Globalisation is the tendency of investment funds and businesses to move beyond domestic and national markets to other markets around the globe, thereby increasing the interconnectedness of different markets. Globalisation has had the effect of increasing not only international trade, but also cultural exchange. An example of globalisation within the UK is that we have many multinational corporations from abroad here. An example would be HSBC. The bank has its roots in Hong Kong and Shanghai, yet its headquarters in London. Furthermore, the UK also has a very diverse workforce with many foreign workers. Britons love to import goods and services too from countries with more competitive items such as China and other Eastern countries. We do not only import goods and services, though, we also export services, particularly business services. It is clear that there are both advantages and disadvantages of globalisation for the UK and so I will attempt to shed some light on this topical issue.
Since the invention of the Jumbo Jet, transport costs for goods as well as for people (tourism) have decreased hugely. It is now affordable for a record number of British families to go on holiday abroad which was unthinkable for many less well-off families in the past. In some cases, it is now cheaper to produce goods in China, for example, and transport them to the UK than just producing them domestically. In relation to the shipping of goods, containerisation has also revolutionised world trade by making it much simpler to transport goods. One container can travel on a plane, ship or train without having to be emptied into another container. The World Trade Organisation (WTO) has been instrumental in bringing about a more integrated and interdependent world economy. One major advantage of having increased free trade of goods and services is that countries are able to specialise in what they have a comparative advantage in. This means that the goods produced in each nation are likely to be made to the best standard. For example, in the UK we have a competitive advantage in building aero-engines whereas in China, they specialise in making low cost goods (mainly plastic). Through a more globalised economy, this allows countries to develop greater economies of scale meaning that the profits will increase as costs decrease.
However, there are a number of disadvantages from globalisation. One of these is increased inequality. Inequality is now greater than it has ever been and globalisation has suppressed wages for the poor whilst boosting incomes for the wealthy. The offshoring of production has made the labour market too competitive, swinging the financial rewards steeply in the favour of the rich. Countries may see an increase in unemployment in some areas in which that country does not have a comparative advantage. An example relatively close-to-home for Brits would be the decrease of the low-skilled manufacturing industry in many of Britain’s previously great Northern cities. During the last few decades, the UK has seen most of the workers previously employed in factories in the North become unemployed and left with few skills because of their background solely in manufacturing. Globalisation caused this as manufacturing went elsewhere to countries with cheaper labour.
To conclude, I will consider the areas of fiscal and monetary policies. These areas of macroeconomic policy are affected greatly by globalisation within the UK. Within fiscal policy, it is key to consider that corporation taxes are forced down by globalisation in order to stop firms leaving the UK. Monetary policy is affected as our interest rates must be better or the same as that of other nations. Because of the reasons explained above, I believe globalisation has been beneficial to the UK economy. Whilst there are some negatives, globalisation has helped to craft the multicultural nation we live in today and the economic benefits it brings are pivotal for the UK economy to function in today’s world.