Macroeconomics – Globalisation

"For its supporters, globalisation describes a dream of opportunity and prosperity. For its opponents, it denotes a nightmare of greed and inequality" Explain the term globalisation and the factors that may have contributed to the process. Globalisation can be defined as the integration of the world's economies into a single international market, as local and national markets become incorporated into the global capitalist system of production with increasing interdependence.

It promotes the free movement of labour, capital, goods, services, technology and management in response to markets around the world. The growth of markets in this manner is not a new, but a process that has seen the markets grow from a local scale to a national one during the Industrial Revolution and to an international scale by the end of the 20th century.

The growth of international trade has been significant in furthering globalisation. During the Industrial Revolution, Britain had a significant comparative advantage as its advanced manufacturing technology allowed hugely improved transport through steamships and railway networks across its Empire.

This opened up huge potential markets around the globe for British exports, at the same time making a huge range of goods from these new trading partners accessible to British consumers. Although comparative advantages have changed, this is a trend that has continued into the 21st century, with the rise of low cost air travel and other forms of transport becoming quicker, cheaper and further reaching. There is certainly incentive for this – international trade driving globalisation has seen a rise in the trade of manufactured goods to $12 trillion in 2005, a hundred times greater than it was in 1955.

Over a similar period, the industrialisation of LEDCs has also been significant. As systems of production in economies such as the Asian Tigers, including Taiwan, South Korea and Hong Kong, and increasingly the Tiger Cubs of Malaysia, Thailand and Indonesia along with other NICs have advanced; their economies have become increasingly suited to manufacturing industries. Cheap labour costs in these countries encourage this development, which has been partly responsible for a new international division of labour.

As production and trade of quaternary services such as research and development has increased in the three main areas of influence of North America, the EU and Japan, MNCs have increasingly looked to NICs to provide secondary industry, incentivised by low production costs and an increasingly welcoming attitude from national governments. Whilst restrictions still exist, this is particularly true in India, where rules that previously did not allow FDI are loosening and large firms such as Wal-Mart are seeing opportunities to access new markets, particularly in the IT sector. It is perhaps a result of this and other economic liberalising policies that India is seeing growth rates of 9%.

Whilst the rise of globalisation has certainly seen a widening in participation in international trade – not even the oil producing nations are, for example, energy independent, some economies are far more integrated in the global capitalist system of production than others. As many MEDCs specialise in the production of services, very little of their economies are left purely domestic. In contrast, however, the remaining non-industrialised LEDCs, such as those in Sub-Saharan Africa, have significantly less impact on the global economy. Trading in 'cash crops' and similar primary goods, much economic activity in these nations is still domestic, with many farmers, notably, practicing subsistence farming to the point they have little to no involvement in the cash economy. 

Evaluate the view that, although globalisation has brought benefits to the UK economy, it has not been without significant costs. The process of globalisation has not continued without criticism. Clearly, there have been considerable benefits to the UK economy over several hundred years as a result of globalisation, but are there costs associated with the rise of the global economy and, indeed, are those costs now outweighing the benefits of an interdependent world?