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Global Economy home

What is globalisation?

It is an imprecise term covering many aspects of politics, economics and culture. Its origins are complex and virtually every one of the 2822 academic papers and 589 new books on globalisation written in 1998 would include their own definition. However, most writers would agree it is a process driven by technological change and rapid advances in communications.

Globalisation leads to greater interdependence between countries as goods, services, capital, labour, knowledge and information move increasingly quickly and freely around the world. Aspects of globalisation include international trade and investment, international agreements to protect the world environment and growth in the number and scope of international organisations.

Whilst globalisation presents opportunities for all countries it is clear that some countries have benefited more than others. The challenge is to ensure that the process is more equitable and more sustainable. The Foreign and Commonwealth Office is a vigorous champion of Corporate Citizenship and Sustainable Development working with other Governments, NGOs and multinational companies to establish standards for human rights and the environment.

Given the rapid changes associated with globalisation many people have strong concerns about the way in which it impacts on their lives. Some of these are addressed in the Key Concerns section.

What are the potential benefits?

Overall, globalisation should lead to higher rates of economic growth.

International trade promotes efficiency and saves resources by encouraging production of goods and services in countries where the costs are lowest. It leads to lower prices for consumers by creating greater competition between businesses. Trade boosts growth by creating new opportunities through larger markets, creating more jobs, and enabling the specialisation of labour, boosting productivity. Trade between two countries increases economic welfare in both by widening the range of goods and services available for consumption.

The UK economy is benefiting disproportionately from globalisation. We are the world’s fourth largest trading nation and second largest foreign investor. Trade represents over 40% of our GDP, twice that of the US or Japan. Inward investment into the UK has created 815,000 jobs to date and accounts for nearly 30% of net manufacturing output. We are particularly strong in business and financial services, telecoms and media - sectors that thrive on globalisation.

Improved governance is another potential benefit of globalisation. Better communications technology, and particularly the Internet, mean governments can more easily be held to account, allowing greater scrutiny of government spending by citizens. This also applies to businesses, enabling better oversight of UK assets overseas. Information technology can also be used to promote innovative programmes and play a key role in the work of environmental, human rights and poverty reduction NGO's.

Another recent development that has helped millions of people is the globalisation of knowledge through information technology. One example is the use of public Internet kiosks in rural India to revolutionise medical treatment and eye care. In the village of Padinettankudi in Tamil Nadu a webcam and online patient questionnaire are being used to photograph and record villagers’ eye problems. Once recorded they are then emailed to the specialist Aravind Eye Hospital, affordably reducing to a few seconds a process that would previously have taken days or weeks. An online doctor/patient discussion takes place subsequently before a free appointment is arranged, saving scarce resources and equitably improving health outcomes.

Globalisation can also be seen as a force for stability. Economic integration normally reduces the possibility of armed conflict and has been central to the peaceful relations in Western Europe witnessed in the second half of the 20th Century.

Scientific breakthroughs like the mapping of the Human Genome (through co-operation of scientific teams across the globe) and aspects of contemporary life such as a diverse range of foods in UK supermarkets and affordable foreign travel are amongst the many other benefits of globalisation.

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