Globalisation: meaning, causes and effects – Economic Integration and Globalization (Senior 6 Economics) | Ganzaa

Economic Integration and Globalization

Lessons

Senior 6 · Economics

Economic Integration and Globalization

5 lessons

Lesson 3 of 5

Globalisation: meaning, causes and effects

25 min

The data: a more connected world, and a more connected Rwanda

One simple measure of how closely an economy is tied to the rest of the world is the value of its trade (exports plus imports of goods and services) as a share of its GDP. The World Bank publishes it for every country.

Another measure is communication: according to World Bank data, the share of Rwanda's population using the internet rose from 0.1% in 2000 to 31.7% in 2024.

Read the graph. (1) What happened to world trade in 2009 and in 2020? Suggest why. (2) How has Rwanda's position changed relative to the world since 2000?

Definition

Globalisation: the growing integration of the world's economies and societies through trade in goods and services, flows of capital, movement of people, and the spread of technology, information and culture across borders.

Trade openness: a country's exports plus imports as a percentage of its GDP.

\text{Openness} = \frac{X + M}{\text{GDP}} \times 100\%

Worked example 1: reading openness

(a) Rwanda's openness rose from 44.4% of GDP in 2020 to 71.7% in 2024 (World Bank). That is a rise of

71.7 - 44.4 = 27.3 \text{ percentage points,}

or, in relative terms,

\frac{27.3}{44.4} \times 100\% \approx 61.5\%.

(b) An economy has a GDP of US$15,000 million, exports of US$4,000 million and imports of US$6,500 million (illustrative). Its openness is

\frac{4\,000 + 6\,500}{15\,000} \times 100\% = 70\%.

Warning

Percentage points are not per cent. A rise from 44.4% to 71.7% is 27.3 percentage points but a 61.5% relative increase. Use "percentage points" whenever you subtract one percentage from another.

Features and types of globalisation

Type	What it involves	Illustration
Economic (trade)	More goods and services cross borders; production is split across countries in global value chains	A phone designed in one country, assembled in another from parts made in many
Financial	Capital moves quickly between countries: FDI, portfolio flows, bank lending, remittances	Remittances to Rwanda of US$640 million in 2025 (BNR)
Technological	Rapid spread of the internet, mobile phones and new production methods	Internet use in Rwanda from 0.1% to 31.7% of people (2000–2024)
Cultural	Films, music, food, fashion and languages spread worldwide	Global brands and streamed music; African music reaching world audiences
Political	More decisions taken in international organisations and agreements	The WTO, IMF, World Bank, African Union and climate agreements
Movement of people	Migration for work and study, tourism, business travel	Rwandans studying and working abroad; tourists visiting Rwanda

Causes of globalisation

Cheaper transport. The standard shipping container, first used in the 1950s, and larger ships and aircraft cut the cost of moving goods.
Information and communication technology: the internet, mobile phones and digital payments let firms manage production and sell across the world.
Trade liberalisation through GATT and the WTO, and regional agreements, lowered tariffs.
Financial liberalisation: fewer controls on capital let money flow to where returns are highest.
The growth of multinational corporations, which spread production and brands across many countries (next lesson).
Political change: the end of the Cold War (around 1991) and economic reforms in China from 1978 and India from 1991 brought billions of workers into the world economy.
International institutions such as the IMF, World Bank and WTO, which promote open markets.

Effects of globalisation on developing countries

Positive effects	Negative effects
Access to bigger export markets and to cheaper imports	Local firms and farmers face strong foreign competition
Inflows of FDI, technology, skills and management methods	Profits flow back to foreign owners; dependence on foreign firms
Jobs in export industries and tourism	Jobs can move away again when costs rise
Faster spread of knowledge, medicine and education	Brain drain: skilled workers emigrate
Remittances from citizens working abroad	Exposure to world crises: the 2008–09 financial crisis, COVID-19 in 2020
Wider choice for consumers	Loss of local culture and languages; environmental damage from more transport and production
International cooperation on shared problems	Gains are shared unequally, within and between countries

Worked example 2: a crisis travels

World trade fell from 60.3% of world GDP in 2008 to 51.9% in 2009 during the global financial crisis (World Bank):

51.9 - 60.3 = -8.4 \text{ percentage points in one year.}

A country that trades more is more exposed to such shocks: in 2020 Rwanda's openness fell from 48.9% to 44.4% as the COVID-19 pandemic cut trade and tourism, then rose to 59.8% in 2021 as trade recovered. Openness brings opportunities and risks together.

Tip

Five flows. Globalisation is the growth of five flows across borders: goods, money, people, ideas (technology and information) and culture. For any example, ask which flow it belongs to.

Important

Discuss. Rwanda's economy has become far more open since 2000. Has globalisation done more good than harm to Rwanda? Use at least one positive and one negative effect from the table, each with evidence from this unit or Unit 2.

Crash Course Economics, "Globalization and Trade and Poverty" (episode 16, about 9 minutes, 2015). The presenters argue that globalisation raises average incomes but does not help everyone. Note the groups they say lose, and whether the same groups exist in Rwanda.

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Practice

Define globalisation and state five of its features.
A country's exports are US$2,000 million, its imports US$3,500 million and its GDP US$11,000 million. Calculate its trade openness.
Rwanda's openness was 31.3% in 2000 and 71.7% in 2024. Find the change in percentage points and in relative terms.
Explain four causes of globalisation.
Distinguish between economic, technological and cultural globalisation, with an example of each.
Give four positive and four negative effects of globalisation on developing countries.
Explain why a more open economy is more exposed to world crises, using the data for 2009 or 2020.
"Globalisation benefits rich countries more than poor ones." Discuss.

Show answersHide answers

The growing integration of economies and societies through trade, capital flows, migration and the spread of technology and culture. Features: more trade; more capital flows; global value chains; migration; spread of technology and information; international institutions.
$\frac{2\,000 + 3\,500}{11\,000} \times 100\% = 50\%$ .
$71.7 - 31.3 = 40.4$ percentage points; relative change $\frac{40.4}{31.3} \times 100\% \approx 129\%$ .
Cheaper transport (containers, larger ships); ICT (internet, mobile phones); trade liberalisation (GATT and WTO); financial liberalisation; growth of MNCs; political change; international institutions.
Economic: trade and global value chains (parts made in many countries). Technological: spread of the internet and mobile phones (Rwanda's internet use). Cultural: spread of music, films, food and fashion.
Positive: bigger markets, FDI and technology, jobs, remittances, choice, cooperation. Negative: competition for local firms, profit outflows, brain drain, exposure to crises, cultural loss, unequal gains.
When trade is a large share of GDP, a fall in world demand or a halt to travel hits a larger part of the economy: world trade fell by 8.4 percentage points of GDP in 2009, and Rwanda's openness fell from 48.9% to 44.4% in 2020 as tourism and trade collapsed.
For: rich countries own most MNCs, capital and technology and set the rules; poor countries export primary goods with volatile prices and lose skilled workers. Against: many developing countries (such as China, and Rwanda since 2000) have gained markets, investment, remittances and technology. A good answer weighs both and concludes.

Sources and credits

Trade as a share of GDP: Trade (% of GDP), and internet use: Individuals using the Internet (% of population), World Bank, World Development Indicators, CC BY 4.0; read in September 2026 and drawn as a graph by Ganzaa.
Remittances, 2025: Monetary Policy and Financial Stability Statement, March 2026, National Bank of Rwanda.
Photo: Container vessels, Yeluma Ntali, via Wikimedia Commons, CC BY-SA 4.0.
Video: Globalization and Trade and Poverty: Crash Course Economics #16, CrashCourse, embedded from YouTube.

Written by Ganzaa: the graph, the tables, the worked examples and the practice items. The economy in worked example 1(b) is illustrative. This lesson adapts CC BY-SA material and is shared under CC BY-SA 4.0.

1The data: a more connected world, and a more connected Rwanda

2Features and types of globalisation

3Causes of globalisation

4Effects of globalisation on developing countries

The data: a more connected world, and a more connected Rwanda

Features and types of globalisation

Causes of globalisation

Effects of globalisation on developing countries