Definition of Globalisation – the process of
increased integration and co-operation of different national economies. It
involves national economies becoming increasingly inter-related and integrated.
Benefits
of Globalisation
1. Free Trade
Free trade is a way for countries to exchange goods and resources. This means countries can specialise in producing goods where they have a comparative advantage (this means they can produce goods at a lower opportunity cost). When countries specialise there will be several gains from trade:
Free trade is a way for countries to exchange goods and resources. This means countries can specialise in producing goods where they have a comparative advantage (this means they can produce goods at a lower opportunity cost). When countries specialise there will be several gains from trade:
1. Lower prices for consumers
2. Greater choice of goods
3. Bigger export markets for domestic manufacturers
4. Economies of scale through being able to specialise
in certain goods
5. Greater competition
2.
Free Movement of Labour
Increased labour migration gives advantages to both
workers and recipient countries. If a country experiences high unemployment,
there are increased opportunities to look for work elsewhere. This process of
labour migration also helps reduce geographical inequality. This has been quite
effective in the EU, with many Eastern European workers migrating west.
Also, it helps countries with labour shortages fill
important posts. For example, the UK needed to recruit nurses from the far east
to fill shortages.
However, this issue is also quite controversial.
Some are concerned that free movement of labour can cause excess pressure on
housing and social services in some countries. Countries like the US have
responded to this process by actively trying to prevent migrants from other
countries.
3. Increased Economies of Scale.
Production is increasingly specialised.
Globalisation enables goods to be produced in different parts of the world.
This greater specialisation enables lower average costs and lower prices for consumers.
4. Greater Competition
Domestic monopolies used to be protected by lack of
competition. However, globalisation means that firms face greater competition
from foreign firms.
5. Increased Investment
Globalisation has also enabled increased levels of
investment. It has made it easier for countries to attract short term and long
term investment. Investment by multinational companies can play a big role in
improving the economies of developing countries.
