Trade Imbalances: Global trade has grown but so too have trade imbalances. Race to the bottom – nations desperate to attract inward investment may be tempted to lower corporate taxes, allow lax health and safety laws and limit basic welfare safety nets with damaging social consequencesĦ. Threats to the Global Commons: Irreversible damage to ecosystems, land degradation, deforestation, loss of bio-diversity and the fears of a permanent shortage of water afflict millions of the world’s most vulnerableĥ. an external event somewhere else in the world coming back to affect you has risen / making a country more vulnerable to macro-economic problems elsewhereĤ.
Vulnerability to external economic shocks – national economies are more connected and interdependent this increases the risk of contagion i.e. Food price inflation (known as agflation) has placed millions of the world’s poorest people at great risk.ģ. Inflation: Strong demand for food and energy has caused a steep rise in commodity prices. Many of the world’s poorest people do not have access to basic technologies and public goods. This leads to political and social tensions and financial instability that will constrain growth. Evidence for this is the growing rural–urban divide in countries such as China, India and Brazil. Inequality: Globalisation has been linked to rising inequalities in income and wealth. Increased awareness among consumers of challenges from climate change and wealth/income inequalityĨ.Ĝompetitive pressures of globalisation may prompt improved governance and better labour protection Drawbacks / Risks of Globalisationġ. Opening up of capital markets allows developing countries to borrow money to over a domestic savings gapħ. Gains from the sharing of ideas / skills / technologies across national bordersĦ. Benefits / Gains from Globalisationġ.Ğncourages producers and consumers to benefit from deeper division of labour and economies of scaleĢ.Ĝompetitive markets reduce monopoly profits and incentivise businesses to seek cost-reducing innovationsģ.Ğnhanced growth has led to higher per capita incomes – and helped many of poorest countries to achieve faster economic growth and reduce extreme poverty measured as incomes < $1.90 per day (PPP adjusted)Ĥ.Ědvantages from the freer movement of labour between countriesĥ. The main benefits and drawbacks of globalisation are outlined below.