Trade, investment and transnational corporations, driven by increased globalisation, significantly impact economic development and growth in the global economy. These interconnected drivers of economic growth have reshaped the global economic landscape, creating new opportunities and challenges for countries and businesses.

Trade and Its Impact on Economic Growth

As we know, trade involves the exchange of goods and services between different economies. Driven by globalisation, increased trade allows economies to expand their export and import markets, allowing for increased sales in goods and services and access to products unavailable domestically. This is known as economic expansion. As a country's exports $(X)$ increase, so does its national GDP. An increase in GDP thus represents economic growth of an economy.

According to the World Trade Organisation (WTO), the value of global trade has grown from $3.5 trillion in 1990 to $19.0 trillion in 2019. This represented an increase from 15.3% to 22.4% of global GDP in this time period. This growth in trade has been accompanied by a significant expansion of global value chains (GVCs), with intermediate goods and services accounting for nearly half of all trade flows.

However, this can be reversed if a country becomes too heavily reliant on imports. With an increase in imports, problems such as imported inflation can occur. This drives the prices of goods and services up in a country, thus hindering economic growth. Additionally, as the component for trade of aggregate demand is exports minus imports $(X-M)$, if a country is importing more than they are exporting, we can see a decrease in aggregate demand. As aggregate demand represents growth in GDP, a decline in aggregate demand can see slow GDP growth, and thus limited economic growth.

Investment and its Impact on Economic Growth and Development

Foreign direct investments (FDI) refers to the investment made by a company or individual from one country into another economy. FDIs have a profound impact on both economic growth and development - mostly in a positive way. Due to globalisation, FDIs have become a major source of capital, technology, and management expertise for many countries, particularly in the developing world.

As such, economies can experience capital formation and job creation with the influx of FDIs. Foreign investment into domestic firms allows for increased production of goods and services. As such, more labour and capital is needed to ensure money and resources are efficiently used to maximise production. As a result of increased jobs, firms must increase wages to attract employment. Thus, we can see that FDIs can increase the economic prosperity and development of the individual, through job creation and increased wages.

The Role of Transnational Corporations on Economic Growth

Transnational corporations (TNCs) are companies operating in multiple countries. Driving globalisation, TNCs are significant in aiding the economic growth and development in multiple countries. When TNCs expand to various economies, the economies they expand to are subjected to job creation and increased trade. For example, Apple, an American company, produces their products in China, allowing for jobs to be created in the Chinese economy. As such, TNCs can increase both economic growth and development across multiple economies.

According to UNCTAD, the world's top 100 non-financial TNCs held $9.0 trillion in foreign assets and employed 21.5 million workers abroad in 2019. These TNCs have played a crucial role in the development of global value chains, with intra-firm trade accounting for around one-third of global trade flows. Thus, we see that TNCs have the potential to contribute to economic growth and development in host countries through various channels, such as technology transfer, skills upgrading, and access to global markets.