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A2 Macroeconomics - Globalisation Essay

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Introduction

"For its supporters, globalisation describes a dream of opportunity and prosperity. For its opponents, it denotes a nightmare of greed and inequality" Explain the term globalisation and the factors that may have contributed to the process. Globalisation can be defined as the integration of the world's economies into a single international market, as local and national markets become incorporated into the global capitalist system of production with increasing interdependence. It promotes the free movement of labour, capital, goods, services, technology and management in response to markets around the world. The growth of markets in this manner is not a new, but a process that has seen the markets grow from a local scale to a national one during the Industrial Revolution and to an international scale by the end of the 20th century. The growth of international trade has been significant in furthering globalisation. During the Industrial Revolution, Britain had a significant comparative advantage as its advanced manufacturing technology allowed hugely improved transport through steamships and railway networks across its Empire. This opened up huge potential markets around the globe for British exports, at the same time making a huge range of goods from these new trading partners accessible to British consumers. ...read more.

Middle

Globalisation has increased the competitiveness of UK markets. Competing in highly contestable markets, British firms face competition from abroad. A few large firms, between whom collusion very well may have occurred, as explained by game theory, had typically dominated domestic markets. As more firms entered the market, they erode larger firms market share with which they may have exercised monopoly power. Domestic firms are thus forced to become more productively efficient, producing at lower cost to compete with, for example, goods manufactured using cheap labour in South East Asia. Competition would also promote innovation so that in an economy with high labour costs, British industry could gain a comparative advantage over foreign firms. The effect of globalisation has thus been an influx of new goods and services combined with lower prices on existing goods, now of a better quality. Globalisation has therefore lead to a net gain in welfare for UK consumers. However, the realities of the situation are very different. Realistically, UK firms cannot compete in the manufacturing industry where economies with cheap labour have been deemed to provide 'unfair competition'. The UK is a high labour cost country and thus at a comparative disadvantage which is effectively impossible to overcome, as demonstrated with the loss of the motor industry in the UK during the 1970s. ...read more.

Conclusion

Northeast England never fully recovered from loss of traditional heavy manufacturing industries such ad shipbuilding. The consequential migration of workers to the south of England has placed pressure on resources and housing, whilst some northern areas such as Liverpool have seen a fall in population. This is allocatively inefficient - resources are wasted whilst the necessary investment needed to deal with the new distribution of population has spurred further investment in the south, widening the north/south divide. In conclusion, the costs to the UK economy from the march of globalisation are highly significant, although their impact can be disputed when the importance of globalisation to UK economic development is considered. However, globalisation is not a process that can be reversed, halted or even slowed. The world is interdependent and will continue to be so, and the UK must be a part of it. International trade, the driving force of globalisation, is enormously important to the UK has been responsible for its position as a major economic power since the days of the British Empire. We have neither the resources nor the inclination to pursue a policy of economic isolationism, as the potential benefits from globalisation are huge. The best option, therefore, would be a cautious approach, devising strategies to tackle problems as they arise with a fundamental focus on sustainability. Hazz Scurfield 13/08/2008 ...read more.

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