What are some Advantages and Disadvantages of Globalisation?

Globalisation is a process of deeper economic integration between countries and regions of the world that has accelerated in the past 50 years. Globalisation benefits large TNCs such as Nike who can reduce their cost of production and thus maximise their utility, through profit maximisation. This cost reduction is through outsourcing production ie. relocating it to the Second or Third World where labour is cheaper, there are tax breaks, fewer health and safety laws as well as environmental regulations. Common locations for such outsourcing include rural China as well as the Asian Tigers. The economies of these host countries gain an injection into their circular flow of income and so a multiplier effect can occur, similarly the workforce will have more job opportunities that are often better paid than the alternatives.

However, globalisation has a negative effect on employment in the countries with higher wages where TNCs used to operate such as the car and textile industry outsourcing from the UK to South Korea and Bangladesh for example. This is a leakage from the UK economy and increases unemployment and since labour is a factor of production can stagnate economic growth as well as making it harder to achieve the macroeconomic objective of full employment. Furthermore, the environment suffers from TNC outsourcing to countries with weak regulations such as the chemical pollution from manufacturing industries in China that now means the Yangtze River is inhabitable and consequently the Yangtze River dolphin has become extinct.

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Answered by Katy B. Economics tutor

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