Gains from Globalisation

Topics: Economics, Inflation, Unemployment Pages: 2 (513 words) Published: August 21, 2013
Gains from Globalisation
Globalisation can lead to improvements in efficiency and gains in economic welfare.

Trade enhances the division of labour as countries specialise in areas of comparative advantage

Deeper relationships between markets across borders enable and encourage producers and consumers to reap the benefits of economies of scale

Competitive markets reduce monopoly profits and incentivize businesses to seek cost-reducing innovations and improvements in what they sell

Gains in efficiency should bring about an improvement in economic growth and higher per capita incomes. The OECD Growth Project found that a 10 percentage-point increase in trade exposure for a country was associated with a 4% rise in income per capita

Globalisation has helped many of the world’s poorest countries to achieve higher rates of growth and reduce the number of people living in extreme poverty

For consumers globalisation increases choice when buying goods and services and there are gains from a rapid pace of innovation driving dynamic efficiency benefits

Risks and Disadvantages from Globalisation
Globalisation is not an inevitable process and there are risks and costs:

Inequality: Globalisation has been linked to rising inequalities in income and wealth. Evidence for this is a rise in the Gini-coefficient and a growing rural–urban divide in countries such as China, India and Brazil. Inflation: Strong demand for food and energy has caused a steep rise in commodity prices. Food price inflation (known as agflation) has placed millions of the world’s poorest people at great risk. Macroeconomic instability: A decade or more of strong growth, low interest rates, easy credit in developed countries created a boom in share prices and property valuations. The bursting of speculative bubbles prompted the credit crunch and the contagion from that across the world in from 2008 onwards. This had negative effects on poorer & vulnerable nations. In 2007-08, financial...
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