Globalisation (Cambridge International IGCSE Economics)
What is globalisation?
Spec point — "Causes of changes in globalisation – changes in trade restrictions – changes in transport costs – changes in communication costs – movement of multinational companies (MNCs)"
What is globalisation?
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Globalisation is the economic integration of different countries through increasing freedoms in the cross-border movement of people, goods and services, technology and finance
- Globalisation has been increasing for thousands of years – it is not a new phenomenon
- This integration of global economies has impacted national cultures, spread ideas, speeded up industrialisation in developing nations and led to de-industrialisation in developed nations
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Improvements in technology and the speed of global connections have exponentially increased the level of interdependence between nations in the past 50 years
- Consumers now source products globally recognising global brands wherever they travel
Causes of changes in globalisation
| Cause | Explanation | Effect on globalisation |
|---|---|---|
| Changes in trade restrictions | - When governments reduce tariffs, quotas, or trade bans, international trade becomes easier | - Encourages more trade and global connections |
| Changes in transport costs | - Improvements in shipping, air travel and logistics lower the cost of moving goods between countries | - Makes global trade faster and more affordable |
| Changes in communication costs | - The internet, mobile phones and digital platforms make it easier to manage and expand international trade | - Speeds up decision-making and supports global trade |
| Movement of MNCs | - Multinational companies expand to new countries, setting up production and creating global supply chains | - Spreads economic activity across the world |
The effects of changes in globalisation
Spec point — "– international trade – competition – the environment – migration – income distribution – economic development"
The effects of changes in globalisation
1. International trade
- Trade increases as countries buy and sell more with each other
- Greater specialisation and exchange of goods and services
- Some domestic industries may struggle with foreign competition and domestic unemployment may actually increase
2. Competition
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Firms compete not just locally, but globally
- This can lead to lower prices and improved quality
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However, domestic small or new firms may be pushed out of the market leading to reduced competition within the country
- This may actually lead to an increase in domestic prices
3. The environment
| Positive effects | Negative effects |
|---|---|
| - Sharing of green technologies between countries - MNCs under pressure to meet global environmental standards | - Increased production and transport raise carbon emissions - Deforestation, pollution and overuse of natural resources |
4. Migration
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Workers move to countries with better job opportunities
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Can help reduce unemployment in sending countries
- But may increase unemployment in the receiving country
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May create pressure on services (e.g. housing, healthcare) in receiving countries
5. Income distribution
| Advantage | Disadvantage |
|---|---|
| - Jobs created in developing countries due to MNC investment - Higher wages are often paid to workers in export industries | - The income gap between skilled and unskilled workers may widen - Wealth may concentrate in cities or with foreign-owned companies |
6. Economic development
- Countries benefit from investment, job creation and new technology
- Export-led growth helps raise GDP and living standards
- Can create long-term dependence on MNCs or vulnerable sectors
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