Producers and the Government in the UK

Evaluate the impact of globalisation on consumers, workers, producers and the Government in the UK. Globalisation refers to the world economy becoming increasingly integrated, becoming a single international market rather than many national markets. It has brought in diminishing national borders and the fusing of individual national markets. The fall of barriers as stimulated free movement of capital and paved the way for companies to set up different regional bases around the world.

When discussing globalisation, many people simply immediately discriminate against the developed countries, claiming they exploit the developing countries and keeping all the gains for themselves. Critics say the West's gain has been at the expense of developing countries. The already meagre share of the global income of the poorest people in the world has dropped from 2.3% to 1.4% in the last decade. 

As always, it is much easier criticising than praising. What truly are the effects of globalisation in the context of the UK? For consumers, globalisation is largely a good thing. Vigorous trade has enabled consumers to have more choice, being able to buy many overseas products. It has encouraged greater spending, rising living standards and growth in international travel. As multinational companies try to exploit economies of scale by producing in countries where labour costs are lower (usually in developing countries), these lower costs can be pushed onto prices, making goods cheaper.

Yet, although globalisation calls for a single international market, it is inevitable that the big multi-corporations are the winners of the game. One would assume that the international market would encourage more competition since all the firms from all around the world would compete with others, but big multinationals, having the power, money and status, may take over smaller businesses all around the globe, increasing their market share.

This in turn is a disadvantage for consumers- Macdonald's and other foreign brands dominate other regional markets, and as they eat out other competition they will reduce the choice available in the market. Gaining monopoly power, the companies may even start charging higher prices from consumers in order to gain more supernormal profit. UK seems to be alright as it is already dominated by certain firms, but due to this it makes overseas companies hard to enter the market since there are such high barriers to entry. 

Globalisation's impact is probably the biggest on workers. Critics deem that those in the developing world are exploited. As multinationals move into LDCs to benefit from lower production costs, jobs are created but workers are paid little and given bad treatment. But even in the developed world, not everyone has been a winner. The freedoms granted by globalisation are leading to increased insecurity in the workplace.

Ever since UK de-industrialised from the 60s onwards, manual workers are particularly under threat as companies shift their production lines overseas to low-wage economies. In the post-war period, manufacturing output reached almost 40% of output, stimulated by production of armaments in the Second World War. However in 1998, manufacturing only accounted for 19.7% of GDP, while services accounted for 69.8%. Changes in the structure of the economy mean changes in wage structure by occupation.

Over the last thirty years UK has seen considerable changes in relative pay between different occupations. Waiters and waitresses saw now increase in real pay per week between 1981 and 1998. Nurses pay almost doubled, and solicitors increased by approximately two thirds. Non manual workers enjoyed higher wage increases than manual workers, and there is increasing wage inequality. The reason is due to the decline of primary and secondary industries and growth of service sector. Globalisation has encouraged this trend as the world economy is becoming increasingly finance-based and forces the service sector to expand.

Also, the government weakened minimum wage legislation present in certain industries during the 1980s and abolished it in 1993. This means workers are not protected. Globalisation has also added pressures on poorly skilled low paid workers. There has been ever increasing trend for work requiring high labour low skill inputs to go into the developing world where wages are a fraction of what even low paid workers earn in the UK. In contrast, the long-term trend for UK manufacturing and services in areas, which are internationally traded, are for UK to specialise in producing ever more sophisticated technological products.

This requires high skilled labour, therefore an increase in demand for workers who are better educated, trained and therefore better paid, putting low paid workers out of work. The changing trends towards a more technology-based century with the Internet thriving means there is higher demand for IT workers. Due to this the UK government may have to increase their government spending in order to provide training programmes for the increasing unemployed. 

For UK producers, globalisation is good. They can now exploit cheaper resources for production and establish in places where labour is cheaper, such as in South East Asia. The expansion of the global market ultimately means a larger marketplace for producers, being able to sell to more consumers. China is the best example; with the huge population, it's opening up since the membership in the WTO means that UK producers can enter the market and sell to Chinese people. Here, UK producers can enjoy cheaper costs while China benefits from foreign investment.