What this lesson teaches
I can explain what changes globalisation and how those changes affect trade, competition, the environment, migration, incomes and development.
Syllabus K343, 6.2.2. Causes and consequences of changes in globalisation: causes of changes in globalisation: changes in trade restrictions, changes in transport costs, changes in communication costs, movement of multinational companies (MNCs); effects of changes in globalisation on: international trade, competition, the environment, migration, income distribution, economic development
Make a guess
A phone maker moves its assembly plant from one country to Vietnam. Who is most likely to lose?
- Consumers who buy the phones.
- Assembly workers in the old location.
- Workers in Vietnam who get the new jobs.
Show the answer
Assembly workers in the old location.
Their jobs move abroad, and they may face structural unemployment until they retrain.
Globalisation increases trade and competition and can lift development, but it can harm the environment, widen income gaps and change who migrates.
International trade and competition. As barriers and costs fall, countries trade more and firms face rivals from around the world. Consumers gain cheaper goods and more choice. Firms must cut costs and improve products to survive, but weaker firms may close and their workers lose jobs. Exporters gain access to bigger markets and can grow.
The environment. More production and more shipping and flying burn more fuel, which adds to pollution and greenhouse gases. Some firms move dirty production to countries with weaker environmental rules. On the other side, cleaner technology, such as solar panels, spreads faster and becomes cheaper when it is traded worldwide.
Migration. It is easier for people to move abroad for work. Host countries gain workers for jobs that locals do not fill; Singapore relies on foreign workers in construction, shipyards and domestic work. Home countries receive money sent back by migrants, but they may lose skilled workers such as doctors and nurses.
Income distribution and development. Workers with skills that the world market wants can earn much more. Workers whose jobs move abroad may lose out. So the gap between rich and poor can widen within a country. Many developing countries, such as Vietnam, have grown fast by making goods for MNCs. Countries that attract little trade or investment can be left behind.
- Globalisation and trade
- More trade and competition: cheaper goods, but weaker firms may close.
- Globalisation and migration
- Hosts gain workers; home countries gain remittances but may lose skilled people.
- Globalisation and income
- Gains are uneven, so income gaps within a country can widen.
Worked example: Who gains and who loses when a factory moves
Suppose an MNC moves its electronics assembly from a high-wage country to Vietnam, where wages are lower.
- Consumers everywhere: the product becomes cheaper because production costs fall.
- Vietnam: new factory jobs raise incomes, and workers learn new skills, which helps development.
- The old location: assembly workers lose their jobs and may face structural unemployment.
- The environment: more shipping of parts and finished goods adds to emissions.
Watch out for this
Globalisation makes everyone in a country better off.
It usually raises total output and gives consumers cheaper goods, but some groups lose, such as workers in industries that cannot compete with imports. The gains are spread unevenly.
Check your understanding
Why might globalisation widen the gap between high and low earners in a country?
- Cheaper imported goods mainly benefit high-income households only
- Skilled workers gain while some low-skilled jobs move abroad
- Globalisation lowers the wages of every worker in the country
Show the answer
Skilled workers gain while some low-skilled jobs move abroad
Right. The gains go to those whose skills the world market wants, and the losses fall on workers whose jobs can move.
Check your understanding
Many doctors and nurses leave a developing country to work abroad. Which effect on their home country is most likely?
- Its income gap narrows, as the best paid workers leave
- Its pollution falls, as factories follow the workers abroad
- Its hospitals gain staff, as the remaining wages fall
- It loses skilled staff but receives money they send home
Show the answer
It loses skilled staff but receives money they send home
Right. Home countries gain remittances but may lose skilled workers such as doctors and nurses.