The Impacts of Globalisation (Edexcel IGCSE Economics)

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, producers, consumers, workers and the environment

• Some stakeholders have benefited from a more global world, while others, often from developing economies, lose out the most

Advantages of Globalisation and Global Companies

• The rise of globalisation, and the increased numbers of global companies, offer many advantages to different stakeholders

Advantages of Globalisation and Global Companies

Disadvantages of Globalisation and Global Companies

• There is increased criticism of globalisation and global companies, particularly from developing countries

• The disadvantages of globalisation and global companies impact stakeholders in the following ways:

Individual countries

• As globalisation increases, so too does inequality between the richest and poorest countries

  • In developing countries, workers have low trade union membership, so there is a greater exploitation of workers through low wages, poor human rights and worsening income inequality

• There is a loss of traditional industries in developed countries as deindustrialisation causes certain industries to move operations to low cost countries

  • E.g. UK textile industry outsources operations to SE Asia where labour costs are lower, creating structural unemployment

Governments

• Tax avoidance is more easily achieved by global firms, as they can find international loopholes or move profits around to avoid corporation tax

  • Many MNCs have offshore bank accounts and do not bring the profit back home

• Many global companies enjoy revenue that is higher than the GDP of the host nation

  • This gives them immense monopoly power that can be used to influence laws and regulations, or gain special access to raw materials

Producers

• Small local firms struggle to compete with established global firms

  • This puts many local firms out of business, reduces competition in that country and may increase structural unemployment in the host country

Consumers

• Global companies have increased cultural globalisation, as western values replace and erode local cultures and goods with global brands such as Coca-Cola, Nike, and Apple

Workers

• Many global firms have poor working conditions and very low wages

  • Workers in sweatshops often have 12-hour shifts and are expected to work six or seven days a week

• Multinationals are often footloose and have no loyalty to a region

  • This means they can easily decide to move factories which may increase regional unemployment

Environment

• Many global firms move manufacturing to countries with less stringent environmental laws and regulations

• The increased global demand for goods and services has contributed to global warming and a rapid depletion of natural resources, particularly in developing countries

  • E.g. The deforestation in Indonesia for palm oil production results in the loss of 45,000 hectares of forest a year