Test Your Knowledge Flash Cards 🔒Play Lemonaire 🔒Play Last Stand

A Connected World » The Rise of the Global Economy

What you'll learn this session

Study time: 30 minutes

Edexcel spec: 8.1 A connected world (a)

What the global economy is and how production and commodity chains have grown
Six factors that encourage it: trade, foreign investment, aid, labour, modern transport and ICT
How to read a line graph or bar chart showing change over 50 years
How to write a clear explain answer

Globalisation and Migration is one of three optional global issues. In Paper 2 Section C, Edexcel students answer on only ONE of the three.

🔒 Unlock Full Course Content

Unlock This Course

The global economy

You have already met globalisation as the way the world is becoming more connected. This lesson looks at the economic side. Think of the phone in your pocket. Its parts, its software and its assembly may each come from a different country, and it is then sold in shops all over the world. That is the global economy at work.

Key terms:

Global economy: the way the money, goods and services of every country are linked together into one world system.
Production chain: the steps needed to make a product, such as making parts, assembling them and selling the finished item. The steps can happen in different countries.
Commodity chain: the linked steps a raw material or crop goes through, from where it is grown or mined, to processing, to the shops where it is sold.
Trade: buying and selling goods and services between people or countries.
Foreign investment: money put into a business or project in another country.

Growth of production and commodity chains

In the past, many products were made in one place, often close to where they were sold. Today, chains have grown longer and cross many borders.

🍫 A commodity chain: chocolate

Cocoa beans are grown on farms in tropical countries. They are dried, shipped abroad and made into chocolate in factories. The bars are then sold in shops far from where the beans grew. Each step adds value and links the farmers to shoppers across the world.

👕 A production chain: a T-shirt

Cotton may be grown in one country, spun into thread in a second, sewn into a T-shirt in a third and sold in a fourth. A company can choose each step in the cheapest or most skilled place.

As more countries joined in, the number of steps and countries in each chain grew. This is the rise of the global economy: more trade, more connections and more countries taking part.

Factors encouraging the global economy

The spec lists six factors. Learn them as a list.

Trade: countries trade because no country has everything it needs. Agreements that lower taxes on imported goods make trade cheaper and so encourage more of it.
Foreign investment: companies build factories, offices and call centres abroad. This brings jobs and skills to the host country and spreads production around the world.
Aid: help given by one country or organisation to another. Aid can pay for roads, ports and schools, which help a poorer country to join in world trade.
Labour: in many countries workers are paid less than in richer countries. Companies can cut costs by making goods where labour is cheaper, and workers also move to find jobs.
Modern transport: huge container ships, bigger aircraft, better ports and motorways carry goods farther, faster and more cheaply. Fresh foods can even be flown overseas in a day or two.
Information and communication technologies (ICT): the internet, email, video calls and mobile phones let firms manage factories in other countries, share designs at once and move money in seconds. Customers can also order from anywhere.

Worked example

Question: Explain how modern transport has encouraged the global economy. [3 marks] Answer: Container ships can carry large amounts of goods (1), which lowers the cost of moving each item (1), so it is cheaper for firms to make products in one country and sell them in another (1).

Skill: reading change over 50 years

In the exam you may be given a line graph or bar chart showing how the global economy has changed over about 50 years, such as the value of world trade. Follow these steps:

Read the title and both axes. Check the units, such as years along the bottom and money up the side.
Describe the overall trend: is it rising, falling or staying the same?
Quote two figures from the graph with their years, including the units.
Look for changes in speed or a sudden dip, and say when they happen.

Example with invented figures. Suppose a line graph shows world trade rising from 2 units in 1970 to 12 units in 2020. A good answer is: "World trade rose steadily between 1970 and 2020 (1), from 2 units to 12 units (1). This is six times as much (1)." To find how many times bigger, divide 12 by 2.

A bar chart works the same way. Compare the heights of the bars, and use figures from the chart rather than just saying "it went up".

Common mistakes

Writing only "cheap labour" for every answer. Explain why it matters: it lowers costs, so companies move production.
Mixing up trade (buying and selling goods) with foreign investment (putting money into a business abroad).
Describing a graph without any figures. Always quote numbers and years.
Listing the factors with no explanation. In an explain question, add "which means" or "so".
Writing about global institutions such as the WTO. That comes in the next lesson.

Exam-style question

(a) Give two factors that have encouraged the rise of the global economy. [2 marks]

(b) Explain how information and communication technologies have encouraged the global economy. [3 marks]

Model answer

(a) Foreign investment (1) and modern transport (1).

(b) The internet and video calls let companies manage factories in other countries (1). Designs and orders can be sent instantly (1), so it is easier and quicker to run production chains across many countries (1).

Exam tip

"Explain" means give a reason and link it to the result. Use a chain such as: the technology does this, so that happens, so the global economy grows.

Test Your Knowledge