What is globalisation, and who gains and loses from a more connected world economy?
What globalisation is and its causes, the role of multinational companies, and the costs and benefits of globalisation for producers, workers and consumers in developed and less developed countries.
An OCR J205 answer on globalisation: what it is and its causes, the role of multinational companies, and the costs and benefits for producers, workers and consumers in developed and less developed countries, including economic, social and environmental sustainability.
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What this dot point is asking
OCR wants you to explain what globalisation is and its causes, the role of multinational companies, and the costs and benefits of globalisation for producers, workers and consumers in both developed and less developed countries, including its effects on economic, social and environmental sustainability.
What globalisation is and its causes
The main causes of globalisation are:
- Cheaper transport. Containers and large ships make moving goods around the world cheap.
- Better communications. The internet and phones let firms manage operations across countries instantly.
- Freer trade. Lower tariffs and trade agreements have removed many barriers to trade.
- Multinational companies. Large firms set up production and sales in many countries.
The role of multinational companies
When a multinational invests in another country (building a factory or buying a local firm) this is foreign investment, and it is one of the main ways globalisation spreads jobs and technology.
Costs and benefits for developed countries
In developed countries (such as the UK), globalisation brings clear gains but also losses:
- Benefits. Consumers get lower prices and more choice; firms reach larger export markets and can buy cheaper inputs; the economy can grow faster.
- Costs. Some industries face competition from cheaper imports, causing job losses in manufacturing (structural unemployment), and gains can be unevenly shared, widening inequality.
Costs and benefits for less developed countries
In less developed countries, globalisation can be transformative but controversial:
- Benefits. Investment by multinationals creates jobs and incomes, brings new technology, and can raise output and lift people out of poverty.
- Costs. Jobs may involve low pay and poor working conditions, work can be insecure, profits often flow back to the foreign company, and rapid growth can cause environmental damage.
Try this
Q1. Define a multinational company. [2 marks]
- Cue. A firm that produces or sells goods or services in more than one country.
Q2. Explain one cost of globalisation for workers in a developed country. [3 marks]
- Cue. Competition from cheaper imports or firms relocating production abroad can cause job losses in some industries (structural unemployment), as home producers cannot compete on cost.
Exam-style practice questions
Practice questions written in the style of OCR exam questions on this dot point, with worked answer explainers. The year tag is the paper they imitate, not the source.
OCR J205/02 20194 marksExplain two benefits of globalisation for consumers in a developed country.Show worked answer →
A 4 mark question worth two marks per developed benefit.
First, globalisation gives consumers lower prices: firms produce in countries where costs are low and competition from imports holds prices down, so households can buy more for their money.
Second, it gives consumers more choice: they can buy goods and services from all over the world (foreign foods, electronics, brands) that their own country may not make. Markers reward two clearly developed benefits with explanation, not a bare list.
OCR J205/02 20226 marksDiscuss the costs and benefits of globalisation for workers in less developed countries.Show worked answer →
A 6 mark evaluative question.
Benefits: globalisation and the arrival of multinational companies can create jobs and incomes, bring in investment and new technology, and help raise output and living standards, lifting some workers out of poverty.
Costs: jobs can involve low pay and poor working conditions, work may be insecure (firms can relocate to cheaper countries), and there can be environmental damage that harms local communities. Markers reward both sides and a judgement, for example that globalisation tends to raise incomes and employment in less developed countries but the gains can be uneven and come with concerns over pay, conditions and sustainability.
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Sources & how we know this
- OCR GCSE (9-1) Economics J205 specification — OCR (2017)