Explain the economic impacts of globalisation, both positive and negative, including growth and jobs, competition, and uneven gains

What this dot point is asking

This dot point asks you to explain the economic impacts of globalisation, both positive and negative. The examiner wants you to show that globalisation has a mixed effect on the economy: it brings growth, jobs, investment and cheaper goods, but also competition, job losses and uneven gains. A strong answer explains effects on both sides with examples, and reaches a balanced view, recognising that for a trading nation like Singapore the benefits are large but the problems must be managed.

The answer

Positive impact: growth, jobs and investment

Globalisation boosts the economy by opening up trade and attracting investment. When companies trade across borders and set up operations in a country, they create jobs and bring money in, helping the economy grow. Access to bigger markets lets businesses sell to the whole world, not just at home, so they can grow larger. For a country open to the world, this is a powerful engine of growth and rising incomes.

Positive impact: cheaper goods and choice

Because countries trade, people gain access to a wider range of goods, often more cheaply than if everything were made at home. Each country can focus on what it does best and trade for the rest. Consumers enjoy more choice and lower prices, which raises living standards. This is a clear everyday benefit of globalisation for ordinary people.

Negative impact: competition and job losses

Globalisation also brings tough competition. When work can move to wherever it is cheapest, some jobs leave for countries with lower costs, and local workers may lose out. Businesses that cannot compete with cheaper or better foreign rivals may close. Workers may also face competition from foreign labour. So globalisation can cause job losses and insecurity, especially for those whose work is easily moved.

Negative impact: uneven gains and exposure to shocks

The gains from globalisation are uneven. Skilled workers and successful businesses tend to gain a lot, while others gain little or lose out, which can widen the gap between rich and poor. Economies also become more exposed: a downturn or crisis in one part of the world can quickly spread, affecting jobs and prices at home. These problems mean globalisation's benefits do not reach everyone equally and come with risks.

Examples in context

Example 1. Foreign companies creating jobs. Global companies that set up regional operations in Singapore create jobs and bring investment, helping the economy grow. This shows the positive economic impact of globalisation through trade and foreign investment.

Example 2. Jobs moving to lower-cost countries. When manufacturing or services move to countries with cheaper labour, some workers in higher-cost economies lose their jobs. This shows the negative side of competition and the need to retrain workers, linking directly to how Singapore responds to economic changes.

Try this

Q1. State two benefits and two problems of globalisation for an economy. [2 marks]

• Cue. Benefits: growth and jobs, and cheaper or wider choice of goods (investment, access to markets also accepted). Problems: competition and job losses, and uneven gains (exposure to global shocks also accepted).

Q2. Explain how globalisation can lead to job losses in some industries. [3 marks]

• Cue. When work can move to wherever it is cheapest, some jobs leave for lower-cost countries, and businesses that cannot compete with cheaper or better foreign rivals may close, so local workers in those industries can lose their jobs.

Q3. Explain why the benefits of globalisation may not reach everyone equally. [3 marks]

• Cue. Skilled workers and successful businesses tend to gain a lot, while those with fewer skills or jobs facing competition gain little or lose out, so the gains are uneven and can widen the gap between rich and poor.