Globalisation and Economic Policy

In what ways does globalisation affect policy making in the UK ?

Key points 

• To some extent the inflation rate is not in the control of policy makers – note oil, commodity and food prices.

• Financial markets are more interlinked than we thought before the credit crunch. Any attempts to regulate financial markets have world-wide effects. Action needs to be global.

• The emerging economies (China, India, Brazil etc.) are taking increasing shares of world trade and enjoy cheap labour. This presents challenges for policy on industrial restructuring.

• International capital is more fluid. Policy makers must address the need to attract such capital. It is also a highly competitive market.

• Free movement of Labour in the EU has had considerable effects on labour markets, wages and employment patterns.

• As corporations become increasingly global, so does the movement of more ‘senior’ management and skilled labour. This constrains policies on income taxes.

• Similarly as companies are globally mobile, corporate tax policy is constrained.