Globalisation is the integration of the world’s economies into a single market. Government’s influence globalisation greatly as they are able to regulate trade and the movement of labor and capital between their borders.
Causes of Globalisation
1. Cheaper international transport which has made it easier and more cost effective to export to foreign countries.
2. Increasing global incomes and demand for goods and services.
3. More advanced technology making communication and marketing cheaper and easier especially on a global level.
4. Increased cooperation between countries and trading blocks to make trading between countries easier.
Effects of Globalisation
1. More international trade which now accounts for about 30% of the worlds GDP.
2. Greater specialisation as there is greater competition from other countries which means they have to rely more and more on products they have a comparative advantage in.
3. Economies of scale have increased due to bigger markets that firms can sell in and more available technology as research can be shared easier.
Developed Economies (MEDC’S)
+Increased competition (lower price and more choice) as less developed economies with lower costs and restrictions compete in the global economy.
+/-Migration as more people wish to come into the country from other countries (especially low income earners), this can boost GDP but can also lead to lower wages and greater unemployment.
-De-industrialization as less developed economies can compete at lower prices mainly due to less restrictions and labor costs, it can lead to structural unemployment especially among low skilled workers.
Less Developed Economies (LEDC’S)
+Greater economic growth as multinationals setup due to lower costs and domestic (native) firms enjoy greater exports.
+Greater investment from abroad (FDI) improves workforce skills, infrastructure and therefore the productive capacity of the economy.
-It can have a big environmental impact due to increased industrial production and transportation.
-It can reduce the power of governments as multinationals have a big effect on the economy and can therefore influence political decisions.