Definition of globalisation

Published by Patrick Mutisya · 14 days ago

IGCSE Economics – Globalisation: Definition

International Trade and Globalisation

Objective: Definition of Globalisation

Globalisation is the process by which the world’s economies, societies and cultures become increasingly inter‑connected and inter‑dependent through the rapid expansion of cross‑border flows of goods, services, capital, people, ideas and technology.

Key Features of Globalisation

  • Expansion of international trade and investment.

  • Greater mobility of labour and migration.

  • Rapid diffusion of technology and information.

  • Integration of financial markets.

  • Spread of cultural influences and consumer preferences.

  • Formation of multinational corporations (MNCs) that operate in several countries.

Why Globalisation Matters in Economics

  1. It creates new markets for exporters and sources of cheaper imports for consumers.

  2. It can lead to economies of scale and increased productivity.

  3. It influences employment patterns and wage levels.

  4. It shapes government policies on trade, investment and regulation.

  5. It raises issues of income distribution and environmental sustainability.

Comparison: Globalisation vs. Trade Restrictions

AspectGlobalisationTrade Restrictions
(e.g., free trade, open markets)(e.g., tariffs, quotas, embargoes)
Effect on PricesGenerally lowers prices through competition and cheaper imports.Often raises domestic prices by limiting cheaper foreign goods.
Impact on ConsumersMore choice and higher standard of living.Reduced choice and potentially lower living standards.
Impact on ProducersAccess to larger markets; pressure to improve efficiency.Protection of domestic industries; may reduce incentive to innovate.
Government RevenueRevenue from taxes on increased economic activity.Direct revenue from tariffs, but may invite retaliation.
Long‑term Economic GrowthPromotes growth through specialization and technology transfer.Can hinder growth if protection is prolonged.

Suggested diagram: World map illustrating major trade flows and the locations of key multinational corporations.

Key Economic Terms

When discussing globalisation, you may encounter the following terms:

  • Trade liberalisation – removal or reduction of trade barriers.

  • Multinational corporation (MNC) – a firm that operates in several countries.

  • Foreign direct investment (FDI) – investment made by a firm or individual in one country into business interests in another.

  • Outsourcing – contracting out a business process to a third party, often in another country.

Summary

Globalisation is a multifaceted process that links economies worldwide, influencing trade patterns, investment flows, technology diffusion, and cultural exchange. Understanding its definition and core characteristics provides a foundation for analysing its benefits and challenges, especially when contrasted with trade restrictions.