Unit 3: Globalisation - past questions

Short Essay - June 2011: What is economic globalisation, and how does it affect economic policy-making in
the UK? (15 Marks)

Plan:

Economic globalisation is the increasing integration, across international borders, of
trade, finance and labour.
The implications for national economic policy-making include:
· The need to recognise that the UK economy needs to attract inward investment
from large overseas and transnational companies
· It has become more difficult for governments to manage money supply and
interest rates, and their impact on imports and exports
· Seemingly domestic policies, such as privatisation, can actually deepen
globalisation as companies may not remain wholly UK-owned
· The need to recognise that some preferred policy options, particularly relating to
taxation, may be impractical in view of the ability of commercial organisations to
evade them by moving assets or their entire organisation
· Rules and regulations, such as those proposed in respect of the financial sector
after the crisis of 2008/9, increasingly require international agreement if they
are to be effective
· Effective control over the movement of labour has become more difficult (and
has been relinquished altogether in respect of the EU) making attempts to
preserve “British jobs for British workers” largely meaningless
· It is far more difficult to manage exchange rates to give UK businesses a
financial edge
· The UK’s involvement in the global economy is deeper than that of the EU, and
so may form a barrier to the UK’s entry to the Eurozone

Long Essay - January 2011: To what extent are governments still able to exert meaningful control over the
economy? (45 Marks)

Plan:

Long Essay - June 2012: To what extent does globalisation take economic policy out of the control of UK governments? (45 Marks)

Long Essay - June 2013: ‘In a globalised world, UK governments have lost their ability to control the national economy.’ Discuss. (45 Marks)

I have jotted down some ideas below. I would suggest you look further to how the Lib Dems have changed policy since joining the coalition.

• Globalisation is the growing “complex web of interconnectedness”. It is the process which many claim to be happening to the world, in which decisions in one place can effect the rest of the world
• International trade is more common and markets are free
• Many claim that this process adversely affects LEDCs whilst benefiting those who already control large proportions of the world’s power and economy.
• It is hard to determine tangible effects of this process, but events and changes are often attributed to it
• Tony Blair believes strongly in the idea of globalisation, saying that it is something we can’t ignore and thus we must “embrace globalisation and not retreat from it”
• He claims that we benefit from the process as a nation as we are able to buy things cheaper, travel easier and also become more aware of the world, but politically the effects are much m ore diverse
• Positively it can be asserted that this process has led to our increased membership of IGOs and this gives us more power throughout the world.
• Membership of the WTO and the G8 gives us increased say on the world’s markets, policies and aims
• However membership of such IGOs as the EU also decreases our sovereignty within our own country.
• Laws passed, in certain areas, in the EU are sovereign over UK law and thus we have politically lost a significant part of our power over domestic policy
• Receiving a loan from the IMF reduced our power over economic policy as we had to follow their guidelines in order to obtain the loan
• Thus in terms of IGOs globalisation could be said to have increased our power over international politics whilst decreasing our power over domestic politics
• Another area of politics that is affected by globalisation are the political parties, a fundamental part of our political system
• Post-Cold War it has been said that liberal capitalism is the only way left
• As a result there has been a noticeable shift of the ideology of our political parties
• The 2 main UK parties, the Conservatives and Labour, have since then been accused of moving to the centre ground away from their traditional right and left wing stances
• It is claimed that Labour has sacrificed the most ideologically speaking, as since coming to power in 1997 they have apparently embraced capitalism.
• They now support privatisation and have seeming moved away from the trade unions
• Good examples of this move are the recent outsourcings or closing downs of various car manufacturing plants
• Companies are moving abroad due to cheaper costs and are able to do this because of globalisation
• This means loss of jobs within the UK, and whereas before Labour would have fought or tried to find a way to keep these companies by introducing schemes or incentives they have merely said that there is nothing we can do about it
• Not only does this lack of action signify a significant shift in ideology but also a decreased control of the economy as companies, like BT, are continuously moving outsourcing to India or such, and the British face more unemployment
• However if faced with this point Blair or Brown would no doubt point out that our unemployment record is much better than France and Germany who are currently facing unemployment rates of over 10%
• Economic globalisation has also contributes to the recent growth of the UK economy. Economic liberals would argue that cheap labour in Britain, the result of immigration, has kept inflation low, boosting the economy.
• They could argue that this is the reason why the British economy has seen substantial growth, whereas the French economy has not
• The perceived strength of the British economy is seen as a reason for the electoral dominance of the Labour party in recent times
• Many see the growth of international terrorism as a backlash against cultural globalisation.
• Organisations such as Al-Qaeda attract the support of many who are angered by the effects of McDonaldization and this has had an impact on UK politics.
• The terrorist attacks on the 11th September 2001 on the USA and the attacks on the 7th July 2005 on the UK has affected British economy and politics considerably
• On and after these dates trade stopped for a short period of time and especially in America this had a terrible effect on the Stock Market as the Dow-Hones fell by the most in one day and in one week, affecting all countries including the UK due to globalisation.
• Fundamental elements of the British constitution such as Habeas Corpus have been ignored for the first time ever in peace time, and many see the proposed introduction of identity cards, caused by fear of terrorism, as an attack on civil liberties
• In recent years there has been a conspicuous increase in voter apathy
• This has been chalked up to various things, including the seemingly sameness of the political parties and the loss of control over policy that Britain appears to suffer from.
• Both things which have been discussed above can be attributed to globalisation.
• An increase of voter apathy means a decrease of political mandate for the government and hence a loss of support form its citizens and power over them
• The movement of many pressure groups headquarters to places like Brussels signifies this loss as they feel that in order to achieve their objectives they must target IGOs like the EU which they view to have more power over British politics than our own government
• Globalisation has also led to a greater awareness of the outside world, and a development of Labour’s questionable ethical foreign policy
• This external awareness brought to us by increased access of the media, means that foreign policy made by our government is not merely driven by national interest but also global interest
• More money and more concentration is spent on those in LEDCs than in previous years and one reason that Blair and his foreign secretaries have used is the extended awareness that globalisation brings
• This concentration of our government on external affairs, whilst seen by the majority as a positive thing, has dramatic effects in Britain as shown by the recent local elections and the increased support of the BNP, who claim that their purpose it to look after British nationals first.
• This increase support of the BNP is a harsh blow to the government, as the BNP is largely seen as a racist party, meaning that any increase of support of the BNP is a step in the wrong direction
• Overall it is clear that although these occurrences may not be purely the result of globalisation, the process does have a significant effect on British politics
• It seems that we have increased control over foreign policy or at least awareness there of, but our sovereignty over domestic policy has diminished
• Globalisation is supported strongly by our government, yet according to recent figures, since 2003 we have dropped 3 places in the index of the world’s globalized countries.
• We can’t deny the benefits but we must also not ignore the disadvantages  

More notes from Tutor2U:

The UK has one of the most open economies in the western world. Twenty years ago, foreign exchange controls were abolished and our financial markets have been gradually deregulated. Trade with other countries assumed a high and rising percentage of total national output.

Clearly, the globalisation process impacts significantly on the British economy – some examples include

• High levels of foreign direct investment (both inwards and outwards). The UK economy has been a favoured venue for overseas direct investment. Many factors explain this trend – including improvements in the supply-side performance of the economy, a favourable tax system and a much improved record on industrial relations

• Rising level of import penetration – particularly in those industries where Britain’s previous comparative advantage has been eroded such as textiles and clothing and the manufacture of lower-valued added electronic products

• Globalisation increases the importance for Britain of continuing to develop a competitive advantage in industries with major growth-potential as a means of improving living standards in the long term.

Globalisation has involved a speeding up of the process by which comparative advantage can change over time – not least because of the faster diffusion of technological progress. Greater investment is needed in high value goods and services – for example in high and medium-high technology manufacturing and in knowledge-intensive service sectors

• Structural change in industries – for example the long-term loss of output and employment in industries such as textiles and other manufacturing sectors. This creates problems where factor resources are occupationally and geographically immobile

• The current wave of globalisation places increasingly heavy emphasis on the importance of human capital as a factor determining long run economic growth. The UK has probably lost forever its comparative advantage in producing relatively low-value added manufacturing products. Whereas the global demand for high skill services and high value-added manufacturing output remains strong. This will require a substantial improvement in the skills and flexibility of the workforce

• The impact of globalisation on the British government – for example in changing the corporate tax regime and reforming labour markets and the welfare system. Some economists believe that globalisation reduces the ability of governments to levy business taxes – because corporations can move their production to countries offering the lowest tax base and the taxation of knowledge products transmitted across international boundaries becomes ever-more difficult. But this issue ignores the fact that many complex factors influence business location decisions (including proximity to markets) and relative tax burdens between different countries are often not the decisive factor in determining where capital flows.


• Globalisation has increased competitive pressures on British businesses in tradable goods industries. Has this helped to improve the trade-off between unemployment and inflation? Cheaper prices for many international commodities and finished manufactured goods have certainly helped to control inflation in recent years and therefore reduce inflationary expectations