become more interconnected.

The division of the 2nd World War was a driving force behind the globalisation that has swept the globe since. Countries determined to co-operate and avoid another catastrophe became more open reducing trade barriers like tarrifs, quotas and regulations.

Transportation has greatly improved meaning that products can be transported to places you wouldn't think possible before. 100 years ago the idea that there might be New Zealand lamb in British supermarkets was outlandish. By far the biggest transportation improvement in terms of trade has been containerisation. The transporting of goods in standard sized containers that can easily be moved between ships, trains and trucks has made it far more convenient to trade in all sorts of goods.

As well as improvements in the trade of goods, countries also reduced rules about foreign ownership. This led to the development of large multinational corporations that exist today spanning multiple countries.

The internet has had a huge role in connecting the world and increasing the pace of globalisation by making it so easy for firms in one country to interact with consumers in another.

How development is measured

The accepted manner of measuring development is with the United Nation's Human Development Index or HDI for short. The HDI measures a range of factors including life expectancy, years of education and GDP per capita

As we mentioned back in the economic growth unit, GDP per capita is a more accurate refection of incomes in a country than GDP alone. The inclusion of other factors helps to take into account disparities that may exist in countries that are disguised by a relatively high GDP per capita.

Life expectancy and access to healthcare can give a lot of indication about the quality of life in a country. The same is true of the number of years of compulsory education and average number of years of education. Access to technology is another key factor with the internet bringing great leaps in areas such as education and business.

Evaluate the costs and benefits of globalisation to developed countries

Costs and benefits for producers

Costs	Benefits
Susceptible to global economic trends for export demand	Larger markets to sell to
Loss of competitive advantage especially where industries are labour intensive	Cheaper or better inputs to production from abroad
Supply chain issues in a crisis	Improved technology through joint research and development projects
	A better quality labour force with more workers of all types

Costs and benefits for workers

Costs	Benefits
If workers are specialised in a declining industry it may be hard to find new work that is suitable	Because of more output due to exporting there will likely be more employment needed to produce the additional output
Global downturns may affect local unemployment levels as less exports are demanded	More foreign investment leading to more jobs being created
If increases are achieved through mechanisation then employment levels may actually fall despite output increasing	Workers are able to work in more different countries
Immigration could lead to some people losing their jobs to qualified foreign workers willing to work for less

Costs and benefits for consumers

Costs	Benefits
Price volatility especially on goods in high demand by all like fuel and basic food stuffs	More choice because there are products from all over the world
Homogenization of products because of global brands available everwhere you go making everywhere seem less unique	Lower prices as a result of things being produced by specialists with a comparitive cost advantage
Higher levels of international crime such as drug and people smuggling	Innovative and high quality products as a result of firms responding to increased competition
	Improved services due to bringing in skilled labour from elsewhere
	Opportunity to travel to mre countries

Evaluate the costs and benefits of globalisation to less developed countries

Costs and benefits for producers

Costs	Benefits
Susceptible to changes in demand from outside especially when focussed on only a few main indutries	They have a wider market in which to sell their produce
Often primary producers and susceptible to climate effects on crops	They can often achieve big technological advances through research and development projects with developed nations
Often face a brain drain with the most skilled workers moving to developed nations	Brings more foreign investment that creates jobs for people in the develping nation
New small scale industries may have trouble competing with international firms limiting new opportunities

Costs and benefits for workers

Costs	Benefits
If gains are through mechanisation it may lead to job losses despite higher output	With a larger market output increases and to roduce this extra output additional workers may be emloyed
Benefits of growth may be very inequally distributed increasing the income and wealth gap in those countries	Workers are able to get jobs in other parts of the world that may offer higher wages and or a better standard of living
Workers may be subjected to poor working conditions as producers aim to cut costs in countries with less stringent health and safety protections for workers	Increased foreign investment can mean more job opportunities for workers
If conditions worsen in countries that buy their produce it could lead to job losses in the developing country

Costs and benefits for consumers

Costs	Benefits
As more countries compete for basics like rice and grains and prices rise it may make these unattainable to developing nations with less resources	International investment often brings improvements in infrastructure that can benefit more businesses in the country
If a lot of the best and brightest leave for jobs in other countries then services in the devlping nation will be poorer with less professionals available	Wider choice of products for those that can afford them including products from multinationals
	Greater ability to travel for those that can afford it

Knowledge check

Questions:

Correct:

Question text