Explain the reasons behind the growing anti-globalisation sentiments, particularly in developed countries.
In recent years, growing anti-globalisation sentiments have questioned the widely accepted belief in the advantages of global economic integration. As trade tensions escalate between major economies, both policymakers and the public are increasingly confronted with the challenges of a world that is becoming more inward-looking.
a. Explain the reasons behind the growing anti-globalisation sentiments, particularly in developed countries. [10]
Introduction
In recent years, anti-globalisation sentiments have intensified, especially in developed economies such as the United Kingdom and the United States. While globalisation—defined as the increasing integration of economies through trade, labour flows, and capital mobility—has generated substantial benefits in the form of higher growth, improved efficiency, and access to wider consumer markets, it has also created winners and losers. The economic costs borne by certain segments of society have led to increasing frustration, feeding into the rise of populist movements, trade protectionism, and political shifts such as Brexit. These sentiments are driven by two key concerns: rising income inequality and the rising cost of living.
Income Inequality and Labour Market Displacement
One of the most significant sources of anti-globalisation sentiment is the widening income inequality, particularly among low-skilled workers in developed countries. In the case of the UK, membership in the EU meant that it had to uphold the principle of free movement of labour, which allowed for a large influx of workers, especially from Eastern European countries.
The entry of low-skilled migrants into the labour market increased the supply of labour, shifting the labour supply curve from SS₀ to SS₁. As a result, in sectors where jobs are more manual or routine—such as logistics, construction, and hospitality—the wage rate fell from P₀ to P₁. Domestic workers in these sectors either had to accept lower wages or faced job displacement. At the same time, the demand for high-skilled labour, such as those in finance and technology, continued to rise due to global connectivity and outsourcing opportunities. This created a wage divergence that benefitted professionals and urban elites while leaving many working-class citizens worse off.
In post-industrial regions such as the North of England and parts of the Midlands, economic stagnation was perceived to be worsened by globalisation. Jobs in manufacturing and mining—once core pillars of these regions—had been outsourced to countries with lower labour costs. Many viewed immigration and global labour competition as causes of depressed wages.
Rising Cost of Living and Inflation Pressures
In addition to labour market concerns, the rising cost of living has become a major issue, fuelling dissatisfaction with global economic integration. In theory, globalisation should reduce prices through greater competition and access to cheaper imports, but in practice, demand-pull and imported inflation have emerged as pressing challenges.
As the UK economy opened up, foreign direct investment and migration increased significantly, boosting aggregate demand (AD). Higher levels of consumption (C), investment (I), and net exports (X-M) led to a rightward shift of the AD curve from AD₀ to AD₁. This increase in aggregate demand, particularly in sectors like housing and services, put upward pressure on prices, contributing to demand-pull inflation.
Meanwhile, wage growth was relatively stagnant, especially for the middle and lower-income groups, meaning that real incomes fell over time.
Moreover, the UK’s heavy reliance on imported goods, including food, energy, and manufactured inputs, made it vulnerable to imported inflation. Disruptions to global supply chains—whether due to geopolitical tensions, such as the Russia-Ukraine war, or the COVID-19 pandemic—caused supply shocks that drove up prices globally. These were passed on to UK consumers, who faced sharp increases in fuel, food, and utility prices. As global commodity prices surged and transport costs rose, households began to feel the squeeze.
Conclusion
In summary, while globalisation has delivered long-term economic benefits in terms of trade, efficiency, and innovation, its short-term distributional effects have led to mounting anti-globalisation sentiments, especially in developed countries. Income inequality, job insecurity, and the rising cost of living have created a sense of exclusion and resentment among certain population segments. These groups, particularly those in rural or deindustrialised areas, increasingly perceive globalisation as a threat rather than an opportunity.
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