Unit 4: Globalisation 2012

Globalisation 2012 – how times change!

GLOBALISATION AND THE UK ECONOMY

Matt Bentley

Drivers of globalisation

Goldman Sachs Projections

Largest economies in 2003

Largest economies in 2025

Largest economies in 2050

USA

Japan

Germany

UK

France

China

Italy

India

Brazil

Goldman Sachs Projections

Largest economies in 2003

Largest economies in 2025

Largest economies in 2050

USA USA

Japan China

Germany Japan

UK Germany

France India

China UK

Italy France

India Russia

Brazil South Korea

Goldman Sachs Projections

Largest economies in 2003

Largest economies in 2025

Largest economies in 2050

USA USA China

Japan China USA

Germany Japan India

UK Germany Japan

France India Brazil

China UK Mexico

Italy France Russia

India Russia Germany

Brazil South Korea UK

Globalisation and the UK

• The UK is a highly open economy

• Strong trade links with other countries

• Over a quarter of our annual GDP is exported

• Open financial (capital) markets– Bonds

– Equities

– Property

• We have a fairly open labour market – tolerant of inflows of workers from overseas

• Globalisation creates opportunities and threats

• The key is to be internationally competitive

Opportunities and benefits for the UK

• Cheaper imports from emerging market countries

– Keeps down inflation and interest rates

• Potential for increasing export sales

– Which markets are we best at?

• Opportunities for overseas investment

– Mergers and takeovers

– Direct investment (e.g. new factories overseas; out-sourcing of manufacturing)

• Opportunities arising from migration of labour

• Opportunities of rapid technological change

Threats for the UK economy

• Threats to our manufacturing industries

• Risk of structural unemployment

• Widening of the rich-poor divide – more inequality

• Social and economic tensions from migration

• Threats to the global environment – this affects us all

• Inflationary risks from higher energy and metal prices

• Property boom and bust – think about the origins of this

• Takeover of UK businesses from overseas?

• Risks of return to protectionism

Threats to current globalisation wave

• Resurgent inflation

– Commodities – including metals and foodstuffs

– World Bank: Food price crisis is the ‘silent Tsunami’

– Wages

• Widening income & wealth inequality within countries (rich and poor)

• Bursting of the financial euphoria / bubbles

• Huge trade imbalances

• Increasing distrust of big business

• Growing pressure for

– Economic nationalism / trade protectionism

– Shift away from multi-lateral trade towards bi-lateral trade agreements

• And the threats to the global commons – perhaps the biggest market failure of all time

Globalisation may stall – it is not inevitable

Trade barriers are back!

• With the world struggling to come out of recession and economic growth stagnant, barriers to trade are once again on the rise!

• US angry at Chinese trade barriers

• Questions for discussion:

• Why would countries want to erect trade barriers?

• How can the UK remain competitive in this new globalised world?

Ten Key Tips!

1. Use diagrams and ensure they are clear and annotated

2. Use the sources provided (where appropriate)

3. Use plenty of real world examples - often exam questions will say “using the data and your own knowledge”

4. Use precise terminology – learn your definitions well

5. Pick up on ‘trigger words’ in the exam question i.e. solely, inevitably

Ten Key Tips!

6. Answer the question but back up any assertion made with evidence or examples

7. Avoid repeating yourself in a conclusion – try to bring something new into the discussion

8. Practice drawing key diagrams

9. Read one topical economics article every day

10.When writing essay answers – leave a line between each paragraph