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What is driving globalisation, and who gains and loses from an increasingly integrated world economy?

Globalisation: the causes and characteristics of globalisation, the role of multinational corporations and foreign direct investment, and the costs and benefits of globalisation for developed and developing economies.

An Eduqas A520 answer to globalisation, covering its causes (trade liberalisation, technology, transport and capital mobility), its characteristics, the role of multinational corporations and foreign direct investment, and the costs and benefits of globalisation for both developed and developing economies.

Generated by Claude Opus 4.812 min answer

Reviewed by: AI editorial process; not yet individually human-reviewed

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  1. What this dot point is asking
  2. What globalisation is and what drives it
  3. Multinationals and foreign direct investment
  4. Costs and benefits
  5. Examples in context
  6. Try this

What this dot point is asking

Eduqas wants you to explain the causes and characteristics of globalisation, the role of multinational corporations (MNCs) and foreign direct investment (FDI), and the costs and benefits of globalisation for both developed and developing economies. Globalisation is the context for the whole trade-and-development area and a rich source of evaluation.

What globalisation is and what drives it

The main causes (drivers) of globalisation are:

  • Trade liberalisation: the reduction of tariffs and barriers through the WTO and the spread of trading blocs.
  • Technological change: the internet, mobile communications and digital platforms that connect markets instantly.
  • Falling transport costs: containerisation and cheaper air and sea freight.
  • Capital-market deregulation: the freer movement of finance across borders.
  • The growth of multinational corporations organising production globally.

Multinationals and foreign direct investment

MNCs and FDI are central to globalisation: they transfer capital, technology and skills to host countries, create jobs and raise tax revenue, and integrate developing economies into world production. But they can also exploit cheap labour and lax regulation, repatriate profits, use their bargaining power to extract subsidies, and avoid tax through transfer pricing.

Costs and benefits

The balance of costs and benefits differs by group and country: consumers and exporters tend to gain, while import-competing workers and over-dependent commodity producers can lose, which is why globalisation generates political tension despite raising total world output.

Examples in context

  • Global supply chains. Smartphones designed in one country, with components from several others and final assembly in another, epitomise MNC-organised production.
  • FDI into emerging Asia. Decades of inward investment drove rapid growth and poverty reduction, alongside concerns about wages and conditions.
  • The "China shock". Cheap manufactured imports lowered prices for consumers but caused structural unemployment in some developed-economy regions.

Try this

Q1. Explain two causes of globalisation. [4 marks]

  • Cue. Any two of: trade liberalisation (WTO, trading blocs), technological change (internet), falling transport costs (containerisation), capital-market deregulation, or the growth of MNCs.

Q2. Explain one cost of globalisation for a developed economy. [4 marks]

  • Cue. Structural unemployment in import-competing industries, downward pressure on low-skilled wages, or wider inequality as the gains accrue unevenly.

Exam-style practice questions

Practice questions written in the style of WJEC Eduqas exam questions on this dot point, with worked answer explainers. The year tag is the paper they imitate, not the source.

Eduqas Component 1 20182 marksDefine foreign direct investment (FDI).
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A 2-mark definition question.

Foreign direct investment is investment by a firm (often a multinational corporation) in productive assets in another country, for example building a factory or acquiring a controlling stake in a foreign business. It involves a lasting interest and a degree of control, unlike short-term portfolio investment.

Markers reward the idea of cross-border investment in productive capacity (or a controlling stake), distinguishing it from short-term financial flows.

Eduqas Component 3 Section C 202112 marksEvaluate the view that globalisation benefits developing economies more than developed economies.
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A levels-of-response essay. Knowledge and application: define globalisation and explain its drivers (trade liberalisation, technology, transport, capital mobility, multinationals and FDI). Set out the benefits to developing economies (FDI, jobs, technology transfer, access to larger markets, faster growth) and to developed economies (cheaper imports, larger markets, higher profits).

Analysis: develop how FDI and trade raise growth and incomes in developing economies.

Evaluation: weigh the costs to developing economies (exploitation of labour and the environment, over-dependence, profit repatriation, vulnerability to global shocks) and to developed economies (structural unemployment in import-competing industries, downward pressure on low-skilled wages, widening inequality). Conclude with a supported judgement that the gains are large but unevenly shared within and between countries, so the comparison depends on which groups and time horizon are considered.

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