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Topic 4.4
Globalisation
In this topic, you will learn about what globalisation is, and the four driving factors behind it. You will also learn about how development is measured, using the Human Development Index. Lastly, you will evaluate the impact of globalisation in both developed and developing countries. This is your final GCSE topic!
The Driving Factors of Globalisation
Globalisation
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Globalisation is the expansion of world trade in goods and services together with capital flow, which increases international interdependence
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Put simply, it is when trade increases between countries so it is easier for goods, ideas, and labour to move between countries and the world begins to act similar to a single market
The Four Driving Factors
Improvements in Transportation
Developments in transport technology have made it easier and cheaper to move goods and people across the globe.
Advances in Technology and Communications
The internet and mobile communications allow information to be shared instantly between countries, facilitating global trade.
Increased International Trade
Reducing trade barriers like tariffs and quotas makes international trade easier, so it is easier for countries to sell their products to each other.
Increased Foreign Direct Investment
Foreign direct investment connects economies by spreading capital, technology, and jobs across borders. By building international supply chains, governments and MNCs (multi-national corporations) integrate domestic markets into one global economy.
Development
Development
Development is the process of improving people's standard of living and wellbeing over time
Developed Country
A developed country is a country with high GDP per capita and developed industry and service sectors
Developing Country
A developing country has lower GDP per capita, lower levels of industrialisation and weaker indications of wellbeing
How do we measure development?
Gross Domestic Product
Human Development Index
Literacy Rate Comparison
Life Expectancy Stats
GNI Per Capita
Infant Mortality Rate
Human Development Index (HDI)
What is HDI?
The Human Development Index is a single measure used to determine a country's level of economic and social development. Unlike GDP, which only looks at money, HDI focuses on how people actually live, providing a more balanced view of a nation's progress.
How it Works
HDI combines three main components: Life Expectancy, Education (years of schooling), and GNI per capita. It gives each country a score between 0 and 1. A score closer to 1 means a very high level of human development, while a score closer to 0 indicates low development.
Evaluating the impact of globalisation to workers in developed countries
Benefits
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Increased employment due to increased output and increased foreign investment (however this takes time and is not immediate)
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Sharing of new ideas: Cross-border knowledge sharing helps workers learn new digital and professional skills
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Growth in high-skill sectors: Workers in fields like technology, finance, and engineering benefit as local companies expand into global markets.
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Increased geographical mobility
Costs
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Loss of manufacturing jobs: Companies routinely move factories to developing countries with lower labor costs. This leads to structural unemployment: displaced factory workers often struggle to find new jobs without retraining.
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Stagnant pay for low-skill roles: Local workers must compete with cheaper global labor, capping wage growth.
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Widening wealth gap: High-skill tech and finance workers gain wealth while blue-collar wages fall behind.
Evaluating the impact of globalisation to producers in developed countries
Benefits
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Cheaper raw materials: Producers source components and ingredients globally at the lowest available prices. This reduces their cost of production
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Labour is significantly cheaper overseas, which also reduces costs of production.
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Global talent recruitment: Businesses hire top international engineers, scientists, and executives without geographic limits.
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Bigger customer base: Companies sell products directly to billions of emerging consumers worldwide.
Costs
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Undercutting by cheap imports: Local producers face stiff competition from foreign firms with much lower labor costs and fewer environmental regulations.
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Exposure to global shocks: Relying on international factories leaves producers vulnerable to shipping delays, political conflicts, or natural disasters.
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Currency exchange fluctuations: Volatile global exchange rates can suddenly turn a profitable international venture into a financial loss.
Evaluating the impact of globalisation to consumers in developed countries
Benefits
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Cheaper everyday goods: Outsourcing production to low-cost countries slashes the shelf price of electronics, clothing, and household items.
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Year-round access: Global logistics networks ensure seasonal foods, like fresh fruit, are available on shelves in all seasons. They will also have a much greater choice of goods to select from.
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Higher quality standards: Cross-border collaboration allows brands to integrate the best international components into their products
Costs
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High carbon footprint: Shipping products across oceans creates massive greenhouse gas emissions that accelerate global climate change.
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Shortages during crises: Relying entirely on foreign factories leaves consumers facing sudden shortages of critical goods, like electronics or medicine, during global disruptions. This can be especially bad as domestic firms might not offer the same quality, and sometimes goods might not even be available domestically.
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Ethical dilemmas: Consumers often unknowingly buy cheap products made using exploited labor or damaging environmental practices abroad.
Evaluating the impact of globalisation on workers in developing countries
Benefits
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Job Creation: Multinational corporations establish factories and service hubs in developing nations, creating millions of new employment opportunities that significantly lower local unemployment rates.
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Higher Wages: Foreign companies typically offer higher salaries and better benefits than domestic firms, which raises the standard of living and helps lift families out of extreme poverty.
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Skills Transfer: Local workers receive specialized training in modern technologies and global business practices, which upgrades the domestic workforce and enhances their long-term career prospects.
Costs
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Labor Exploitation: Workers often endure poor working conditions, long hours, and weak safety standards because developing nations may lower regulations to attract foreign investment.
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Wage Suppression: Multinational companies can keep local wages low by threatening to move their factories to cheaper countries if workers demand better pay or attempt to unionize.
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Economic Insecurity: Global economic shifts or sudden corporate decisions can cause companies to close factories instantly, leaving entire local communities suddenly unemployed without a safety net
Evaluating the impact of globalisation on producers in developing countries
Benefits
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Access to Global Markets: Producers can export their goods directly to billions of international consumers, vastly expanding their customer base beyond limited local markets.
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Technology and Infrastructure: Foreign partnerships often bring advanced machinery, modern agricultural techniques, and improved logistics, which dramatically boost local production efficiency and quality.
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Integration into Global Supply Chains: Small and medium enterprises can become stable suppliers for massive multinational brands, securing long-term contracts and steady revenue streams that foster business growth.
Costs
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Inability to Compete: Small local producers are often driven out of business because they cannot match the massive economies of scale, lower prices, and heavy marketing budgets of giant multinational corporations.
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Vulnerability to World Economy: Local businesses become highly exposed to global economic shocks, commodity price crashes, and foreign currency fluctuations that are entirely outside of their control.
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Brain Drain and Resource Depletion: Large foreign firms often outbid local producers for the best local talent and primary raw materials, leaving domestic businesses with fewer resources to grow
Evaluating the impact of globalisation on consumers in developing countries
Benefits
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Access to Choice and Quality: Consumers gain immediate access to global brands and a wider variety of high-quality goods, which forces local markets to improve their own product standards.
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Greater Travel Opportunities: The expansion of global aviation networks and international booking platforms makes traveling abroad significantly cheaper, easier, and more accessible for local citizens.
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Better Infrastructure: Foreign investment in local roads, airports, and digital telecommunications networks directly improves daily life, connectivity, and access to services for everyday consumers.
Costs
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Loss of Local Culture: Mass availability of global brands can overshadow traditional products, leading to a loss of cultural identity and the homogenization of local consumer habits.
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Rising Cost of Living: Increased foreign investment and the entry of wealthier global brands can drive up the prices of local goods, housing, and services, making them unaffordable for average citizens.
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Increased Environmental Damage: The rapid consumption of cheap, imported goods leads to massive amounts of electronic and plastic waste, which severely strains the weak local waste management systems.
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Key Exam Tip
Make sure you memorise all six of these 6-markers fully and in detail. Globalisation is a high-frequency topic that appears in Paper 2 at least every 2 years, so knowing these answers inside out is essential for securing top marks.