Economics Unit 3- Globalisation

1. Globalisation means that MNC’s can move freely between countries and can locate in LEDC’s to take advantage of low labour costs. This is a benefit to LEDC’s as there will be a higher chance of employment. This means higher living standards for those living in LEDC’s as they will have higher incomes.

2. The arrival of MNC’s into LEDC’s means that there can be a transfer of technology and skills to that country. This is because the MNC will have the most up to date technology and production techniques. This means that other businesses can benefit from exposure to better technology and can become more productive themselves.

1. Globalisation has led to an increase in pollution in LEDC’s. This is because there are more factories located in these countries and often very few government regulations about pollution. This means that MNC’s can produce their goods and pollute the local environment. There is also more pollution caused by transporting the goods and services from LEDC’s to MEDC’s.

2. The wages and conditions in some of the factories are very poor.  This is because there are very few labour laws in LEDC’s eg National Minimum wages. This means that workers may have a job but they are working for a very low wage and in conditions which would not be tolerated in MEDC’s.

Overall, globalisation has been beneficial to LEDC’s because even though the wages and conditions experienced in MNC’s are poor, we can assume that the next best alternative is even worse. This means that living standards are improving. Equally, no job is always worse than a poorly paid job.

1.      1. With increased amounts of trade, consumers in MEDC’s have access to products which they would not have access to if it had to be produced domestically eg. Bananas and pineapples. They can also purchase products for a lower price.

2     2.British firms can sell their exports all over the world. This increases profits for firms and leads to a balance of payments surplus.

1.      1. Increased globalisation has led to the loss of jobs in MEDC’s. This is because firms can locate anywhere in the world so tend to locate in countries where there are low labour costs, unlike in the UK where there is a National Minimum Wage. This means firms leave MEDC’s to locate abroad and this causes unemployment.

2    2. UK firms may struggle to compete with firms from all over the world as they may not be competitive eg. British steel cannot compete with Chinese steel.

1.      1. Increased globalisation has led to the loss of jobs in MEDC’s. This is because firms can locate anywhere in the world so tend to locate in countries where there are low labour costs, unlike in the UK where there is a National Minimum Wage. This means firms leave MEDC’s to locate abroad and this causes unemployment.

2    2. UK firms may struggle to compete with firms from all over the world as they may not be competitive eg. British steel cannot compete with Chinese steel.

Overall, The UK has benefited from globalisation since living standards have risen significantly since the 1950’s. This is linked to cheaper food and fuel, two necessities for high stands of living.

1. Poor Healthcare

-Without access to basic healthcare, there will be a lower life expectancy in the country. This means the size of the workforce will be smaller and so will limit the output of the country.

-Poor healthcare also means that workers will not be fit to attend work and this reduces household income and can lead to absolute poverty.

-Poor healthcare will also deter inward investment from MNC’s because they will not want to locate in a country where the incidence of communicable diseases is high. They will also not want to invest in the education of the workers because a low life expectancy will mean their investment will not pay off.

EVALUATION:

Even though the provision of basic healthcare can be relatively cheap to provide, it will only be effective if there is sufficient infrastructure to reach people in rural areas as this is where healthcare provision tends to be worse in LEDC’s.

2. Education

-Poor standards of education will mean that workers may well be illiterate so can only take up unskilled poorly paid jobs. This lowers household income levels and can perpetuate absolute poverty and lower economic growth.

-Also, a poorly educated workforce will have a lower level of skills and therefore lower levels of productivity. This means that their businesses will not be as competitive as those in other countries so cannot benefit from exporting their goods globally.

-Low education levels may also deter inward investment from MNC’s as the workers will be unskilled and so require higher levels of training.

EVALUATION:

Providing education will be effective in helping a country benefit from globalisation in the long term. However it takes a long time to educate a person whereas providing healthcare can have almost immediate impacts on the productivity of workers.

1. Infrastructure

-Poor infrastructure means that citizens may have no access to clean water. This increases the level of absolute poverty as well as leading to the spread of diseases such as cholera. Also, without good transport, rural citizens may not be able to travel to urban areas to receive treatment for their illnesses.

-Poor transport links mean that businesses cannot transport their goods easily and cheaply. This means that their exports will be less competitive than those of other countries and they will not be able to sell as many exports.

-Poor communication eg. The Internet will limit the ability of businesses to access the global market and sell their goods and services globally through online services.

EVALUATION:

Infrastructure is arguably the most important factor limiting countries from benefiting from globalisation. This is because the provision of healthcare and education is dependent on good infrastructure so not only does it have impacts on workers but it also enables firms to access the global market and create growth.

1. Corruption

-Corruption is a form of dishonest or unethical conduct by a person entrusted with a position of authority, often to acquire personal benefit. Corruption may include many activities including bribery and embezzlement. Corruption will limit the benefits of globalization since funding will be diverted away projects which will benefit growth and development eg. Education. Research has found a very strong link between corruption and economic development and is said to be the biggest limiting factor to development in Africa.

EVALUATION:

However, if the World Bank and the IMF can hold countries accountable for how their funds are spent, this will limit the amount of corruption and allow funds to be spent effectively in their country and help them benefit from globalisation.

1. Civil war

- Civil war leads to higher levels of absolute poverty since homes and farms are often destroyed. Also, the labour force is reduced in size due to high death tolls.

- War also diverts funds away from development projects such as health since the money is being spent on guns.

- War will also deter inward investment from MNC’s who will not want to locate in such an unstable country. It may also lead to MNC’s leaving the country to locate in other countries.

EVALUATION:

Civil war is seen as one of the biggest contributors to limits in development since some of the lowest growth rates and highest poverty rates are seen in Sub-Saharan Africa, an area which also has a high incidence of civil war.