Economics terms are thrown about by those in-the-know all too regularly. Frankly, its baffling for those of us without expert knowledge in the subject, and “put simply” explanations are infrequent to say the least. #LetsTalkPolitics and challenge this.
Globalisation is a widely used word in that is often misunderstood or unclear to a large proportion of us. The definition lies in the intersection between Geography and Economics. Globalisation can essentially be seen as the increasing interconnectedness and integration of national economies and the increasing flows of goods, services, labour, ideas and capital between them.
We are in a very globalised world, a world where Transnational and Multinational companies dominate global interactions and borders are flattened to accommodate the exponential growth of nations in tandem with companies. So, what are the underlying causes of Globalisation?
- Growth of Free Trade (Read Previous article on free trade)
- Growth of Multinational (MNC) companies such as Coca Cola
- Development in Technology (communication, transport etc.)
- Development in trading blocs, trans-national relations (Ease in trade)
Globalisation is obviously a large topic to cover with varying different meanings, but what are the impacts both spatially and temporally?
- Increased interconnectedness between nations can mean that countries that previously may not have been affected by global trade cycles may now be (China may affect Taiwan’s trade growth e.g.)
- There is increased global competition; global markets become more competitive as there are more incumbent (existing in market) firms. (This can lead to lower prices to consumers as well as an array of other forms such as greater technological innovation)
- Greater labour mobility, rise in movement and fluidity of labour
- Greater economies of scale (As the firm increases in size it can gain different benefits, e.g. bulk buying economies of scale – a firm of a larger size can purchase more raw materials at a cheaper price)
What are some of the costs?
- Domestic firms can become uncompetitive, local firms can be pushed out or receive little to no business as large trans-national corporations move in
- Certain countries may have a ‘comparative advantage’ over other economies in the production of goods and services – this can create an unbalanced global economy
- There are obvious environmental costs, with the growth of consumerism and production pollution is inevitable
As you can see there are various costs and benefits provided by globalisation. All in all, it is an inevitable process and for sustainability to be achieved, sound management from extra-governmental bodies such as the World Trade Organisation must take place over time.