4.1.1 Pros and cons of Globalisation


4.1.1 Pros and cons of Globalisation


  • Firms gain access to cheaper raw materials -> lowers CoP
  • Consumers gain access to cheaper goods/services
  • Relocation of MNCs to emerging economies -> provides jobs
  • Efficiency gains (PE from specialisation and AE from goods being avaiable to more people)
  • Econ. growth in LEDCs from FDI (creates jobs=> outward PPF shift and also leads to an increase in national income => increase in tax revenue => increase in gov spending => increase in AD => growth)
  • FDI permits net investment in capital stock
  • Infrastructure improvement => greater quality of living
  • Higher profits for firms
  • FDI can plug the savings gap
  • Technology transfer from LEDCs to MEDCs => leapfrogging


  • Environmental concerns/ '******' of natural resources
  • Possible trade wars (Infant Industry Argument)
  • Structural unemployment
  • Dutch disease
  • DEoS
  • Overeliance on FDI
  • MNCs=> global loss of cultural diversity
  • MNCs create barriers to entry
  • MNCs are sometimes more powerful than governments
  • Tax rates pushed down to attract FDI => lower tax revenue
  • MNCs often repatriate profits => minimising multiplier effect
  • Property rights of people in LEDCs may be transgressed by MNCs
  • MNCs may employ workers from home country for high-skilled jobs
  • Effect on inequality?


In terms of long-term development for emerging economies. globalisation has mostly a positive impact, as FDI, which can plug the savings gap, allows these countries to accumulate the capital stock required to increase output and improve production processes. Globalisation allows nations to specialise where they have comparative advantage, thus increasing choice for consumers worldwide. However, it can become problematic when economies rely solely on exports for growth, as an increase in global protectionism and trade wars (which is argued for by the Infant Industry Argument), would lead to a rapid decline in growth for those export-led economies.


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