What is the impact of Globalisation

  • Created by: becky.65
  • Created on: 13-04-18 19:57

The impact of globalisation on economic growth:

  • The impact of globalisation on a country's economic growth rate is almost always wholly positive
  • Globalisation raises output and average standards of living
  • Globalisation enables each country to specialise
  • No modern examples of autarky exist and the countries that come closest to it - North Korea - are normally deperately poor
  • Some countries are better at producing goods and services than others:
    • in part this simply reflects a different endowment of resources
    • Saudi Arabia specialises in oil production because it is endowed with abundant oil-bearing strata
    • New Zealand specialises in wool and mutton because it has abundant land suitable for grazing sheep
    • Bangladesh has tens of millions of semi-skilled workers but little in the way of available land so it specialises in sewing many of the world's garments
  • If each country specialises and then trades then all countries will end up with more goods than if each country tried to produce everything itself 
  • Specialisation only works if it is then followed by trade
  • The 'gains from trade' show how much each country has gained compared to the no-specialisation option 
  • Less productive countries can gain from specialisation as they release a very productive workforce to do really well and in return they get to keep some of the 'gains from trade'
  • Specialisation and trade leads to every country becoming richer, not just those which have the most to offer
  • Less productive countries can still gain by specialising in the products in which they do relatively well
  • If specialisation is not followed by trade, then the countries will end up with none of one good and lots of another
  • This is known as the 'strategic argument' for limiting free trade in order to retain a degree of self-sufficiency 
  • Britain drills for oil in the high-cost environment of the North Sea even though it would often be cheaper to buy from Saudi Arabia 
  • Globalisation make each industry more competitive
  • Industrial trade makes the market structures of industries much more competitive 
  • When consumers and firms have many suppliers to choose from, competitive forces will reduce the prices while the quality of the products will be driven up, rising prosperity of a country
  • Globalisation always increases competition 
  • Each time another country tries to sell its goods in Britain, then competition in Britain will be increased
  • Even if the new products are no good, then the level of competition has stayed the same; it can never decline
  • Economic growth can therefore, only increase
  • As unit costs are forced down in response to competitive pressues, firms become more productive - for a given quantity of resources they can produce more
  • Therefore, the productive capacity of the economy will increase, enabling economic growth to take place
  • At the height of public consciousness of the concept of globalisation at the turn of the century, there were a number of anti-globalisation protests:
    • 30 November 1999 - Battle of Seattle
    • The WTO Conference was disrupted by several thousand protestors who managed to control several…


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