Globalisation and its impacts
EconomicsΒ· 45 min read
1. Definition and Key Drivers of Globalisationβ β ββββ± 15 min
Globalisation
The increasing integration and interdependence of national economies through growing cross-border flows of goods, services, capital, labour and technology.
Example:
A smartphone designed in the US, with components made in South Korea, assembled in China and sold globally.
Globalisation is not a new phenomenon, but its pace accelerated dramatically from the 1980s onwards. There are four widely recognised key drivers that have promoted this integration:
Trade liberalisation: Reduced tariffs and non-tariff barriers via trade agreements and WTO membership have lowered trade costs.
Technological progress: Container shipping and digital communication have cut the cost of coordinating global operations.
Financial deregulation: Removal of capital controls has enabled free movement of finance and FDI across borders.
Political change: Adoption of market policies in China, India and Eastern Europe opened large low-cost labour markets.
Identify and explain two drivers of the post-1980 acceleration of globalisation.
- 1
First driver: technological advancement in transport. Containerized shipping drastically reduced the per-unit cost of moving goods across long distances, making it economically viable to split production across multiple countries.
- 2
Second driver: liberalization of capital markets. Most countries removed restrictions on foreign ownership of assets in the 1980s and 1990s, allowing multinational corporations to easily invest in low-cost production facilities in developing countries.
2. Economic Benefits of Globalisationβ β ββββ± 15 min
Proponents of globalisation argue it brings widespread benefits to both developed and developing economies, rooted in the principle of comparative advantage:
Gains from specialisation: Countries focus on goods/services where they have comparative advantage, raising global output and lowering consumer prices.
FDI and capital inflows: Developing countries gain access to capital to fund infrastructure and industrial development.
Technology and knowledge transfer: Multinational corporations bring new technologies and management practices that raise productivity.
Increased competition: Global competition incentivises domestic firms to innovate and improve efficiency.
Explain one key benefit of globalisation for a developing country such as Vietnam.
- 1
Vietnam has attracted massive FDI from multinational corporations in manufacturing (textiles and electronics) as a result of global integration.
- 2
This FDI has created millions of formal jobs, generated large export earnings, and brought new production technologies and skills to the Vietnamese economy.
- 3
The resulting sustained economic growth has lifted over 45 million Vietnamese people out of extreme poverty since the 1990s, demonstrating a clear core benefit of globalisation.
3. Costs and Criticisms of Globalisationβ β β βββ± 20 min
Globalisation faces widespread criticism for its negative impacts, particularly the uneven distribution of gains across groups and countries:
Rising inequality: Globalisation has increased within-country inequality, as unskilled workers in developed countries lose jobs to low-wage locations.
Economic vulnerability: Increased interdependence means crises in one country spread rapidly globally, as seen in the 2008 financial crisis.
Exploitation: Multinational corporations often locate in countries with weak regulations, leading to low wages, poor working conditions and environmental degradation.
Loss of sovereignty: National governments have less policy autonomy, as mobile capital can threaten to leave if policies are deemed unfriendly.
Analyse one negative impact of globalisation on a developed economy such as the United Kingdom.
- 1
One key negative impact is the decline of manufacturing in former industrial regions of the UK.
- 2
After trade liberalisation, many firms moved mass production to lower-wage countries in Eastern Europe and East Asia, leading to widespread factory closures.
- 3
This caused long-term unemployment, regional economic decline and rising inequality between prosperous southern regions and deindustrialised northern regions.
4. Evaluating Globalisationβ β β βββ± 15 min
A balanced evaluation for CIE exams requires weighing aggregate gains against the distribution of costs and benefits. Pro-globalisation arguments note that hundreds of millions of people have been lifted out of extreme poverty in China, India and other emerging economies due to global integration.
Critics note that most gains have been captured by wealthy elites and multinational corporations, while working class communities and the environment bear most of the costs. Anti-globalisation movements advocate for greater regulation of capital, stronger labour and environmental protections, and increased support for local production.
Evaluate the view that the benefits of globalisation outweigh the costs for developing economies.
- 1
Arguments for benefits outweighing costs: East Asian economies used global integration to access export markets, attract FDI and achieve rapid growth, lifting hundreds of millions out of poverty. Cheaper imported inputs also boost domestic firm competitiveness.
- 2
Arguments for costs outweighing benefits: Many African economies have seen domestic manufacturing collapse due to competition from cheap imports, leading to deindustrialisation. Commodity dependent developing countries are also more vulnerable to global price shocks.
- 3
Conclusion: The net impact of globalisation depends on how it is managed. Countries that invest in education, infrastructure, and regulate FDI appropriately tend to gain significantly, while those with weak institutions see more costs. Overall, globalisation can be beneficial if well-governed.
5. Common Pitfalls
Wrong move:
Confusing globalisation with only international trade
Why:
Globalisation is a broader process that includes flows of capital, labour and technology, not just trade
Correct move:
Always acknowledge multiple types of cross-border interconnectedness in your answer
Wrong move:
Claiming all developing countries are affected equally by globalisation
Why:
CIE examiners expect you to recognise that impacts vary based on policy and resource endowments
Correct move:
Differentiate between successful integrating countries and those that have not gained in your evaluation
Wrong move:
Only presenting benefits or only costs in an evaluate question
Why:
Examiners require balanced consideration of both sides to reach a supported conclusion
Correct move:
Always outline arguments for both sides before drawing your final conclusion
Wrong move:
Only discussing impacts on developing countries
Why:
Most essay questions ask for analysis across all types of economies, so missing developed economy impacts loses marks
Correct move:
Explicitly cover impacts on both developed and developing economies unless the question specifies otherwise
Wrong move:
Claiming globalisation is an entirely new 21st century phenomenon
Why:
Global integration has occurred since the 19th century, only the pace accelerated after 1980
Correct move:
Acknowledge it as a long-running process that has accelerated in recent decades
6. Quick Reference Cheatsheet
Category | Key Summary Points | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Definition | Increasing global integration via trade, capital, labour, technology | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Main Drivers | Trade liberalisation, tech progress, financial deregulation, political change | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Key Benefits | Comparative advantage gains, FDI-led growth, lower prices, tech transfer | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Key Costs | Rising inequality, economic vulnerability, exploitation, environmental damage | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
E | v | a | l | u | a | t | i | o | n | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
N | e | t | i | m | p | a | c | t | d | e | p | e | n | d | s | o | n | p | o | l | i | c | y | ; | g | a | i | n | s | a | r | e | u | n | e | v | e | n | l | y | d | i | s | t | r | i | b | u | t | e | d | a | c | r | o | s | s | g | r | o | u | p | s |
7. Frequently Asked
Is globalisation always beneficial for developing countries?
No. While globalisation can drive growth and poverty reduction, it can also cause exploitation, environmental damage, rising inequality and increased vulnerability to global economic shocks, especially when poorly regulated.
What is the difference between globalisation and trade liberalisation?
Globalisation is the broad process of increasing global interconnectedness across multiple areas (trade, investment, technology, labour). Trade liberalisation, the reduction of trade barriers, is just one key driver of globalisation.
When this came up on past exams
AI-estimated based on syllabus patterns β cross-check with official past papers for accuracy. Use only as revision-focus signals.
- 2023 Β· 4
Evaluate costs/benefits of globalisation
- 2022 Β· 2
Explain drivers of globalisation
- 2021 Β· 4
Impact of globalisation on inequality