What Is Globalisation, and What Causes It?
Learn what globalisation means and what causes it, from lower trade barriers to better transport and technology, with a concise A Level Economics explanation.
Globalisation is the growing interconnectedness of countries through trade, investment, technology and the movement of people and ideas. It means that economic decisions in one country can have wider effects elsewhere. For example, a firm might design a product in one country, make it in another and sell it in several more.
Syllabus focus: International economic issues; A Level point 11.6.1, meaning of globalisation and its causes and consequences. Globalisation is part of the A Level content, although it builds on international trade studied at AS Level.
What causes globalisation?
- Lower trade barriers: Reducing tariffs (taxes on imports) and other restrictions makes it easier for goods and services to cross borders.
- Better transport: Faster, cheaper shipping and air travel reduce the cost of moving products and people.
- Improved communication: Digital technology helps firms coordinate production and reach customers in different countries.
- International investment: Firms can set up or expand operations abroad. A multinational company is a business that operates in more than one country.
- Greater movement of people: Migration can connect labour markets and spread skills and ideas.
For example, if shipping costs fall, a firm can buy components from suppliers abroad and sell its finished goods in more markets. This links production across countries. If a disruption stops one supplier, firms and consumers elsewhere may face delays or higher prices.
Why does it matter?
Globalisation can give consumers more choice and firms access to larger markets. It can also create jobs through investment. However, firms facing stronger foreign competition may lose sales or close, and the gains may not be shared equally. Its effects therefore depend on which workers, firms and countries you consider.
Common exam mistake: Do not define globalisation as simply ‘more international trade’. Trade is one part of it; investment, production links, technology and the movement of people also connect economies.
