What this lesson teaches
I can explain how globalisation brings countries both economic growth and economic vulnerability.
Syllabus K230, Issue 3, Guiding Question 2, Economic impacts of globalisation. Economic growth and economic vulnerability experienced by countries
Make a guess
A food producer in Singapore wins orders from overseas supermarkets. What do you think happens to its factory here?
- It will probably move overseas to be nearer those customers.
- It may expand, producing more than Singapore alone would ever buy.
- Little changes, because overseas orders rarely affect local output.
Show the answer
It may expand, producing more than Singapore alone would ever buy.
Foreign demand gives firms a reason to grow. More output across many firms means economic growth.
Globalisation can help an economy grow by giving it overseas customers, foreign investment and new technology.
Picture a food producer that wins orders from supermarkets overseas. It expands its factory in Singapore to supply them. Foreign demand gives it a reason to produce more than Singapore alone would buy.
Economic growth means a country produces more goods and services over time. It is usually measured by real GDP. GDP (gross domestic product) is the value of everything produced inside the country. Real means the effect of price rises has been removed. If prices rise, the money value of output goes up even when nothing extra is made. That is not growth.
Sometimes real GDP is shown as an index, with one year set to 100. A later value of 105 means 5% more output than that year. It does not mean $105.
Globalisation can boost growth in three ways. Exports let firms sell to far bigger markets than Singapore alone. Foreign investment brings money from abroad to build factories, equipment and services here. Imports bring in technology and know-how that make production better. But firms still need customers and the ability to supply them.
Growth describes the economy as a whole. A sector is one part of it, such as manufacturing or finance. Some sectors and households gain more than others, and some may lose work or income. So a higher GDP does not prove everyone's pay went up.
Real pay is pay adjusted for price rises, so it shows what people can actually buy. Average pay is total pay divided by the number of workers. If average real pay falls, the group as a whole lost buying power, so not everyone can have gained. But it does not mean every single person's pay fell.
- Economic growth
- An increase in a country's output of goods and services.
- Real GDP
- Value of output, adjusted for price changes.
- Three routes
- Exports, foreign investment, imported technology.
Real examples to use
Foreign investment
MNCs have built factories, research centres and regional headquarters in Singapore, bringing investment, jobs and new skills that help the economy grow.
A trading hub
Singapore's total trade is over three times its GDP. So when world demand for goods such as electronics and chemicals rises, Singapore's economy grows.
Worked example: Selling sauce overseas
A Singapore sauce maker wins regular orders from overseas supermarkets. It buys more equipment and produces more sauce in its local factory.
- Overseas demand gives it a reason to produce more.
- More output adds to Singapore's economic growth. This is one firm's contribution; national growth also depends on the rest of the economy.
- It may also create jobs, but the example does not show how the extra income is shared between owners and workers.
Watch out for this
Higher GDP means every worker got a pay rise.
GDP measures the whole economy. Some workers may gain a lot and others nothing.
Check your understanding
How can exports help Singapore's economy grow?
- They bring in imported goods that are cheaper than local products.
- They raise wages for each worker in the firms that sell abroad.
- They let firms sell to far larger markets than Singapore alone.
Show the answer
They let firms sell to far larger markets than Singapore alone.
Right. More customers encourage more production.