Explain globalisation, its causes, and assess its benefits and costs for countries, firms and workers

What this dot point is asking

The syllabus wants you to explain globalisation, its causes, and to assess its benefits and costs for countries, firms and workers. The big idea is that the world's economies have become far more connected, which brings real gains in trade, investment and choice, but also creates winners and losers, so a good answer weighs both sides.

The answer

What globalisation is

A connected world means goods made in one country are sold everywhere, firms operate across many countries, and money and information flow almost instantly between them.

The causes of globalisation

Several developments have driven globalisation:

• Cheaper, faster transport. Container shipping and air freight make it cheap to move goods worldwide.
• Improved technology and communication. The internet and modern communications let firms run operations across many countries and let money and data flow instantly.
• Freer trade. Lower trade barriers and free trade agreements have made it easier to trade across borders.
• The growth of multinational companies (MNCs). Large firms that produce and sell in many countries spread production and trade across the globe.

The role of multinational companies

A multinational company (MNC) is a firm that produces or operates in more than one country. MNCs are central to globalisation: they invest in factories abroad, create jobs, and move goods, technology and profits across borders. Their decisions about where to produce shape the global economy.

The benefits of globalisation

Globalisation brings real gains:

• Cheaper and more varied goods for consumers, as goods are made where they are cheapest.
• Larger markets and growth for firms and countries that can export to the world.
• Foreign investment and jobs, as MNCs build operations in other countries.
• Transfer of technology and skills from richer to poorer countries.

The costs of globalisation

Globalisation also has costs, and the gains are not shared equally:

• Pressure on local firms and jobs. Domestic firms may be unable to compete with large MNCs or cheap imports, and some jobs move to lower-cost countries.
• Insecure or low-paid work, and profits may flow back to an MNC's home country rather than staying local.
• Greater dependence, leaving countries more exposed to global downturns and disruptions.
• Environmental costs, as more production and transport can raise pollution.

Examples in context

Example 1. Singapore as a global hub. Singapore has embraced globalisation, attracting many multinational companies to base regional operations there and building world-class port and airport links. This has brought investment, jobs and growth, making Singapore one of the clearest examples of a country that has gained from a connected world.

Example 2. Jobs moving between countries. As firms seek lower costs, some manufacturing jobs have moved from higher-wage to lower-wage countries. This benefits consumers through cheaper goods and the receiving country through new jobs, but workers in the industries that shrink can lose out, showing the uneven effects of globalisation.

Try this

• Cue. Define globalisation. The growing connection and integration of the world's economies through rising trade, investment and the movement of people, money, technology and ideas across borders.

• Cue. State two causes of increasing globalisation. Any two of: cheaper and faster transport; improved technology and communication; freer trade and trade agreements; or the growth of multinational companies.

• Cue. Give one benefit and one cost of globalisation for workers. Benefit: new jobs created by foreign investment and larger export markets. Cost: some jobs lost as production moves to lower-cost countries, and work may be insecure or low-paid.