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Social Studies Model Answer Chapter 9 (Economic Growth vs Economic Downturn)

Economic Growth vs Economic Downturn for Countries

Globalization can benefit countries because they can bring about greater economic growth to the countries. Economic growth refers to the increase in Gross Domestic Product (GDP) and employment levels in the country. In a globalized environment, it is easier for countries to seek out Foreign Direct Investments (FDIs) and Free Trade Agreements (FTAs). Singapore for instance has consistently attracted FDIs from many MNCs overseas because of its attractiveness in the form of a stable political environment, excellent infrastructure, low corporate tax as well as the availability of a large pool of skilled labor. These has resulted in many MNCs setting up their manufacturing plants and factories in Singapore contributing to more goods and services produced in our country. These MNCs has also created many high paying jobs for Singaporeans thus contributing to a higher standard of living over the years. For example, Singapore is home to many big oil companies like Mobile and Shell, which contribute significantly to our economic growth. Another main reason for economic growth is due to more FTAs between Singapore and other countries. FTAs are agreements between countries to trade and exchange goods freely with each other. When there are more FTAs, Singapore can export more products cheaply without heavy tariffs from other countries. This would result in Singapore needing to produce more goods and services local for export, which will lead to economic growth. For instance, Singapore has bilateral FTAs with USA and China, allowing Singapore to export more of products to these two economic giants. These FTAs allow more goods and services to be produced locally to generate more economic growth.

On the other hand, globalization can also bring economic downturns to countries as the more interconnected systems of the world leads to economic damage when one member is affected. During the beginning of the 2020 Covid-19 pandemic, the virus, which was first detected in Wuhan, China, was allowed to spread to other countries via air travel easily due to the world being connected by many air-routes. As a result, many countries, including Singapore, went into lockdowns in order to contain the spread of the virus in their countries. This lockdowns meant that all non-essential businesses in the countries are forced to shut, people have work from home, schools are closed, and tourism stops. This severely reduce our economic output, which will lead to downturns. Due to this lockdown, many companies have also shut down increasing unemployment levels in the countries. Similarly, during the Global Financial Crisis of 2008, a major collapse of the banking sector in the USA, led to a worldwide financial crisis as many foreign banks and businesses have strong financial and business connections with many US banks. The result was a worldwide recession that forced many countries to suffer from economic downturns. Hence, globalization can lead to economic downturns.

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