Factors Affecting Globalisation

Idea

Globalisation is not a one-way process: economic, technological and political factors can each accelerate it by deepening interconnectedness, or decelerate it by pulling economies apart. This note catalogues the drivers on both sides.

Considerations

• Economic factors. Because trade along comparative-advantage lines yields benefits, countries are drawn to raise their trade volumes, deepening interconnectedness and accelerating globalisation. The proliferation of free trade agreements, encouraged by pro-trade bodies such as the World Trade Organisation, lowers barriers and accelerates it further. Working the other way, a poor economic outlook pushes governments towards protectionism, which discourages trade and decelerates globalisation.

• Technological factors. Improvements in transport technology lower the cost of moving goods across borders, making imports more attractive and encouraging trade. Improvements in information and communications technology (ICT) make it cheaper and easier for multinational corporations to build global supply chains, transferring goods, factors and labour across borders. Both accelerate globalisation. However, some technological advances that strengthen a country’s own comparative advantage can reduce its need to trade — as US shale-oil extraction cut American petroleum imports — and so decelerate globalisation instead.

• Political factors. The rise of capitalist over communist and socialist ideals through the late twentieth century encouraged countries to open up to foreign trade, accelerating globalisation.

The picture is two-directional: the same category of factor can speed up or slow down integration, so an answer should weigh both pulls rather than assume globalisation only ever advances.