Syllabus Topic
HSC Topic One - The Global Economy
Globalisation and economic development
effects of globalisation
Globalisation continues to shape the world economy, influencing trade, investment, technology, and social structures. The effects of globalisation have been particularly pronounced in areas such as economic growth, inequality, geopolitical tensions, and environmental sustainability. This article explores these impacts using recent examples and statistics.
Economic Growth and Trade Expansion
Globalisation has historically driven economic growth by facilitating international trade and investment. Global trade remains a key driver of economic activity, with exports accounting for approximately 25% of global GDP. However, trade growth has slowed due to heightened geopolitical tensions and protectionist policies. The World Economic Situation and Prospects report indicates that global economic growth is projected to decline to 2.4% in 2025, down from 2.9% in 2024. This slowdown is attributed to trade disruptions, increased tariffs, and financial market volatility.
Despite these challenges, globalisation continues to foster technological advancements and cross-border collaboration. The rise of digital trade and e-commerce has mitigated some of the negative effects of trade restrictions, allowing businesses to access international markets more efficiently.
Rising Inequality and Labour Market Shifts
While globalisation has lifted millions out of poverty, it has also exacerbated income inequality. In 2025, disparities between developed and developing economies remain a pressing issue. Many trade-dependent developing countries face declining exports, lower commodity prices, and tighter financial conditions. These economic pressures disproportionately affect low-income households, deepening social inequalities.
Labour markets have also been reshaped by globalisation. Automation and outsourcing continue to displace traditional jobs, particularly in manufacturing sectors. In response, governments and businesses are investing in workforce retraining programs to equip workers with skills suited for the digital economy.
Geopolitical Tensions and Economic Fragmentation
Geopolitical instability has intensified in 2025, influencing global economic dynamics. The World Economic Forum’s Global Risks Report highlights that state-based armed conflicts, trade wars, and economic sanctions are among the top risks. The ongoing trade disputes between major economies, such as the United States and China, have led to increased tariffs, disrupting global supply chains and raising production costs.
Additionally, the rise of economic nationalism has prompted countries to reassess their reliance on global trade. Some nations are prioritising domestic production and reshoring industries to reduce dependence on foreign markets. While this strategy enhances economic resilience, it also contributes to economic fragmentation and reduced international cooperation.
Environmental Challenges and Climate Impact
Globalisation has contributed to environmental degradation, but it also plays a role in addressing climate change. In 2025, extreme weather events—including heatwaves in Asia, flooding in Brazil and Europe, and wildfires in Canada—underscore the urgent need for sustainable policies. The continued use of fossil fuels exacerbates climate risks, prompting governments to implement stricter environmental regulations.
International collaboration remains crucial in tackling climate change. Global agreements and green technology investments are helping nations transition to sustainable energy sources. However, disparities in climate adaptation funding between developed and developing countries pose challenges to equitable progress.
Conclusion
The effects of globalisation reflect both opportunities and challenges. While it fosters economic growth, technological innovation, and international cooperation, it also exacerbates inequality, geopolitical tensions, and environmental concerns. As nations navigate these complexities, policies that balance global integration with economic resilience and sustainability will be essential.
Sources
- World Economic Forum – Global Risks Report 2025
- United Nations – World Economic Situation and Prospects as of mid-2025 https://desapublications.un.org/publications/world-economic-situation-and-prospects-mid-2025
- Our World in Data – Trade and Globalization
https://ourworldindata.org/trade-and-globalization
.jpg)
