economic globalisation

economic globalisation definition

• Free trade leads to greater transnational flow of goods, services and capital resulting in closer global connections and interdependence

Positives of Economic Globalisation

• Reduction of trade barriers stimulates global trade and investment

• Developing countries have benefitted, leading the greater convergence between global North and South

• Greater consumer choice and lower costs

Negatives of Economic Globalisation

• Creates a 'race to the bottom', undermining worker's rights and job security

• Developing countries are exploited

• Exacerbates greater inequality

2008 financial crash

• Originated in the US housing market → spread worldwide due to interconnected banks and financial markets.

• Showed how crises in one country can trigger global recessions (contagion effect).

• Led to massive state bailouts and international cooperation (e.g. G20 crisis meetings).

• Highlighted the risks of economic interdependence as well as the need for stronger global financial regulation.

role of organisations in 2008 crash

• IMF (International Monetary Fund) → Provides loans and advice to states in crisis (e.g. Greece after Eurozone crisis). Criticised for enforcing austerity.

• World Bank → Funds development projects, infrastructure, and poverty reduction, integrating poorer states into global economy.

• WTO (World Trade Organisation) → Promotes free trade by reducing tariffs and resolving disputes. Supporters say it drives growth; critics argue it benefits rich states most.

why has growth of economic globalisation been so rapid

• significant advancements in technology, particularly in communication and transportation, which lowered barriers to trade and investment.

• This was further spurred by political and economic policies that reduced trade barriers and facilitated capital mobility, combined with increased infrastructure investment and the rise of multinational corporations seeking new markets and lower costs, especially in emerging economies like China

how do the 3 schools of thought view economic globalisation

• hyperglobalists

  • See it as proof that globalisation is real and unstoppable. Markets, MNCs, and global finance are eroding state power, creating a borderless global economy.

• sceptics

  • Argue the growth is exaggerated. They say most trade/investment happens within regions (e.g. EU, NAFTA), and states still control economic policy. They stress that globalisation mainly benefits rich countries.

• transformationalists

  • Accept that rapid growth is real but stress it is reshaping, not destroying, state power. States adapt by cooperating through global institutions, while power shifts are complex and uneven.

is the state still relevant when it comes to the economy?

YES - state is still relevant

• The idea that globalisation has “killed” the state is exaggerated and often ideological.

• 80% of global trade still takes place within regions (e.g. EU, NAFTA) and mostly between developed states.

• Globalisation is not new — states have always shaped economic links.

• Trade policy: e.g. Trump’s tariffs on China show states can still protect domestic markets.

• Taxation & regulation: e.g. Ireland’s decision to lower corporation tax to 12.5% to attract investment.

• Brexit illustrates a state reclaiming control over economic policy from supranational bodies.

• States remain the final decision-makers on domestic policy, providing legal frameworks, public services, and maintaining sovereignty.

NO - state is irrelevant

• Since 1950, international trade has increased by over 4500%, showing economies are deeply interdependent.

• This scale of integration reduces the ability of states to act independently.

• Corporations like Apple and Nike operate across borders with supply chains spanning dozens of countries.

• Their economic power rivals that of many states, limiting state control.

  • In 2024, Apple’s market value exceeded $3.5 trillion, which is larger than the GDP of most countries (e.g., bigger than Brazil or Canada).

  • Its global supply chain spans 43 countries, meaning its operations and pricing decisions can influence national economies, sometimes more than the states themselves.

• time space compression - high-speed transport and digital networks allow transactions and trade to happen almost instantly, shrinking the effective distance between countries and limiting state control over economic flows.

• Institutions like the IMF and World Bank enforce neoliberal economic policies through bailouts and structural adjustment programmes.

• The IMF, European Central Bank, and European Commission (the “Troika”) provided bailout loans to Greece during Eurozone crisis. In return, Greece had to implement structural adjustment programmes: austerity measures, pension cuts, and tax reforms.

• This shows how global institutions can dictate economic policy, limiting the state’s autonomy—Greece couldn’t fully decide its own economic path without external oversight.