Globalisation (Edexcel A Level Economics A)
Revision Note
Characteristics of Globalisation
Globalisation is the economic integration of different countries through increasing freedoms in the cross-border movement of people, goods/services, technology, and finance. The world becomes the market place for consumers, producers, employers and employees
This integration of global economies has impacted national cultures, spread ideas, accelerated industrialisation in developing nations and led to de-industrialisation in developed nations
Globalisation has been increasing for thousands of years - it is not a new phenomenon
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
The Four Main Characteristics of Globalisation
Increasing foreign ownership of companies | Increasing movement of labour and technology across borders |
Free trade in goods/services | Easy flows of capital (finance) across borders |
Factors Contributing to Globalisation
In 2000, the value of global trade was approximately $6.45 trillion. By 2020, this figure was at $19 trillion
Numerous factors have contributed to the rapid increase in the pace of globalisation but perhaps two of the most significant causes are the improvements in containerised shipping and the innovation in communication technology
Factors Contributing to Globalisation in the Last 50 Years
Economies of scale generated by containerisation in the shipping industry. Improvements in technology have increased capital intensive production, improving productivity | The improved ability for firms to easily connect and to promote themselves internationally as a result of the internet and improvements to communications technology e.g. Skype, WhatsApp, WeChat, Zoom, Microsoft Teams, Google Meet, TikTok etc | The Increased effectiveness of the World Trade Organisation (WTO) in negotiating new trade agreements and in helping countries to open up to free trade (trade liberalisation). This increases international specialisation and the volume of trade |
A rapid growth in the number and influence of transnational corporations like Apple, Microsoft and Amazon | The end of the cold war between Russia and the West in 1990 opened up former communist countries around the world, enlarging the global supply of labour, e.g. more than 800,000 people migrated from East Germany to West Germany between 1990 and 1991 | In the 1990's, the deregulation of many financial markets resulted in the expansion of global financial services and provided more access to capital |
Impact of Globalisation on Stakeholders
Many of the impacts of globalisation have been positive; however, there have been some very negative ones too
When considering the impacts, it is useful to acknowledge all of the stakeholders, including individual countries, governments, firms, consumers, workers and the environment
Two of the more recent criticisms of globalisation include
The lack of action by some governments to help workers unable to find new jobs as a result of structural unemployment
The use of legal mechanisms (e.g. transfer pricing) and corruption by transnational corporations is stripping developing countries of their assets and has been called 'new colonialism'
Examiner Tips and Tricks
De-globalisation is a more recent process you could research. As inequality has widened due to global free market forces, the election and re-election of President Trump in the USA and Brexit in Europe are possible indications of globalisation going too far for some. A global pandemic in 2020 further added to countries reassessing their overdependence on other countries for trade Will COVID-19 slow down globalisation?
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