Costs and Benefits of Globalisation

a summary of cost and benefits of globalisation

benefits

1. Increased global GDP -> due to increases in trade between countries

2. Greater levels of efficiency -> specialisation and division of labour, comparative advantage

3. Greater profits for firms -> more markets to grow into

4. More choice for consumers

5. Higher living standards, particularly in developing countries -> reduction in poverty levels

6. Economies of scale -> lowered costs per unit due to containerisation, large cargo ships etc.

7. Increased global competition -> lower prices and better allocative efficiency

8. Increased world integration -> greater ability to tackle global issues like climate change

costs

1. Increased global inequality -> developed countries sell higher value products than smaller countries and therefore earn far higher incomes -> MNCs often originate in developed countries

2. Reduced competition -> MNCs can push out small local firms

3. Exploitation of workers -> MNCs can offer jobs in developing countries, but working conditions may still be poor and wages may still be low

4. Some countries can have really large BoP deficits/surpluses -> this can be unsustainable

5. WTO, IMF, World Bank etc -> global institutions are generally run and organised by developed countries -> potential for corruption

6. Overspecialisation -> countries can be dependent on certain industries e.g. tourism, oil, mining. This is a risky position if these industries go into decline

7. Prices may rise -> increased global demand and limited supply may lead to certain commodities rising in price e.g. oil

8. Degradation and depletion of natural resources - environmental market failure

9. Economic instability -> increased interdependence between countries -> global recessions more likely

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