2.6.1 Globalisation (A-level only)

Globalisation Integrates National Economies Through Trade, Investment, Migration and Technology

1. Globalisation is the increasing integration of national economies.
2. It works through trade, investment, migration and technology.
3. Its features include rising trade, capital flows, migration and transnational production.
4. It has been driven by liberalisation, falling costs and political change.

Rising Trade, Capital Flows, Migration and Transnational Production Define Globalisation

1. Trade has risen as a share of world output.
2. Investment and capital flows have grown across borders.
3. Migration has increased between countries.
4. Transnational production spreads supply chains across countries.

Liberalisation, Falling Costs and Political Change Caused Globalisation

1. Trade and capital-market liberalisation opened economies.
2. Falling transport and communication costs made trade cheaper.
3. Containerisation cut the cost of shipping goods.
4. The opening of China and the former Soviet bloc added huge new markets.

Globalisation Is a Broad Process, Not Just Rising Trade

1. Focusing only on trade misses much of globalisation.
2. Investment and migration are just as important.
3. Technology ties markets ever more closely together.
4. So globalisation is a broad process, not just rising trade.

Cover All Four Strands When You Define Globalisation

Globalisation Creates Winners and Losers Across Developed and Developing Countries

1. Globalisation brings both benefits and costs.
2. These fall differently on more-developed and less-developed countries.
3. They also fall differently on producers, consumers and workers.
4. So there are winners and losers, not one uniform effect.

The Benefits Include Growth, Lower Prices and Technology Transfer

1. Trade and investment can raise growth.
2. Larger markets allow economies of scale and lower prices.
3. Consumers gain more choice.
4. Technology can transfer between countries.

The Costs Include Structural Unemployment, Inequality and Environmental Damage

1. Some sectors face structural unemployment as production shifts.
2. Inequality can widen within countries.
3. Labour can be exploited in low-cost locations.
4. Transfer pricing can cut tax revenue and production can harm the environment.

Whether Globalisation Is Good or Bad Depends on the Country and the Group

1. For globalisation: faster growth, lower prices and technology transfer.
2. Against: job losses, inequality, exploitation and environmental harm.
3. The balance differs across countries and groups.
4. On balance, globalisation raises total output but creates winners and losers, so whether it is good or bad depends on the country, the group and how far losers are supported.

Identify the Winners and Losers Before Reaching a Judgement

Multinationals Drive Globalisation Through Foreign Direct Investment

1. A multinational corporation produces in more than one country.
2. Foreign direct investment is investment in productive assets abroad.
3. Firms invest abroad for markets, lower costs and resources.
4. FDI brings benefits and costs to the host country.

Firms Invest Abroad to Reach Markets, Cut Costs and Access Resources

1. To reach new markets and customers.
2. To lower costs by producing where inputs are cheaper.
3. To access resources or skills.
4. To get inside a trading bloc's tariff wall.

FDI Brings Jobs and Technology but Also Profit Repatriation and Transfer Pricing

1. FDI can create jobs and raise growth.
2. It can transfer technology and skills.
3. But profits may be repatriated rather than reinvested.
4. Transfer pricing can shift profits to cut tax.

Whether FDI Helps the Host Depends on Reinvestment, Tax and Government Control

1. For FDI: jobs, growth, technology and investment.
2. Against: profit repatriation, transfer pricing and market power.
3. Governments may struggle to control large transnationals.
4. On balance, FDI can benefit a host country, but the gain depends on how much is reinvested, how much tax is paid and how far the government can hold the firm to account.

Weigh the Host-Country Gains Against the Losses