Effect of Globalization on the UK Economy

Globalization is hard to precisely define, but it involves the increased integration and interdependence of economics throughout the world. The process of globalization has led to increased trade, increased inward investment and greater communication. Globalization has led to increased mobility of labor and capital between different economies. There has also been an increased role for multinational corporations and international bodies such as the IMF.

Globalization has been characterized by increased international trade. This has created several benefits for the UK. The law of comparative advantage states that there will be an increase in economic welfare if countries specialize in the goods where they have a lower opportunity cost. Globalization has enabled a reduction in tariffs and transport costs leading to cheaper imports. This increases the consumer surplus of UK consumers. It has also enabled a wider choice of goods and services, for example, supermarkets are now able to stack a wide range of fruit and vegetables throughout the year.

Although globalization gives a greater choice of goods and services, some have criticized globalization for an increased homogeneity of products. Critics argue multinational cooperatives have been able to dominate, leading to big multinationals pushing out smaller independent retailers to the detriment of local firms. For example, the growth of coffee chains like Starbucks have made it more difficult for smaller independent coffee shops, it may be due to other factors like out of town shopping centers; also small shops can still exist even with the process of globalization.

Globalization has enabled firms to benefit from greater economies of scale. Due to globalization, production is increasingly specialized; for example, the manufacture of a car has increasingly been split up into different countries. This process of increased specialization and economies of scale have enabled lower average costs Of production leading