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OBE FACULTY - DESIGNED MODULE

THE CONTEMPORARY WORLD

I. Subject: GE3 - The Contemporary World

II. Learning Outcomes:
1. Define and understand market integration.
2. Identify the governing bodies that are significant to market integration.
3. Appreciate the effects of market integration.
III. Topic/Lesson: Market Integration
IV. Days of Learning Sessions:
Online/Modular
BSCRIM 1A - Friday/Wednesday
BSCRIM 1B - Wednesday/Friday
BSCRIM 1C - Thursday/Saturday
V. Expected Outcome:
Distinguish the purpose of market integration.
VI.Delivery:
1. Thought Processing
1.1. Pre-assessment Activity (Collaboration)
Activity 1.
What do you see in the image below? What interpretation/s can be drawn
from the image, explain your answers briefly.

Absolutely, yes. No man is an island, and that very saying also translates into the work
field. You may have individual tasks but it ultimately leads towards completing an entire
project to help achieve your business goal.
Well maybe not always from a series of sparks, but a vast majority of times anyway. No
question. And certainly a great reason to work with your team on collaboration. It takes a
great entrepreneur with vision to start a business, but it requires strong leadership

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 collaboration skills and a collaboration of many people to make it a success.Collaboration
is working together to achieve a goal. It is a recursive process where two or more people
or organizations work together to realize shared goals. Note that collaboration is NOT
cooperation … it is much more than the intersection of common goals. It is a collective
determination to reach an identical objective by sharing knowledge, learning, and
building consensus.Collaboration is an attribute that cuts across many businesses and
business processes. We need to make it an intentional process and cultivate it into any
team’s culture. That’s where leadership comes in as a key ingredient, to drive the
collaborative process to make the whole team better than the sum of the parts.

2. Presentation Phase:
The 3-A Approach

2.1. ANALYSIS (Communication)

Activity 2
In the context of international relationship among countries, do you believe
in the saying that “NO MAN IS AN ISLAND”? Why or why not? Expound
your answer.
It is trivially true. An island is a relatively small patch of land in the sea. A man, or a
woman for that matter, is a member of the human species.Now, as a slogan, I guess it is
intended to mean that no one is fully independent, or absolutely self-reliant, in the way an
island, isolated from the rest of the world, may be. That, again, is true. We begin our lives
as highly dependent and vulnerable creatures, and many of us will experience similar
dependence and vulnerability at the end of our lives. It takes years before we can make
significant decisions on our own, and these years of learning and growing up shape us,
our beliefs, our moral convictions, and so on, in countless ways. Even as we are grown
ups, we remain dependent on others in many ways, because they work in ways that
benefit us even when we don’t notice it, keep our social world running more or less
smoothly, so that we basically support each other more than any single person is able to
grasp.The self-made man, by contrast, is little more than a myth, and a deleterious one at
that.

2.2. ABSTRACTION (Critical Thinking)

To aid your understanding, read the article published by REX Bookstore,
written by Prince Kennex Reguyal Aldama.

MARKET INTEGRATION

Introduction

The social institution that has one of the biggest impacts on society is the
economy. You might think of the economy in terms of the number—number of
unemployed, gross domestic product (GDP), or whatever the stock market is
doing today. While we often talk about it in numerical terms, the economy is
composed of people. It is the social institution that organizes all production,
consumption, and trade of goods in the society. There are many ways in which
products can be made, exchanged, and used. Think about capitalism or
socialism. These economic systems and the economic revolutions that created
them- shape the way people live their lives.

Economic systems vary from one society to another. But in any given
economy, production typically splits into three sectors. The primary sector
extracts raw materials from natural environments. Workers like farmers or
miners fit well in the primary sector. The secondary sector gains the raw
materials and transforms them into manufactured goods. This means, for
example, that someone from the primary sector extracts oil from the earth then
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 someone from the secondary sector refines the petroleum to gasoline.
Whereas, the tertiary sector involves services rather than goods. It offers
services by doing things rather than making things. Thus, economic System is
more complicated or at least, more sophisticated than the way things used to be
for much of human history.

This chapter will show the contributions of the different financial and
economic institutions that facilitated the growth of the global economy. The
history of the global market will be discussed by looking at the different
economic revolutions. The growth and dynamics of multinational corporations
that are emerging in today's world economy will also be examined.

International Financial Institutions

World economies have been brought closer together by globalization. It is

reflected in the phrase "When the American economy sneezes, the rest of the
world catches a cold." But it is important to remember that it is not only the
economy of the United State but also other economies in the world that have a
significant impact on the global market and finance. For instance, the financial
crises experienced by Russia and Asia affected the world economy. 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. For example, Argentina's serious financial crisis at 1990s and early
2000s had a comparatively small impact on the economy.

Although countries are heavily affected by the gains and crises in the
world economy, the organizations that they consist also contribute to these
events. The following are the financial institutions and economic organizations
that made countries even closer together, at least, when it comes to trade.

The Bretton Woods System

The major economies in the world had suffered because of World War I,
the Great Depression in the 1930s, and World War ll. Because of the fear of the
recurrence of lack of cooperation among nation-states, political instability, and
economic turmoil (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). These
consist the background for the establishment of the Bretton Woods system.

In general, the Bretton Woods system has five key elements. First element
is the expression or currency in terms of gold or gold value to establish a par
value (Boughton, 2007). For instance, a 35 U.S. dollar pegged by the United
States per ounce of gold is the same as 175 Nicaraguan cordobas per ounce of
gold. The exchange rate therefore would be 5 cordobas for 1 dollar. 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 exchange rates, plus or minus a one-percent
margin" (Boughton, 2007, Pp. 106-107). The third element of the Bretton Woods
system is the establishment of an overseer for these exchange rates; thus, the
International Monetary Fund (IMF) was founded. Eliminating restrictions on the
currencies OT member states in the international trade is the fourth key
element. The final element is that the U.S. dollar became the global currency.

The General Agreement on Tariffs and Trade (GATT) and the World Trade
Organization (WTO)
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 According to Peet (2003), global trade and finance was greatly affected by
the Bretton Woods system. One of the systems born out of Bretton Woods was
the General Agreement on Tariffs and Trade (GATT) that was established in
1947 (Goldstein et al., 2007). GATT was a forum for the meeting of
representatives 23 member countries. It focused on trade goods through
multinational.

Trade-agreements conducted in many "rounds" of negotiation. However,

it was out of the Uruguay Round (1986-1993) that an agreement was reach to
create the world Trade Organization (WTO)" (Ritzer, 2015, P. 60).

The WTO headquarters is located in Geneva, Switzerland with 152 member

states as of 2008 (Trachtman, 2007). Unlike GATT, WTO is an independent
multilateral organization that became responsible for trade in services, non-
tarriff-related barriers to trade, and other broader areas of trade liberalization.
An example cited by Ritzer (2015) was that of the "differences between nations
in relation to regulations on items as manufactured goods or food. A given
nation can De taken to task for such regulations if they are deemed to be an
unfair restraint on the trade in such items" (p. 61). The general idea where the
WTO is based was that of neoliberalism. This means that by reducing or
eliminating barriers, all nations will benefit.

There are, however, significant criticisms to WTO. One is that trade

barriers created by developed countries cannot be countered enough by WTO,
especially in agriculture. A concrete case was that the emerging markets in the
Global South made the majority in the WTO, but they suffered under the
industrial nations which supported the agriculture with subsidies. Grain prices
increased and food riots occurred in many member states of WTO, like Mexico,
Egypt, and Indonesia in 2008. Aside from issues in agricultural sector, the
decision-making processes were heavily influenced by larger trading powers, in
the so-called Green Room, while excluding smaller powers in meetings. Lastly,
Ritzer (2015) also pointed out that International Non-Government Organizations
(INGOs) are not involved, leading to the staging of "regular protests and
demonstrations against the WTO" (P. 61).

The International Monetary Fund (IMF) and the World Bank

IMF and the World Bank were founded after the World War 1. Their
establishment was mainly because of peace advocacy after the war. These
institutions aimed to help the economic stability of the world. Both of them are
basically banks, but instead of being started by individuals like regular banks,
they were started by countries. Most of the world's countries were members of
the two institutions. But, of course, the richest countries were those who
handled most of the financing and ultimately, those who had the greatest
influence.

IMF and the World Bank were designed to complement each other. The
IMF's main goal was to help countries which were in trouble at that time and
who could not obtain money by any means. Perhaps, their economy collapsed
or their currency was threatened. IME, in this case, served as a lender or a last
resort

For countries which needed financial assistance. For instance, Yemen

loaned 93 million dollars from IMF on April 5, 2012 to address its struggle with
terrorism.The world, bank, in comparison had a more long-term approach. Its
main goals revolved around the eradication of poverty and it funded specific

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 projects that helped them reach their goals, especially in poor countries. An
example of such is their investment in education since 1962 in developing
nations like Bangladesh, Chad and Afghanistan.

Unfortunately, the reputation of these institutions has been dwindling,

mainly due to practices such as lending the corrupt governments or even
dictators and imposing ineffective austerity measures to get their money back.

The Organization for Economic Cooperation and Development (OECD), the

Organization of petroleum exporting countries (OPEC) and the European
Union (EU)

The most encompassing club of the richest countries in the world is the
Organization for Economic Cooperation and Development (OECD) with 35
member states as of 2016, with Latvia as its latest member. It is highly
influential, despite the group having little formal power. This emanates from the
member countries' resources and economic power.

In 1960, the Organization of Petroleum Exporting Countries (OPEC) was

originally comprised of Saudi Arabia, Iraq, Kuwait, Iran and Venezuela. They are
still part of the major exporters of oil in the world today. OPEC was formed
because member countries wanted to increase the price of oil, which in the in
the past had a relatively low price and had failed in keeping up with inflation.
Today, the United Arab Emirates, Algeria, Libya, Qatar, Nigeria and Indonesia
are also included as members.

The European Union (EU) is made up of 28 member states. Most

members in Eurozone adopted the euro as basic currency but some Western
European nation's like the Great Britain, Sweden and Denmark did not. Critics
argue that the euro increased the prices in Eurozone’s and resulted in
depressed economic growth rates, like in Greece, Spain and Portugal. The
policies of the European Central Bank are considered to be a significant
contributor in these situations.

NORTH AMERICA FREE TRADE AGREEMENT (NAFTA)

The North America 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. It was first created in 1989 with only
Canada and the United States as trading partners. NAFTA helps in developing
and expanding world trade by broadening international cooperation. It also aims
to increase cooperation for improving working conditions In North America by
reducing barriers to trade as it expands the markets of the three countries.

The creation of NAFTA has caused manufacturing jobs from developed

nations (Canada or the United States) to transfer to less developed nations
Order to reduce the cost of their products. In Mexico, producer prices dropped
and some two million farmers were forced to leave their farms. During is time,
Consumer food prices rose, causing 20 million Mexicans, about 25% of their
population, to live in "food poverty."

The tree trade, however, gave a modest impact on US GDP. It has

become $127 billion richer each year due to trade growth. One can argue that
NAFIA was to blame tor job losses and wage stagnation in the United States
because competition from Mexican firms had forced many U.S. firms to relocate
to Mexico. This is because developing nations have less government

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 regulations and cheaper labor. This is called outsourcing. As an example, the
United States outsourced approximately 791,000 jobs to Mexico in 2010.

As for Canada, 76% of Canadian exports go to the United States and

about a quarter of the jobs in Canada are dependent in some way on the trade
with the United States. This means that if NAFTA changes or is eradicated, it
would be devastating for Canada's economy.

Generally, NAFTA has its positive and negative consequences. It 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, and created five million U.S. jobs, Some of the negative effects,
however, include excessive pollution, loss of more than 682,000 manufacturing
jobs, exploitation of workers in Mexico, and moving Mexican farmers out of
business

Activity 3: Process Question

Given the situation where different countries around the world do not have
good relationship to each other, what do you think will happen to the
contemporary world? In your own words, explain the significance of the
word “integration”. Answers should be short and concise.
In every and all ideologies, regardless if it is communist, socialists, fascist, liberal,
oligarchic, capitalist, developed, undeveloped, rich, poor, warlike, peace loving,
militaristic, religious, atheistic, etc, LOVES commerce of and from their nations. Trade is
supposedly the biggest business in the world because the world still depends on other
nation to supply these nations in the globalization of global economies. We need that
global supply chain of necessities to economically survive.

Activity 3: (Application)

We have discussed market integration and the significant organizations

responsible for it. In this modern and global age that we live in, we
were able to experience the effects of market integration among
countries. Hence, it is fun and sensible to look back for its practical
scenarios in our daily living. Narrate at least one scenario in your life
where you think “market integration” has been part of it, explain its
perceived advantages/disadvantages briefly.
Advantages
1. Competition leads to efficiency because businesses that have fewer costs are more competitive
and make more money.
2. Innovation is encouraged because it provides a competitive edge and increases the chance for
wealth.
3. A large variety of goods and services are available as businesses try to differentiate themselves
in the market.
4. Economic activity is encouraged because you need money to live and need to engage in
economic activity (through employment or self-employment) to make money.
5. Freedom of individual choice is possible to the extent that the market provides options for work,
developing a business, and purchasing goods
Disadvantages

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 1. The exploitation of workers has a big disadvantage because of the working conditions, long
hours for less pay for a very few benefit. The large corporations have moved their production to
countries where they can get cheap labor with few safety regulations for the workers.
2. Investment  and wealth becomes distorted. The wealthy keep getting wealthier and the public
sector such as public education, transportation routes and public health does not get the
needed funds to keep evolving and providing for the public’s needs.
3. Goods will be mass produced and therefore the cost will be driven lower. As a product becomes
popular and overproduced, the manufacturers must unload the goods, even if that means
lowering prices to where the general public can afford them.
4. Due to overproduction, industrial machinery will lay idle and there will be no production or
profit for the manufacturer. Until the prices drop, the goods will remain unsold and people who
cannot afford them have their needs unmet.
5. Unemployment rates go up due to the overproduction of goods. Workers are not needed to
keep producing goods and therefore companies cannot afford to keep workers employed.
6. Having the market economy system will lead to periods of economic crisis. The economy will
stop growing when goods are overproduced and workers are then unemployed. The economic
crisis will not end until the next item is found that the wealthy just have to have. Then the cycle
starts again

3. Assessment Phase:
3.1. Quiz: Answer the following questions, put a check mark on the
space (√ ) provided.

1. Which of the following best describes market integration?

(√) Agreements between countries regarding tariffs.
( ) Agreements between countries to create common markets.
( ) Agreements between two or more countries to reduce barriers to
trade and economic activities between the countries.
( ) Effort to create a one world government with a completely
integrated economy.

2. Which of the following is the general argument in support of economic

integration?
( ) It helps poor countries.
(√) It helps rich countries.
( ) It helps international organizations such as the United Nations
and World Bank.
( ) It will eventually lead to an equalization of wealth among nations.

3.2. Take Home Tasks/ Suggestive Readings:

Read articles about the global economy

VII. Reference/s:

The Contemporary World by Prince Kennex Reguyal Aldama, published by REX Book Store,
2018

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