GLOBALIZATION
Globalisation involves the world becoming one market as a result of a reduction in the barriers
to the movement of goods and services, direct and portfolio investment and workers.
The world is becoming more like one country where there are fewer restrictions on where
people buy products from, where they set up firms and where they work.
There are lots of possible causes of globalization.
1. One reason is advances in communications and technology. This has made it easier for firms
to keep in contact with their production plants from a greater distance and to co-ordinate the
production process across the world.
2. The Improvement in transport, greater speed, more reliability and lower cost of transport
have made it cheaper and easier for households to buy goods from other countries.
3. The third reason is the removal of some trade restrictions. Removing tariffs, for instance,
enables firms to compete on more equal terms and so can promote international trade.
4. The fourth reason is the removal of restrictions on the countries to setup firms. Some
countries still have some limits on, for example, foreign firms buying out domestic firms or
foreign firms setting up in the countries
The consequences of globalization include:
Advantages
1. Globalization can drive economic growth. It can encourage countries, and regions within
those countries, to specialize in what they are best at producing.
2. Consumers enjoy a greater choice of goods and services at lower prices.
3. The free movement of direct and portfolio investment has the potential to reduce income
inequality between countries.
Disadvantages
1. It can create structural unemployment. This is because while opening up an economy to
greater international competition will cause some industries to expand, it will also cause some
industries to decline.
2. Countries are more susceptible to demand and supply-side shocks when they become more
closely linked with other economies. These may be negative shocks. For instance, a natural
disaster in a major supplier of a country’s raw materials could cause disruption to the output of
Globalisation involves the world becoming one market as a result of a reduction in the barriers
to the movement of goods and services, direct and portfolio investment and workers.
The world is becoming more like one country where there are fewer restrictions on where
people buy products from, where they set up firms and where they work.
There are lots of possible causes of globalization.
1. One reason is advances in communications and technology. This has made it easier for firms
to keep in contact with their production plants from a greater distance and to co-ordinate the
production process across the world.
2. The Improvement in transport, greater speed, more reliability and lower cost of transport
have made it cheaper and easier for households to buy goods from other countries.
3. The third reason is the removal of some trade restrictions. Removing tariffs, for instance,
enables firms to compete on more equal terms and so can promote international trade.
4. The fourth reason is the removal of restrictions on the countries to setup firms. Some
countries still have some limits on, for example, foreign firms buying out domestic firms or
foreign firms setting up in the countries
The consequences of globalization include:
Advantages
1. Globalization can drive economic growth. It can encourage countries, and regions within
those countries, to specialize in what they are best at producing.
2. Consumers enjoy a greater choice of goods and services at lower prices.
3. The free movement of direct and portfolio investment has the potential to reduce income
inequality between countries.
Disadvantages
1. It can create structural unemployment. This is because while opening up an economy to
greater international competition will cause some industries to expand, it will also cause some
industries to decline.
2. Countries are more susceptible to demand and supply-side shocks when they become more
closely linked with other economies. These may be negative shocks. For instance, a natural
disaster in a major supplier of a country’s raw materials could cause disruption to the output of
