Globalisation

Globalisation is an increase in interdependence between countries and movement towards a single global economy.

?
  • Created by: Ayomide
  • Created on: 24-02-13 00:54

Globalisation

Advantages

  • Higher Profits for MNC's e.g. due to lower costs by employing cheaper labour.
  • Income from FDI for developed countries where MNCs are based. In addition they provide jobs.
  • MNC's being able to produce goods cheaply could result in lower prices
  • Increase in quantity of labour as workers are able to move freely between countries e.g. EU legislation
  • Less conflict - More trading internationally could reduce war
  • Extra output and unemployment from FDI will mean increased economic growth for developed countries
  • Developed countries gain more tax revenue as they tax MNCs
  • Free trade is encouraged by globalisation and so all countries benefit
  • FDI allows countries to increase exports, as the output sold by the MNC in their is counted as an export for their country.
  • Globalisation creates employment, especially for developing countries, from MNCs using FDI.
  • It means usually that developing countries are introduced to new technology and modern working practices through MNCs.
  • Workers in developing countries learn new skills as a result of training and on-the-job learning when employed by MNCs.

Disadvantages

  • Globalisation usually results in global economic growth which usually means more environmental damage. E.g. more cars are bought.
  • Less developed countries could be exploited:
  • Globalisation could encourage developing countries to produce in the primary sector, which restricts growth as their income elasticity of demand is low. Also the prices of primary products fluctuate frequently, meaning the country's income is never constant.
  • MNCs pay low wages and may employ child labour. Poor conditions.
  • Resources are extracted and sold with little money going to country.
  • Tax gained by country is minimal
  • Globalisation involves interdependence This means if the economy of one country fails, the economies of others will suffer. E.G Germany in 1929 after America's wall street crash.
  • Developed countries benefit more from globalisation as they have the resources to exploit the forces of globalisation.

Evaluation

Globalisation is better for the global economy however it is likely that developed countries are likely to benefit more from it than developing countries.

Comments

No comments have yet been made

Similar Economics resources:

See all Economics resources »