In what ways has the Economy of UK been Affected by Globalisation?
The UK at present has the most open economies in the western world. However, twenty year ago, foreign exchange controls were abolished and country's financial market has been step by step deregulated. By the means of this, trade with foreign countries acknowledged a high and constantly rising percentage of total national output.
In general terms, globalisation can be defined as the increasing integration and interdependence of countries as well as their economies, societies, cultures, politics, technology and ecology1 (Hosseini, 2005). However, it affects people's daily lives by influencing their access to labour market and employment. Present study focuses on outlining some of the major advantages of globalisation to the UK but on the other side, depicting the threats that may bring deeper integration in economy of the country.
Looking at the present condition of UK it can be stated that, globalisation process impacts significantly on the British economy. However, globalisation describes the increased transferring of goods, services, labour, technology and finance & capital throughout the world. Although it is not a new development in the world, but in recent times its pace has increased by the means of indulging latest technology and most significantly in the area of telecommunication as for countries trading with each other becomes more easy and effective 2(O’Sullivan, 2008).
In the start, few points those are essential to study:
No immunity can be defined as, most of the time UK has been a beneficiary of globalisation. However, country cannot isolate itself from the positive effects of globalisation like growth in international trade, capital flows and transnational corporate activity. Foreign market in recent times is constantly becoming challenging for the countries to deal with. It is important for UK government to meet competitive challenges of the next decade otherwise, country may face risks and uncertainties regarding fall in economic growth as well as relative decline in standard of living of the people. But contrary to that, if economy handles the challenges of globalisation with care then it has to fear very little and much more to gain.
Too early to say with constant increment in globalisation, it is very early to say for UK, about the long term impacts of it. However, government has to be prepared for it and make valiant efforts in terms of moving parallel to the change in circumstance around the world 3(Seddon, 2008).
Broad arguments supporting the beneficial effects of globalisation on the UK economy
Here are some broad arguments supporting the beneficial effects of globalisation on the UK economy. According to O’Sullivan (2008), globalisation has made positive impact on the functioning of UK by providing it with opportunity to attain sustained economic growth. The rationale to this statement is that, over the last twelve years, UK has enjoyed a period of sustained economic growth, rise in employment and constantly improving standard of living. However, the current growth of rate of country's economy is 2.5% per annum which is considered as the longest sustained growth phase in recent history 4(Gabrielsson, Darling and Luostarinen, 2006). Furthermore, rapid increase in foreign trade and investment has helped UK to overcome all the challenges of international competition which has contributed to healthy growth.
On the other hand, globalisation has also made positive impact on economy by lowering inflation rate. As per the view of Mack 5(2010), globalization helped UK government to bring down the prices of various imported goods and service that are essential in terms of living 6(Hosseini, 2005). By the means of this, inflation rate were down and which ultimately provided assistance in lowering national interest rate. In regards to this Chavagneux, (2010), stated that, economic process is a major factor that has assisted to enhance the trade off between inflation and unemployment in UK.
In addition to that, one of the major positivity that globalisation has on UK is high inwards investment. In general terms, cited country is considered as the most favoured market for making inward foreign investment 7(Hill and Cronk, 2010). By the means of this, it has become the leading venue for inwards FDI inflow and outflow within the European Union which led the country to attain flexible labour market, competitive product markets, low corporate taxes and many more that encouraged and motivated high inflow of inwards investments. Overall it boosted the GDP, protected mammoth jobs as well as assisted in portraying growing current account balance of payments. Jones (2006), stated that, foreign investment made by government of UK helped country build up stock of oversees assets so that it can generate steady flow of net investment income.
In the view of Meera (2009), entering of various multinational companies in UK has helped the country raise its productivity and efficiency in the economy. The main advantage of this is that it helps in providing appropriate platform for building and sustaining a comparative advantage in those areas in which UK was facing major concerns and issues. However, with the help of inward investment UK economy has the capability to bring constantly innovation in manufacturing techniques. It is considered as one of the major benefits that country gained through globalisation 8(Gabrielsson, Darling and Luostarinen, 2006). Further, it is the responsibility of government bodies to maintain the economic environment within UK so that productivity can be raised.
Thereafter, benefits of globalisation can be seen in the terms of trade in UK. In other words it can be stated that, due to current wave of globalisation, the term of trade has been moved in the favour of UK. Country's economy is showing enhancement in regard to manufacturing and sale of high value and services which assist government to sale goods at higher price in foreign market and import at cheaper rate goods like household products. Further, by the means of this UK's trade terms has got boost and it started generating high national income. The main advantages of this is that, it assist the people of UK to attain better living of standards, better opportunity of jobs and employment etc.
Lastly, globalisation has helped in improving labour migration opportunities for UK. However, it is because, economic process has always focused on increasing international labour to minimize unemployment around the world. Several experts stated that it is a potential benefit for the British economy. Furthermore, rationale to this fact is that, it helps UK in generating labour for different sector like public services, constructions and other industries which were suffering from scarcity of workers 9(Walker, 2008).
Therefore, above stated are some of the major benefits that UK economy attained due to increase in globalisation. However, credit can be given to government as they have used this tool effectively and efficiently in terms of generating feasible results and outcomes.
Apart from benefits there are several drawbacks and disadvantages that economy of UK faced due to globalisation. In spite of several benefits at times issues such as recessions and foreign trends it impact on the economy of the country and creates major issues and concerns. However, opponents of whole process of globalisation often tend to concentrate the impact of globalisation on jobs and inequality. Other than this, various finance experts stated that, economic process is the major driver in terms of increasing scale of poverty. There are several experts that outline certain disadvantages that are needed to be focused are illustrated bellow:
According to Darling and Luostarinen (2006), due to globalisation people lost jobs in manufacturing industry however it is because in many traditional industrial heartlands, rising import penetration and a switch of production to lower costs manufacturing centres in venues like South East Asia and Eastern Europe framed various issues and obstacles regarding creating jobs for qualified people. As per the view of Mack 10(2010), rising unemployment creates major issue of structural unemployment as well as it may worsen the regional economic condition of the country.
Other than this, economic process (globalisation) is at times threat to service industry of UK. It can be justified by the fact that, country outsource services for low labour cost countries such as call centres of India. In regards to this arguments can be raised that companies acquiring outsourcing services from various countries that leads to make optimum utilisation of service companies in UK which may affect the economy 11(Hill, 2011). Therefore, focusing on globalisation is helping economy of UK, but it is the responsibility of government subsidiaries to choose the sectors which are permitted to trade in foreign market so that financial condition of country can be managed and controlled as well as it maintain position in European Union. In addition to that, at times globalisation has created adverse situations that worsen the United Kingdom's balance of payment. According to Murphy (2010), UK has trade balance from long ago with other nations since 1997 when the weakening began. During this course of year trade surplus showed down fall and due to which trade gap in commodities increased up to 57 billion during the year 2004 12(Jens-Uwe and Meera, 2009).
Along with this, globalisation has also forced UK economy to compromise with national economic interest majorly due to trade liberalism, financial strengths of Multinational Corporation and worldwide mobility of capital. However, it is disadvantage of UK because there are several multinational companies which undertake resources of country and trade in the foreign market to generate profits for themselves. Apart from this, UK economy is highly affected by social issues in the country like human trafficking and smuggling of illegal goods and services just because of over stretched criminal networks13 (Jones, 2006). However, it is constantly increased as people from different countries poses a difficulty to government in regards to protect its physical.
In addition to that, globalisation has created effect economy and environmental consequences due to which overall functioning of the country have been affected. In terms of increasing trade through sea and air transport which increases pollution per capita as well as emitting of waste household and industrial waste has increased due to which government raised external costs and a threat for long term aspect of business enterprise 14(Palan, Murphy and Chavagneux, 2010). In regards to this, government of UK has to focus on using latest technology to trade in such circumstances so that all the external and internal costs can be managed and controlled effectively and efficiently. As per the view of Hymer 15(2005), globalisation usually carries more risks rather than benefits to a country's economy it is how the legal bodies and financial management of country undertakes and uses to bring change so that benefits can be attained in desired manner.
Lastly, most importantly economic process and income and wealth inequality needs to cover up. However, it is essential because there are several opportunities that globalisation provides to the international companies of the country so that they can deal in foreign market and help in generating high national income for UK and maintain GDP. In addition to this, top authorities needs to indulge in various approaches by the means of which they can easily counter the negative aspect of globalisation such as: increase in skills level of the people in UK so that existing industries can acquire quality of people and overall functioning within sector can be executed effortlessly and desired results can be generated 16(Gabrielsson, Darling and Luostarinen, 2006). Along with that, government of UK has to undertake modern industrial approaches for trading in global market so that companies can establish their business appropriately. Furthermore, as studied UK is required to improve its transportation methods so that they can minimize or reduce external costs and contributes in increasing national income.
In concluding the study it can be stated that, globalisation has dual impacts on economy of UK. However, it can be justified as there are several companies that have different origins but majorly operates in UK because it has high economy growth and sustainability. But the negative aspects has been evaluated which highlights that due to enhancement in globalisation unemployment in the country has raised due to which major concerns has been faced by the UK economy. Along with that, study entails that, increase in global technological aspects has forced government of cited country to invest large money for acquiring the technology and maintaining position within foreign markets.
- Hosseini, H., 2005. An Economic Theory of FDI: A Behavioural Economics and Historical Approach. The Journal of Socio-Economics.
- O’Sullivan, N., 2008. Concept and Reality in Globalization, Privatization, and Free Market Economy, Westport, CT. Quorum Books/Greenwood.
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- Jens-Uwe,W. and Meera W., 2009. A Dictionary of Globalization. Taylor & Francis.