MARKET INTEGRATIONS

Submitted by:

Quirante, Eddie II
Cacaldo, Erika Jane
Malahay, Palanz Bray Hermil E.
Villanueva, Jhon Ray
Torres, Cindy
Palmes, Mae Ann
Blanco, Henry Cesar
Divinagracia, John Karlo
Manza, Queenlie Marie

September 10, 2019

I. Objectives

At the end of the lesson, the students will be able to:

a. Be able to Objective: To be able to explain what the information revolution contributed to the

rise of the global economy

b. Define and differentiate Capitalism and Socialism

c. Learn more and discover on how the elements of Bretton Woods System work

d. Identify the importance, advantages and the downsides of Global Corporations

II. Flow of Discussion

a. International Financial Institutions

- World economies have been brought closer together by globalizations

- It is not only the economy of the United States but also other economies in the world that have a

significant impact on the global market and finance.

- The strength of a more powerful economy brings greater effect on other countries. In the same

manner, crises on weaker economies have less effect on other countries.

Ex: Argentina’s serious financial crisis in the late 1990s and early 2000s had a comparatively small

impact on the global economy.

b. The Bretton World System

The major economies in the world had suffered because of World War I, the Great Depression in

the 1930s, and World War II. Because of the fear of the recurrence of the lack of cooperation among

nation-states, political instability, and economic turnoil (especially after the Second World WAR),
reduction of barriers to trade and free flow of money among nations became the focus to restructure

the world economy and ensure global financial stability (Ritzer, 2015).

 First element is the expression of currency terms of gold or gold value to establish a par value

(Boughton, 2007).

 Another element is that “the official monetary authority in each country (a central bank or its

equivalent) would agree to exchange its own currency for those of other countries at the

established exchanged rates , plus or minus a one-percent margin”

 Third element: The establishment of an overseer for these exchange rates;

 Fourth element: Eliminating restrictions on the currencies of member states in the international

trade

c. The General Agreement on Tarrifs and Trade (GATT) and the World Trade Oranization (WTO)

The General Agreement on Tariffs and Trade (GATT) covers international trade in goods. The

workings of the GATT agreement are the responsibility of the Council for Trade in Goods (Goods

Council) which is made up of representatives from all WTO member countries. The Goods Council

has 10 committees dealing with specific subjects (such as agriculture, market access, subsidies, anti-

dumping measures and so on). Again, these committees consist of all member countries.

d. International Monetary Fund (IMF) and World Bank

-are based in Washington DC

-founded after World War II

-because of peace advocacy

International Monetary Fund

-Comprised 189 countries including the United States, aims to ensure monetary stability around the

world.
-Member countries work together to foster global monetary cooperation, secure financial stability,

facilitate international trade, and promote employment.

-Each Member contributes of money called Quota subscription.

-Monitors economic activity, offers members policymaking tools and analysis, and also provides loans

to member countries.

Maintains its mission in 3 ways:

1. It keeps track of the global economy and those of its member countries

2. It gives practical help to members by providing policymakers by helping them plan fiscal policies

3. It lends to countries with balance of payments difficulties. It provides this financial assistance as

long as the borrowed country implements initiatives.

World Bank

-Purpose is to aid long-term economic development and reduce poverty in developing countries. It

accomplishes this by making technical and financial support available to countries.

-Initially focused on rebuilding infrastructure in Western Europe following World War II and then

turned its operational focus to developing countries to reform inefficient economic sectors and

implement specific projects.

e. Organization for Economic Cooperation and Development (OECD), Organization of the

Petroleum Exporting Countries (OPEC), and European Union (EU)

-Is a group of 34 member countries that discuss and develop economic and social policy, OECD

members are democratic countries that support free market economies

-It variously referred to as a think tank or monitoring group. It stated goals include fostering economic

development and cooperation; fighting poverty, and ensuring the environmental impact of growth and

social development.

-Publishes economic reports, statistical databases, analyses and forecasts on the outlook for

economic growth.

Organization of the Petroleum Exporting Countries (OPEC)

-Is a group consisting 14 countries of the world's major oil-exporting nations.

- Coordinates the petroleum policies of its member states with technical and economic aid.

-Was formed because member countries wanted to increase the price of oil, which in the past had

relatively low price and had failed in keeping up with inflation.

-Is a cartel that aims to manage the supply of oil on the world market, in order to avoid fluctuations

that might affect the economies of both the producing and purchasing countries.

European Union (EU)

- Is a group of 28 European countries that operates as a cohesive economic political outlook.

-Consists of a group that acts as one economic unit in the world economy

-Purpose is to establish a unified economic and monetary system, promote inclusion and combat

discrimination, break down barriers to trade and borders.

-Encourage technological and scientific developments

- Promote goals like a competitve global market and social progress

- Some member countries adopted Euro as the basic currency. Those countries who have been

utilizing Euro as their basic currency are called Eurozone .

f. North American Free Trade Agreement(NAFTA)

-The North American Free Trade Agreement(NAFTA) is a trade pact between the United States,

Mexico, and Canada.

- created on January 1, 1994 when Mexico joined the two other nations

-first created in 1989 with only Canada and the United States as trading partners

-helps in developing and expanding world trade by broadening international cooperation

- aims to increase cooperation for improving working conditions in North Amrica by reducing barriers

to Trade as it expands the markets of the three countries

-has caused manufacturing jobs from developed nations(Canada or the US) to transfer to less

developed nations (Mexico) in order to reduce the cost of their products

-The free trade, however, gave a modest impact on US GDP. It has become 127 billion dollars richer

each year due to trade growth.

-76% of Canadian exports go to the US and about a quarter of their jobs in Canada are dependent in

some way on the trade with the US.

-If NAFTA changes or is eradicated, it would be devastating for Canada’s economy.

Advantages

-lowered prices by removing tariffs

-opened up new opportunities for small and medium-sized businesses to establish a name for itself

-quadrupled trade between the three countries

-created 5 million US jobs

Disadvantages

-excessive pollution

-loss of more than 682,000 manufacturing jobs

-exploitation of workers in Mexico

-moving farmers out of business

g. History of Global Market Integration

Before the rise of today’s modern economy, people only produced for their family. Nowadays,

economy demands the different sectors to work together in order to produce, distribute, and

exchange products and services.

h. The Agricultural and the Industrial Revolution

THE AGRICULTURAL REVOLUTION

- the first big economic change (1700s)

- when people learned how to domesticate plants and animals, they realized that it was much more

productive than hunter-gatherer societies, thus became the new agricultural economy

- farming helped build surpluses, meaning not everyone had to spend their time producing food

INDUSTRIAL REVOLUTION

- second major economic revolution (1800s)

- with the rise of the industry came new economic tools, like steam engines, manufacturing, and mass

production

- factories popped up and change how work functioned

- instead of working at home, people began working as wage laborers and became more specialized

in their skills

- overall, productivity went up and people had access to a wide variety of goods

i. Capitalism and Socialism

The 2 competing economic models around the time of the Industrial Revolution

1. Capitalism - An economic system in which all-natural resources and means of production are

privately owned.

1.1 In a Free Market Set up, all economic activities are undertaken for the purpose of profit.

1.2 Profit maximization and competition are its main drivers of efficiency.

1.2.1 Profit Maximizations - A process that companies undergo to determine the best output price

levels in order to maximize its return.

1.2.2 Competition - Rivalry between companies selling similar products and services with the goal of

achieving revenue, profit, and market share growth.

1.3 Invisible hand – Introduced by Adam Smith in his book ‘The Wealth of Nations’ in the 1770’s.

The Invisible Hand is the unobservable market force that helps the demand and supply of goods in a

free market to reach equilibrium.

1.3.1 The idea is that if one leaves a capitalist economy alone (autopilot), consumers will

regulate things themselves by selecting goods and services that provide the best value.

1.4 An economy, if left on autopilot, will not work very well. There are many sectors where a

hands-off approach can lead to what economists call Market Failures.

1.4.1 Market Failure – When an unregulated market ends up allocating goods and services

inefficiently.
 1.4.2 When an economy is unregulated, the government might step in and force the company

to break up into smaller companies to increase competition.

2. Socialism - An economic system in which all of the means of production are under collective

ownership.

2.1 The government controls all means of production.

2.1.1.1 Decisions pertaining to production and distribution are made through central

planning.

2.2 The government dictates the consumption pattern. It is based on the principle “from

each according to his ability to each according to his needs.”

2.3 In a socialist economy, properties are owned by the government and allocated to all citizens.

2.3.1.1 Socialism emphasizes collective goals, expecting everyone to work for the

common good and placing a higher value on meeting everyone’s basic needs than on

individual profit.

2.4 Karl Marx, a German Economist, viewed Socialism as a stepping stone towards communism.

2.4.1.1 Communism- is an ideological and social political movement that aims to set up a

better version of society.

j. Information Revolution

The Information Revolution describes current economic, social and technological trends

beyond the Industrial Revolution. Its main feature is the growing economic, social and technological

role of information.

Technology has reduced the role of human labor and shifted it from a manufacturing-based

economy to one that is based on service work and the production of ideas rather than goods.
- Computers and technologies are beginning to replace many jobs because of automation or

outsourcing jobs offshore.

- Decline in union membership (with most unions nowadays are for public sector jobs like teachers)

What do jobs in the post-industrial society look like?

A post-industrial society is a stage in a society's evolution when the economy shifts from

producing and providing goods and products to one that mainly offers services. In a post-industrial

society, technology, information, and services are more important than manufacturing actual goods.

Agricultural jobs in the Philippine labor force have fallen drastically over the last century. In the

United States, manufacturing jobs have declined in the last 30 years. The US economy started with a

lot of workers serving either the primary or secondary economic sectors. But today, much of their

economy is centered on the tertiary sector or the service industry.

The service industry (tertiary sector) includes every job such as administrative assistants,

nurses, teachers, and lawyers. This is a big and diverse group because the tertiary sector is mainly

defined by what it produces rather than what kinds of jobs it includes.

TWO TYPES OF JOBS

Primary Labor Market – includes jobs that provide many benefits to workers (high income, job

security, health insurance, and retirement packages). These are white-collared professions, like

doctors, accountants, and engineers.

Secondary Labor Market – provide fewer benefits and include lower-skilled jobs and lower-level

service sector jobs; have unpredictable schedules, typically not offering health insurances and tend to

have less job security.

What is next after capitalism and socialism?

No one knows what the next economic revolution is going to be like. A key part of both our economic

and political landscape is corporations.

Corporations are defined as organizations that exist as legal entities and have liabilities that are

separate from its members.

k. Global Corporations

-can be interchangeably termed as multinational or transnational corporations (MNCs or TNCs)

-intentionally surpass national borders and take advantage of opportunities in different countries to

manufacture, distribute, market, and sell their products

Examples: McDonald’s, Coca Cola and General Electric

Advantages

-promotes more rapid advances in the developing nation because of the ideas and innovations

brought over from the industrialized nations

-makes nations around the world more interdependent, which minimizes the potential for conflict

-Better allocation of resources

-Lower prices for products

-More employment worldwide

-Higher product output

Disadvantages

-The people working in the factories are exploited as their wages are cut.

-They are often prohibited from unionizing.

-It can even result in sweatshop conditions with long working hours, substandard wages, and poor

working conditions.

-If the labor laws in one country become too restrictive to the TNC’s they can just move their factory

to a new country, leaving widespread unemployment in their wake.

-Setting up factories in these developing nations may also hurt the core country where the TNC is

based because many potential jobs are being sent abroad

- The global corporations also influence politics and allow workers to be exploited.

Global Corporations and Cultural Changes

-The changes a country experiences from international trade are not only economic.

-Cultural practices and expressions are also passed between nations, spreading from group to group

is called diffusion.

-Nowadays, mass media and the Internet allow the transfer of ideas instantaneously. This is most

commonly seen in the transmission of scientific knowledge and the spreading of the North American

culture, which dominates the Internet.