Using Items A and B and your own economic knowledge, discuss whether increasing globalisation is beneficial for people in less economically developed countries.

Justify your answer.

Increasing globalisation presents both significant benefits and serious drawbacks for people in less economically developed countries (LEDCs). While it can be a powerful engine for growth and poverty reduction, its benefits are not always guaranteed or evenly distributed. On one hand, globalisation is hugely beneficial. As Item B states, people in LEDCs have 'benefitted from the job creation that has followed the locating of multinational companies (MNCs)'. When an MNC like Apple or Volkswagen sets up a factory in a country like Vietnam (as per Table 6), it directly creates jobs. These jobs often pay higher wages than local alternatives, providing a vital source of income that can lift people out of poverty and increase living standards. This injection of foreign direct investment (FDI) also brings new technology, skills, and infrastructure to the host country, creating positive spill-over effects for the wider economy. Furthermore, free trade, a key component of globalisation mentioned in Item A, allows LEDCs to sell their products on the global market. This enables them to earn export revenue, which is crucial for funding development, and to specialise in producing goods where they have a comparative advantage, leading to a more efficient allocation of resources globally. Access to imports also benefits consumers in LEDCs by providing greater choice and lower prices. However, the benefits of globalisation are not always realised. Item B highlights that MNCs 'do not always generate the benefits... that was hoped for'. A major issue is the exploitation of labour. While jobs are created, they may involve low pay, long hours, and poor safety standards as MNCs seek to minimise costs. This can trap workers in a cycle of poverty despite being employed. Another significant problem mentioned is tax avoidance. Item B notes that MNCs use 'tax avoidance schemes' so that a 'significant proportion of the tax revenue... is often not paid to the government'. This deprives the host country's government of vital funds that could be spent on education, healthcare, and infrastructure, thus limiting long-term development. Moreover, domestic firms in LEDCs can struggle to compete with large, efficient MNCs, potentially leading to the closure of local businesses and job losses. There is also a risk of environmental damage as MNCs may relocate to countries with less stringent environmental regulations, leading to pollution and resource depletion. In conclusion, increasing globalisation has the potential to be highly beneficial for people in LEDCs, primarily through job creation, investment, and trade. However, the extent of these benefits depends heavily on the policies of both the MNCs and the host governments. The drawbacks, such as labour exploitation, tax avoidance, and environmental damage, are significant. Therefore, globalisation is beneficial only if it is managed effectively, with strong domestic regulations and international cooperation to ensure that the gains are shared equitably and sustainably, rather than being extracted solely for the profit of the MNCs. Without this governance, the benefits can be limited and the negative consequences severe.