Monday, October 21, 2013

Republic of the Philippines POLYTECHNIC UNIVERSITY OF THE PHILIPPINES COLLEGE OF COMMUNICATION DEPARTMENT OF JOURNALISM Sociology of Economy (a term paper) In Partial fulfillment of the requirement in Sociology, Culture and Family Planning Submitted to: Wilfredo R. San Juan Submitted By: Marco P. Pagtakhan and Marc Ace B. Palaganas

Table of Contents

i.           Introduction

----------------------Part One-----------------------

I.     Economy: an Overview
A.  Nature and Definition
B.  Ancient and Medieval times of Economics
C.  Top 10 Most Influential Economists
II. Economic Systems
A. Definition
B. Mode of Production( a related concept)
C. Analysis
D. Study areas
E. Subcategories of different systems
F. Components
G. Types
H. Classification of economic systems based on Panopio (1994)
III.  Economic Ideologies
A. Definition
B. Examples
C. Principles
IV. Corporation and their powers
A. Definition
B. Mercantilism
C. Modern corporation
D. Ownership and control
E. Formation
F. Naming
G.  Advantages of a Corporation
H. Disadvantages of a Corporation
I. Different Types of Corporations
J. Oligopoly
K. Collusive oligopolies
L. Competitive oligopolies
M. Pricing strategies of oligopolies
N. Non-price strategies
O. Theory of oligopoly
V.      Multinationals (MNC’s and TNC’s)
A. Definition
B. MNC’s “Things-giving-identity”
C. Benefits
D. Criticisms
E. Top ten Biggest MNC in the world

VI.The Philippine Economy and its Contemporary Problem

A. Overview
B. Composition by sector
C. Contemporary problems of the Philippine Economy
VII. Government’s Solutions to Economic Problems
VIII.Nationalist alternatives

-------------------------Part two--------------------------

IX. Economic globalization in the Philippines
X.    Poverty
A. Definition
B. Etymology
C. Types
D. Effects
E. Poverty at Philippines
F. Causes of Poverty
G. Key Findings
XI. How Pork Barrel Issue Affected the Philippine Economy?
XII. Labor Code of the Philippines

XIII. The Philippine Stock Exchange

A. Overview
B. History
C. Business
D. Record highs

ii.    Definition of Terms


We humans were created more complicated compared to those which were created the same time as we did. Yet our minds were made way higher than those of the others. This led us to explore more about life, and how to make it simpler and more productive through the means of organized laboring. That is when economics paved a way through our minds; later then was born into the realm, and prospered until today.

Since time immemorial, men have already been taking part in economical discussions even though they are not too much aware yet of what “economics” truly mean.

Even the times of ancient tribal years, economics has already been tackled by people. People were initially known to hunt animals for food necessities. Time changed and hunting turned into herding. It simply shows how people were inclined to economics even since the early times of the world.

Economics is the science and art discussing how human beings produce, consume and do services for economic means. This also determines how a country’s status is. In the following pages you shall find how economics was and how it flourished our world. What composes a country’s economy and how it is tackled professionally.

As to finish discerning this term paper of us, shall you have the patience and love of knowledge for we have prepared it without ease. Also, here you shall find the parts of an economy, its history and the people who prospered the means of economy.

Part One

I. Economy: An Overview

A. Nature and Definition
Economics may be defined, briefly, as the study of men earning a living; or, more fully, as the study of the material world and of the activities and mutual relations of men so far as all these are the objective conditions to the gratification and to the welfare of men.  The word 'Economics' is derived from the Greek word 'Oeikonomicus'. The Greek word 'Oeiko' means 'households' and 'Nomicus' means 'study'. The word oeikonomics refers to the science of household management.
Denotatively speaking, economics is a social science dealing with the production, distribution, and consumption of goods and services and with the theory and management of economies or economic systems.
Economics differ from pure science in some ways. For example, At first glance, a science is a way of thinking that emphasizes putting forward basic hypotheses and then doing controlled experiments that are set up to distinguish in stark relief whether each hypothesis is right or wrong. Clearly, economists cannot usually do controlled experiments in a laboratory. Economists are often stuck with using historical or cross-country evidence to tease out what might merely suggest a result. Political viewpoints and the everyday language used in economics make unbiased statements or interpretations of results, or the understanding of ideas, imprecise and easily misinterpreted. Economics is a science in some ways but not others. 

At second glance, though, even the most fundamental scientific aspects of physics are more complicated than the ideal. Real life physics experiments can't always be set up to test the key hypotheses. Experimental results in physics are never 100% conclusive and are subject to dispute even centuries after the fact. The ideal of creating a physics hypothesis before looking at the evidence is often more of an art than depicted in physics textbooks.

B. Ancient and Medieval times of Economics

The first attempts to analyze economic problems appear in the writings of the ancient
Greeks. Plato recognized the economic basis of social life and in his Republic organized
A model society on the basis of a careful division of labor. Aristotle, too, attributed great
Importance to economic security as the basis for social and political health and saw the
owner of a middle-sized plot of land as the ideal citizen.
Roman writers such as Cicero, Vergil, and Varro gave significant advice about the
Economics of agriculture. The medieval period was marked by the disruption of the
Flourishing commerce of the ancient world, and its economic life was dominated by

During the early years of economics, there emerged several theories regarding economics. Some of it is physiocracy and mercantilism.

Physiocracy- is an economic theory developed by the Physiocrats, a group of economists who believed that the wealth of nations was derived solely from the value of "land agriculture" or "land development." Their theories originated in France and were most popular during the second half of the 18th century. Physiocracy is perhaps the first well-developed theory of economics. 

Mercantilism- is an economic doctrine based on the theory that a nation benefits by accumulating monetary reserves through a positive balance of trade, especially of finished goods. Mercantilism dominated Western European economic policy and discourse from the 16th to late-18th centuries.[1] Mercantilism was a cause of frequent European wars in that time and motivated colonial expansion. Mercantilist theory varied in sophistication from one writer to another and evolved over time. Favours for powerful interests were often defended with mercantilist reasoning.

C. Top 10 Most Influencial Economists

1) Adam Smith – was a Scottish moral philosopher and a pioneer of political economy. One of the key figures of the Scottish Enlightenment,[1] Adam Smith is best known for two classic works: The Theory of Moral Sentiments (1759), and An Inquiry into the Nature and Causes of the Wealth of Nations(1776). The latter, usually abbreviated as The Wealth of Nations, is considered hismagnum opus and the first modern work of economics. Smith is cited as the "father of modern economics" and is still among the most influential thinkers in the field of economics today. 

2) John M. Keynes - Father of  Keynesian economics. He introduced modern macro-economics in both theory and policy to the world. Keynes died in 1946, but is still intensely debated today. Also, he was a British economist whose ideas have fundamentally affected the theory and practice of modern macroeconomics, and informed the economic policies of governments. He built on and greatly refined earlier work on the causes of business cycles, and is widely considered to be one of the founders of modern macroeconomics and the most influential economist of the 20th century. His ideas are the basis for the school of thought known as Keynesian economics, and its various offshoots. 

3) Karl Marx – Father of socialist economics. Very influential from mid-1800’s to mid-1900’s, but losing steam today. He also was a German philosopher, economist, sociologist, historian, journalist, andrevolutionary socialist. Marx's work in economics laid the basis for the current understanding of labour and its relation to capital, and has influenced much of subsequent economic thought. He published numerous books during his lifetime, the most notable being The Communist Manifesto (1848) and Das Kapital (1867–1894). 

4) Milton Friedman – Recently deceased, modern day monetarist. A staunch defender of free markets and limited government intervention, he will be missed. He an Americaneconomist, statistician, and writer who taught at the University of Chicago for more than three decades. He was a recipient of the 1976 Nobel Memorial Prize in Economic Sciences, and is known  for his research on consumption analysis,monetary history and theory, and the complexity of stabilization policy. As a leader of the Chicago school of economics, he profoundly influenced the research agenda of the economics profession. A survey of economists ranked Friedman as the second most popular economist of the twentieth century after John Maynard Keynes, and The Economist described him as "the most influential economist of the second half of the 20th century...possibly of all of it. 
5) Alan Greenspan – Is an American economist who served as Chairman of the Federal Reserve of the United States from 1987 to 2006. He currently works as a private adviser and provides consulting for firms through his company, Greenspan Associates LLC. First appointed Federal Reserve chairman by President Ronald Reagan in August 1987, he was reappointed at successive four-year intervals until retiring on January 31, 2006 after the second-longest tenure in the position. A pioneer in macro-economic modeling and forecasting, also a pretty good FED Chairman for almost two decades.

6) Friedrich A. Hayek – as Friedrich August von Hayek and frequently known as F. A. Hayek, was an Austrian, later British, economist and philosopher best known for his defense of classical liberalism. In 1974, Hayek shared the Nobel Memorial Prize in Economic Sciences (with Gunnar Myrdal) for his "pioneering work in the theory of money and economic fluctuations and ... penetrating analysis of the interdependence of economic, social and institutional phenomena". Member of the modern Austrian school, along with Ludwig von Mises, defenders of democracy and free-markets against socialist thought in the mid-twentieth century. Best books: The Road to Serfdom (Hayek, 1944) and Human Action (Mises, 1949). 

7) Joseph Schumpeter – was an Austrian American economist and political scientist. He briefly served as Finance Minister of Austria in 1919. One of the most influential economists of the 20th century, Schumpeter popularized the term "creative destruction" in economics. Austrian economist specializing in business cycle theory, wrote ‘Business Cycles’ in 1939. 

8) Irving Fisher – An American monetarist in the first half of the twentieth century, wrote ‘The Debt-Deflation Theory of Great Depressions’ in 1933, also wrote ‘The Theory of Interest’. He was an American economist,statistician, inventor, and social campaigner. He was one of the earliest Americanneoclassical economists, though his later work on debt deflation has been embraced by the Post-Keynesian school. 

9) David Ricardo – was a British political economist. He was often credited with systematizing economics, and was one of the most influential of the classical economists, along with Thomas Malthus, Adam Smith, andJohn Stuart Mill. He was also a member of Parliament, businessman, financier and speculator, who amassed a considerable personal fortune. Perhaps his most important contribution was the theory of comparative advantage in which he advocates that a nation should abandon industries in which it is internationally competitive in order to concentrate solely on those industries in which it is most competitive. This theory contrasts with the concept of absolute advantage where a nation retains all internationally competitive industries and only abandons those which are not. In essence, Ricardo promoted the idea of extreme industry specialisation by nations, to the point of dismantling competitive and profitable industry for this purpose. This theory has been challenged by, among others, Joan Robinson and Piero Sraffa, but remains the corner stone of the theoretical argument in favour of international free trade. Major writer in the early 1800’s on free trade (specialization and comparative advantage) and the rise of capitalism.

10) John Locke – was an English philosopher and physician regarded as one of the most influential of Enlightenment thinkers. Considered one of the first of the British empiricists, following the tradition of Francis Bacon, he is equally important tosocial contract theory. His work had a great impact upon the development ofepistemology and political philosophy. His writings influenced Voltaire and Rousseau, many Scottish Enlightenment thinkers, as well as the American revolutionaries. His contributions to classical republicanism and liberal theory are reflected in the United States Declaration of Independence A pioneer in discussin  g the accumulation of private property (within God’s laws) in the mid 1600’s. 

II. Economic Systems

A. Definition:

“There's more than one way for a society to organize its economy. Maybe everyone simply follows tradition, following pretty much the same economic pursuits as their parents and grandparents before them. Or maybe the government decides what's best. Or perhaps the government stays out of it, leaving the economic system to be determined by the combined decisions of millions of individual people.
In modern practice, most large industrial economies – including that of the United States – offer some balance between the last two approaches, with individuals mostly left to do their own thing but with the government still intervening into economic affairs in important ways.”

“An economic system is the system of producing and distributing goods and services and allocating resources in a society. It includes the combination of the various institutions, agencies, entities (or even sectors as described by some authors) and consumers that comprise the economic structure of a given community.” 
- Wikipedia, free encyclopedia

“An economic system is comprised of the various processes of organizing and motivating labor, producing, distributing, and circulating of the fruits of human labor, including products and services, consumer goods, machines, tools, and other technology used as inputs to future production, and the infrastructure within and through which production, distribution, and circulation occurs.  These processes are over determined by the political, cultural, and environmental conditions within which they come to exist.  In comparative economic systems, these economic systems are usually defined within determinate political boundaries.  Thus, one would speak of a Chinese economic system, although China may, in fact, be a complex conglomeration and interaction of economic systems. Nevertheless, bounding economic systems in this way provides a way of discussing how such systems are made possible and changed by the specific effects of politico-institutional, cultural, and environmental differences. ”


A related concept is the mode of production.

B. Mode of Production

Mode of production is the method of producing the necessities of life (whether for health, food, housing or needs such as education, science, nurturing, etc.).

“The Mode of Production is the unity of the productive forces and the relations of production. Production begins with the development of its determinative aspect – the productive forces – which, once they have reached a certain level, come into conflict with the relations of production within which they have been developing. This leads to an inevitable change in the relations of production, since in the obsolete form they cease to be indispensable condition of the production process. In its turn, the change in the relations of production, which means the substitution of the new economic basis for the old one, leads to less rapid change in the entire society. Therefore, the change in the Mode of Production comes about not through people’s volition, but by virtue of the correspondence between the productive relations to the character and level of development of the productive forces. Due to this, the development of society takes the form of the natural historical change of socio-economic formations. Conflict between the productive forces and the relations of production is the economic basis of social revolution.”

“The mode of production is a central concept in Marxism and is defined as the way a society is organized to produce goods and services. It consists of two major aspects: the forces of production and the relations of production.
The forces of production include all of the elements that are brought together in production – from land, raw material, and fuel to human skill and labor to machinery, tools, and factories. The relations of production include relationships among people and people’s relationships to the forces of production through which decisions are made about what to do with the results.”

“Everything that goes into the production of the necessities of life, including the "productive forces" (labor, instruments, and raw material) and the "relations of production" (the social structures that regulate the relation between humans in the production of goods. According to Marx and Engels, for individuals, the mode of production is "a definite form of expressing their life, a definite mode of life on their part. As individuals express their life, so they are. What they are, therefore, coincides with their production, both with what they produce and how they produce”.

[Karl Marx saw labor as a social process; that is, labor - the human transformation of nature - is done by groups. The worker is never an isolated figure, a Robinson Crusoe, but is someone who stands in relationship to others as kinsman, self, slave, or wage laborer. Marx used the ten "production" to mean the complex set of mutually dependent relations among nature, work, social labor, and social organization. Marx listed many modes of deploying social labor; Eric Wolf has simplified them to three modes. These modes do not necessarily represent an evolutionary sequence, but many societies have, in fact, passed from one of the modes to the next. ] 

“There are three types of modes in terms of production:

i.Kin-Ordered Mode of Production 
The kin-ordered mode of production is found in "stateless" societies. In these societies kinship can be understood as a way of committing social labor to the transformation of nature. Kinship is, thus, a particular way of laying claims to labor: because of certain relations based on birth or marriage, one person or group of persons has the right to claim work from another person or group. In 1450 the societies using this mode of production would have been found only at the peripheries of state societies. 

ii.Tributary Mode of Production 
The tributary mode of production is based on ruling elite of surplus takers who have the right or power to take surplus from the working population. These elite may be centralized or decentralized. In this system, the laborer is the possessor of the means of production: the workers 5 own the tools necessary to do the work. The workers conduct agricultural activity and the rural home industries connected with it independently. The surplus taking elite provides management, defense, and often such other services as irrigation. In 1450 those areas of the world organized into states used this mode of production. 

iii.Capitalist Mode of Production 
The capitalist mode of production came into being when• monetary wealth became able to buy labor power. For labor power to be offered for sale, the relationship between producers and the means (tools) of production had to be severed. Holders of wealth had to acquire the means of pro­duction and choose those who were to operate them. The capitalist mode of production is based, then, on 1) workers who are free to sell their work; 2) ownership of the means of production by a small economic elite; 3) the emergence of a money based economy. In 1450 this mode of production had not been established; by 1850 it was becoming the predominant mode in Western industrialized nation states. “
[Adapted from Eric Wolf, Europe and the 
People Without History, Berkeley: University 
Of California Press, 1982.]


“Marxist writing on development and underdevelopment, which barely a decade ago was largely confined to the shrill critiques of a few voices crying in the wilderness, seems well and truly now to have ‘taken off’. [*] Indeed, the growth of this new (or rediscovered) paradigm has been such that there seems to be almost as much variety of opinion and analysis within it as could be found among the bourgeois development theories that Marxists so trenchantly criticized. [1] A few years ago it seemed appropriate to sketch out the distinctive features of a Marxist perspective as such, in comparison with other approaches. [2] Today the observer is more likely to be struck by the controversies and debates going on between participants who would probably all claim to be in some sense Marxists, but who appear deeply and perhaps increasingly divided over fundamental issues. We can illustrate this briefly by looking at a range of recent Marxist attempts to grapple with what must be the most basic question for all such writers: namely, the proper characterization of ‘underdevelopment’ itself. A few (following Marx himself) continue radically to reject this problematic as such. [3] Warren, for instance, argues that the ‘Third World’ today is at an early stage (or various stages) of industrialization and the development of capitalism, precisely as we know these processes from the experience of ‘developed’ countries. [4] They are en route, even if the journey will be long and painful.

C. Economic Systems Analysis

"Data before analysis. Analysis before policy or prescription." 

(Simon Kuznets)

“Economists build dynamic models for studying cycles, forecasting, simulating alternative policies and generally understanding the structure of complicated systems. Mathematical, statistical and numerical methods are used for this kind of analysis and are described in this paper. This is just one aspect of the use of mathematical methods in economics, but it is one that is attracting increasing attention at the present time.”

“An economic analysis or evaluation is a process carried out by economists, statisticians and mathematicians on behalf of both for-profit and nonprofit small business. The goal of this exercise is to gain a clear picture of the current economic climate as it relates to the organization’s ability to conduct business. This is accomplished through an in-depth appraisal of the strengths and weaknesses of the market. A few different methods are used to carry out economic analysis.”
Wikipedia, The free encyclopedia

There are three ways to analyze economic systems:


“Cost/benefit is an economic analysis technique used to determine whether a project is feasible. This is accomplished by weighing the cost of implementation against the benefits of the project's creation.”

“Cost-benefit analysis (CBA), sometimes called benefit–cost analysis (BCA), is a systematic process for calculating and comparing benefits and costs of a project, decision or government policy (hereafter, "project"). CBA has two purposes:

To determine if it is a sound investment/decision (justification/feasibility),
To provide a basis for comparing projects. It involves comparing the total expected cost of each option against the total expected benefits, to see whether the benefits outweigh the costs, and by how much. 

“The French economist Jules Dupuit, credited with the creation of cost-benefit analysis. Cost–benefit analysis is often used by governments and other organizations, such as private sector businesses, to evaluate the desirability of a given policy. It is an analysis of the expected balance of benefits and costs, including an account of foregone alternatives and the status quo. CBA helps predict whether the benefits of a policy outweigh its costs, and by how much relative to other alternatives (i.e. one can rank alternate policies in terms of the cost-benefit ratio). Generally, accurate cost-benefit analysis identifies choices that increase welfare from a utilitarian perspective. Assuming an accurate CBA, changing the status quo by implementing the alternative with the lowest cost-benefit ratio can improve Pareto efficiency. An analyst using CBA should recognize that perfect evaluation of all present and future costs and benefits is difficult, and while CBA can offer a well-educated estimate of the best alternative, perfection in terms of economic efficiency and social welfare are not guaranteed.

CBA attempts to measure the positive or negative consequences of a project, which may include:
Effects on users or participants
Effects on non-users or non-participants
Externality effects


“Cost/effectiveness analysis is a technique used in weighing the effectiveness of a project against its price. Unlike cost/benefit, however, a low cost does not equate to high effectiveness, and vice versa. 

“Cost-effectiveness analysis (CEA) is a form of economic analysis that compares the relative costs and outcomes (effects) of two or more courses of action. Cost-effectiveness analysis is distinct from cost-benefit analysis, which assigns a monetary value to the measure of effect. Cost-effectiveness analysis is often used in the field of health services, where it may be inappropriate to monetize health effect. Typically the CEA is expressed in terms of a ratio where the denominator is a gain in health from a measure (years of life, premature births averted, and sight-years gained) and the numerator is the cost associated with the health gain. The most commonly used outcome measure is quality-adjusted life years. Cost-utility analysis is similar to cost-effectiveness analysis. Cost-effectiveness analyses are often visualized on a cost-effectiveness plane consisting of four-quadrants. Outcomes plotted in Quadrant I are more effective and more expensive, those in Quadrant II are more effective and less expensive, those in Quadrant III are less effective and less expensive, and those in Quadrant IV are less effective and more expensive. 
The concept of cost effectiveness is applied to the planning and management of many types of organized activity. It is widely used in many aspects of life. In the acquisition of military tanks, for example, competing designs are compared not only for purchase price, but also for such factors as their operating radius, top speed, rate of fire, armor protection, and caliber and armor penetration of their guns. If a tank's performance in these areas is equal or even slightly inferior to its competitor, but substantially less expensive and easier to produce, military planners may select it as more cost effective than the competitor. Conversely, if the difference in price is near zero, but the more costly competitor would convey an enormous battlefield advantage through special ammunition, radar fire control and laser range finding, enabling it to destroy enemy tanks accurately at extreme ranges, military planners may choose it instead—based on the same cost effectiveness principle.
Cost effectiveness analysis is also applied to many other areas of human activity, including the economics of automobile usage.

iii. Cost/Minimization

“Cost/minimization analysis is the technique of seeking out the least expensive method of carrying out a project. This method of economic analysis is used primarily when costs savings are at a premium and must outweigh all other considerations.”

“Cost-minimization is a tool used in pharmacoeconomics and is applied when comparing multiple drugs of equal efficacy and equal tolerability
Therapeutic equivalence must be referenced by the author conducting the study and should have been done prior to the cost-minimization work. Since equal efficacy and equal tolerability is already demonstrated, there is no requirement to find a common efficacy denominator as would be the case when conducting a cost-effectiveness study. The author is not precluded from doing so through the use of "cost/cure" or "cost/year of life gained". If efficacy and tolerability is demonstrated, however, then a simple comparison of "cost/course of treatment" can suffice for the purpose of comparing two or more therapeutically equivalent treatment alternatives.
When conducting a cost-minimization study, the author needs to measure all costs (resource expenditures) inherent to the delivery of the therapeutic intervention and that are relevant to the pharmacoeconomic perspective. It is the simplest method It is used to compare costs of alternative therapies that have: identical clinical effectiveness (including adverse reactions, complications and duration of therapy), BUT Different costs Choose the least cost alternative among equivalent or equally efficacious alternatives”

“A firm that maximizes its profit must choose the inputs it uses to minimize the cost of producing whatever output it chooses. Its choice of output depends on the environment in which it operates (it may be a monopolist, for example, or may be competing with a few or with many other firms). But whatever the firm's output, the bundle of inputs must be chosen to minimize the cost of producing that output.
The cost-minimization problem of a firm that can vary only one input and the problem of a firm that can vary two inputs are qualitatively different, and we consider the separately.”

D.Study Areas

i.National Income and Wealth
“The primary research activities of this study unit are theoretical and empirical studies of national accounts and related topics. Because the system of national accounts forms the basic framework to overview the activities and effects of economic systems as a whole, it provides an indispensable tool for macroeconomic quantitative analysis, especially for econometric analysis.”

“This unit is engaged in the development of statistical theory and the applications of statistical methods to economic analysis. The former includes the development of theories on sample surveys, economic indices, time series and multivariate analyses, as well as mathematical statistics”

“This study unit is concerned with the development of econometric methods and their applications. Econometric model building, simulation, prediction and control based on estimated models are also included. Moreover, the development of methods for descriptive analysis of phenomena insufficiently covered by existing economic theories, and empirical studies based on these methods, are also important themes of this unit. These latter include a comprehensive study on time-series analysis and cross-sectional analysis, multivariate analysis and quantification of qualitative phenomena.”

iv. Economic System Analysis
“This study unit examines both theoretically and empirically the workings of economic systems from the following view points: (1) information structure; (2) construction and maintenance of econometric models that assess policy effects; (3) welfare economics; (4) construction of software and methods of numerical analysis; and (5) cost-benefit analysis.”

E.Subcategories of different systems 

planning, coordination, and reform
productive enterprises; factor and product markets; prices; population
public economics; financial economics
national income, product, and expenditure; money; inflation
international trade, finance, investment, and aid
consumer economics; welfare and poverty
performance and prospects
natural resources; energy; environment; regional studies
political economy; legal institutions; property rights


“There are multiple components to economic systems. Decision-making structures of an economy determine the use of economic inputs (the factors of production), distribution of output, the level of centralization in decision-making, and who makes these decisions. Decisions might be carried out by industrial councils, by a government agency, or by private owners. Some aspects of these structures include:

i.Coordination mechanism: 
How information is obtained and used to coordinate economic activity. The two dominant forms of coordination include planning and the market; planning can be either centralized or de-centralized, and the two mechanisms are not mutually exclusive.

ii.Productive property rights: 
This refers to ownership (rights to the proceeds of output generated) and control over the use of the means of production. They may be owned privately, by the state, by those who use it, or held in common by society.

iii.Incentive system: A mechanism for inducing certain economic agents to engage in productive activity; it can be based on either material reward (compensation) or moral reward (social prestige).


i.Capitalist economic system (capitalism) production
“Carried out to maximize private profit, decisions regarding investment and the use of the means of production are determined by competing business owners in the marketplace; production takes place within the process of capital accumulation. The means of production are owned primarily by private enterprises and decisions regarding production and investment determined by private owners in capital markets. Capitalist systems range from laissez-faire, with minimal government regulation and state enterprise, to regulated and social market systems, with the stated aim of ensuring social justice and a more equitable distribution of wealth (see welfare state) or ameliorating market failures.
This economic system is also called as the Market System. The system is characterized by the private ownership of resources and the use of market and prices to coordinate and direct economic activity. 
Components of a Market System

Labor resources, natural resources, capital resources (e.g., equipment and buildings), and the goods and services produced in the economy are largely owned by private individuals and private institutions rather than by government. This private ownership combined with the freedom to negotiate legally binding contracts permits people, within very broad limits, to obtain and use resources as they choose.

Private entrepreneurs are free to obtain and organize resources in the production of goods and services and to sell them in markets of their choices. Consumers are at liberty to buy that collection of goods and services that best satisfies their economic wants. Workers are free to seek any jobs for which they are qualified.

The "Invisible Hand" that is the driving force in a market economy is each individual promoting his or her self-interest. Consumers aim to get the greatest satisfaction from their budgets; entrepreneurs try to achieve the highest profits for their firms; workers want the highest possible wages and salaries; and owners of property resources attempt to get the highest possible prices from the rent and sale of their resources.

Economic rivalry means that buyers and sellers are free to enter or leave any market and that there are buyers and sellers acting independently in the marketplace. It is competition, not government regulation, that diffuses economic power and limits the potential abuse of that power by one economic unit against another as each attempt to further its own self-interest.

Markets are the basic coordinating mechanisms in our type of economy, not central planning by government. A market brings buyers and sellers of a particular good or service into contact with one another. The preferences of sellers and buyers are registered on the supply and demand sides of various markets, and the outcome of these choices is a system of product and resource prices. These prices are guideposts on which participants in markets make and revise their free choices in furthering their self-interests.

A competitive market economy promotes the efficient use of its resources. As a self-regulating and self-adjusting economy, no significant economic role for government is necessary. However, a number of limitations and undesirable outcomes associated with the market system result in an active, but limited economic role for government.

ii.Socialist economic system (socialism)

“Production is carried out to directly satisfy economic demand by producing goods and services for use; decisions regarding the use of the means of production are adjusted to satisfy economic demand, investment (control over the surplus value) is carried out through a mechanism of inclusive collective decision-making. The means of production are either publicly owned, or are owned by the workers cooperatively. A socialist economic system that is based on the process of capital accumulation, but seeks to control or direct that process through state ownership or cooperative control to ensure stability, equality or expand decision-making power, are market socialist systems.”

“It is an economic system in which the state owns a major share of the productive resources, except for labor (Sweden, and some other European countries).

“It is characterized by social ownership of the means of production and co-operative management of the economy.[1] "Social ownership" may refer to cooperative enterprises, common ownership, state ownership, citizen ownership of equity, or any combination of these.[2] There are many varieties of socialism and there is no single definition encapsulating all of them.[3] They differ in the type of social ownership they advocate, the degree to which they rely on markets or planning, how management is to be organized within productive institutions, and the role of the state in constructing socialism.

“Social and economic doctrine that calls for public rather than private ownership or control of property and natural resources. According to the socialist view, individuals do not live or work in isolation but live in cooperation with one another. Furthermore, everything that people produce is in some sense a social product, and everyone who contributes to the production of a good is entitled to a share in it. Society as a whole, therefore, should own or at least control property for the benefit of all its members.
“Socialists generally argue that capitalism concentrates power and wealth within a small segment of society that controls the means of production and derives its wealth through economic exploitation. This creates unequal social relations which fail to provide opportunities for every individual to maximize their potential, and does not utilize available technology and resources to their maximum potential in the interests of the public.
iii. Planned economy

A planned economy is a type of economy consisting of a mixture of public ownership of the means of production and the coordination of production and distribution through economic planning. There are two major types of planning: decentralized-planning and centralized-planning. Enrico Barone provided a comprehensive theoretical framework for a planned socialist economy. In his model, assuming perfect computation techniques, simultaneous equations relating inputs and outputs to ratios of equivalence would provide appropriate valuations in order to balance supply and demand.
iv. Self-managed, decentralized economy

A self-managed, decentralized economy is based upon autonomous self-regulating economic units and a decentralized mechanism of resource allocation and decision-making. This model has found support in notable classical and neoclassical economists including Alfred Marshall, John Stuart Mill and Jaroslav Vanek. There are numerous variations of self-management, including labor-managed firms and worker-managed firms. The goals of self-management are to eliminate exploitation and reduce alienation. One such system is the cooperative economy, a largely free market economy in which workers manage the firms and democratically determine remuneration levels and labor divisions. Productive resources would be legally owned by the cooperative and rented to the workers, who would enjoy usufruct rights.[26] Another form of decentralised planning is the use of cybernetics, or the use of computers to manage the allocation of economic inputs. The socialist-run government of Salvador Allende in Chile experimented with Project Cybersyn, a real-time information bridge between the government, state enterprises and consumers.  Another, more recent, variant is participatory economics, wherein the economy is planned by decentralized councils of workers and consumers. Workers would be remunerated solely according to effort and sacrifice, so that those engaged in dangerous, uncomfortable, and strenuous work would receive the highest incomes and could thereby work less. A contemporary model for a self-managed, non-market socialism is Pat Devine's model of negotiated coordination. Negotiated coordination is based upon social ownership by those affected by the use of the assets involved, with decisions made by those at the most localized level of production.

v. State-directed economy
A state-directed economy may refer to a type of mixed economy consisting of public ownership over large industries, as promoted by various Social democratic political parties during the 20th century. This ideology influenced the policies of the British Labor Party during Clement Attlee's administration. In the biography of the 1945 UK Labor Party Prime Minister Clement Attlee, Francis Beckett states: "the government... wanted what would become known as a mixed economy “State socialism can be used to classify any variety of socialist philosophies that advocates the ownership of the means of production by the state apparatus, either as a transitional stage between capitalism and socialism, or as an end-goal in itself. Typically it refers to a form of technocratic management, whereby technical specialists administer or manage economic enterprises on behalf of society (and the public interest) instead of workers' councils or workplace democracy.

vi. Market socialism
Market socialism consists of publicly owned or cooperatively owned enterprises operating in a market economy. It is a system that utilizes the market and monetary prices for the allocation and accounting of the means of production, thereby retaining the process of capital accumulation. The profit generated would be used to directly remunerate employees or finance public institutions.[39] In state-oriented forms of market socialism, in which state enterprises attempt to maximize profit, the profits can be used to fund government programs and services through asocial dividend, eliminating or greatly diminishing the need for various forms of taxation that exist in capitalist systems. The neoclassical economist Léon Walras believed that a socialist economy based on state ownership of land and natural resources would provide a means of public finance to make income taxes unnecessary.[40] Yugoslavia implemented a market socialist economy based on cooperatives and worker self-management.

vii. Market economy
Market economy ("hands off" systems, such as Laissez-faire capitalism)
Laissez-faire (Listeni/ˌlɛseɪˈfɛər-/, French: [lɛsefɛʁ] ( listen)) (or sometimes laisser-faire) is an economic environment in which transactions between private parties are free from government restrictions, tariffs, and subsidies, with only enough regulations to protect property rights. The phrase laissez-faire is French and literally means "let [them] do", but it broadly implies "let it be," "let them do as they will," or "leave it alone". Scholars generally believe a laissez-faire state or a completely free market has never existed.
As a system of thought, laissez faire rests on the following axioms: 
1. The individual is the basic unit in society. 
2. The individual has a natural right to freedom. 
3. The physical order of nature is a harmonious and self-regulating system. 
4. Corporations are creatures of the State and therefore must be watched closely by the citizenry due to their propensity to disrupt the Smithian spontaneous order. 

These axioms constitute the basic elements of laissez-faire thought, although another basic and often-disregarded element is that markets should be competitive, a rule that the early advocates of laissez-faire have always emphasized.

viii. Mixed economy 

Mixed economy (a hybrid that blends some aspects of both market and planned economies)
Mixed economy is an economic system in which both the state and private sector direct the economy, reflecting characteristics of both market economies and planned economies. Most mixed economies can be described as market economies with strong regulatory oversight, and many mixed economies feature a variety of government-run enterprises and governmental provision of public goods.
The basic idea of the mixed economy is that the means of production are mainly under private ownership; that markets remain the dominant form of economic coordination; and that profit-seeking enterprises and the accumulation of capital remains the fundamental driving force behind economic activity. However, unlike a free-market economy, the government would wield considerable indirect influence over the economy through fiscal and monetary policies designed to counteract economic downturns and capitalism's tendency toward financial crises and unemployment, along with playing a role in interventions that promote social welfare. Subsequently, some mixed economies have expanded in scope to include a role for indicative economic planning and/or large public enterprise sectors.
The elements of a mixed economy have been demonstrated to include a variety of freedoms:

To possess means of production (farms, factories, stores, etc.)
to participate in managerial decisions (cooperative and participatory economics)
to travel (needed to transport all the items in commerce, to make deals in person, for workers and owners to go to where needed)
to buy (items for personal use, for resale; buy whole enterprises to make the organization that creates wealth a form of wealth itself)
to sell (same as buy)
to hire (to create organizations that create wealth)
to fire (to maintain organizations that create wealth)
to organize (private enterprise for profit, labor unions, workers' and professional associations, non-profit groups, religions, etc.)
to communicate (free speech, newspapers, books, advertisements, make deals, create business partners, create markets)
to protest peacefully (marches, petitions, sue the government, make laws friendly to profit making and workers alike, remove pointless inefficiencies to maximize wealth creation)

“An economic system that includes a mixture of capitalism and socialism. This type of economic system includes a combination of private economic freedom and centralized economic planning and government regulation.”
ix. Traditional economy 

Traditional economy (a generic term for older economic systems)
A traditional economy is any historical subsistence economy or one that otherwise falls outside the definitions of market or planned economies. Examples of traditional economies include those of the Inuit or those of the tea plantations in south India.[1] Traditional economies are popularly conceived of as "primitive" or "undeveloped" economic systems, having tools or techniques seen as outdated.[2] As with the notion of contemporary primitiveness and with modernity itself, the view that traditional economies are backwards is not shared by scholars in economics and anthropology.
Traditional economies may be based on custom and tradition or command, with economic decisions based on customs or beliefs of the community, family, clan, or tribe.[4]
An underdeveloped economy in which communities use primitive tools and methods to harvest and hunt for food, often resulting in little economic growth. Traditional economies are often found in rural regions with high levels of subsistence farming. Countries that evolve their economies past the traditional level often develop into market economies or command economies.

Traditional economies are found in rural, non-developed countries
Some parts of Asia, Africa, South America and the Middle East have traditional economies
Customs govern the economic decisions that are made
Technology is not used in traditional economies
Farming, hunting and gathering are done the same way as the generation before
Economic activities are usually centered toward the family or ethnic unit
Men and women are given different economic roles and tasks

x. Participatory economics 

Participatory economics (a system where the production and distribution of goods is guided by public participation)
Participatory economics, often abbreviated parecon, is an economic system proposed primarily by activist and political theorist Michael Albert and radical economist Robin Hahnel, among others. It uses participatory decision making as an economic mechanism to guide the production, consumption and allocation of resources in a given society. Proposed as an alternative to contemporary capitalist market economies and also an alternative to centrally planned socialism, it is described as "an anarchistic economic vision",[1] and is a form of socialism, since in a parecon the means of production are owned in common.
The underlying values that parecon seeks to implement are equity, solidarity, diversity, workers' self-management and efficiency. (Efficiency here means accomplishing goals without wasting valued assets.) It proposes to attain these ends mainly through the following principles and institutions:

workers' and consumers' councils utilizing self-managerial methods for making decisions
balanced job complexes
remuneration according to effort and sacrifice
participatory planning

One of the primary propositions of parecon is that all persons should have a say in decisions proportionate to the degree to which they are affected by them. This decision-making principle is often referred to as self-management. In parecon, it constitutes a replacement for the mainstream economic conception of economic freedom, which Albert and Hahnel argue that by its very vagueness has allowed it to be abused by capitalist ideologues.

xi. Gift economy 

“Gift economy (where an exchange is made without any explicit agreement for immediate or future rewards)
A gift economy, gift culture or gift exchange is a mode of exchange where valuables are given without an explicit agreement for immediate or future rewards.[1] In contrast to a barter economy or a market economy, social norms and custom govern gift exchange, rather than an explicit exchange of goods or services for money or some other commodity.[2] Gift exchange is frequently "embedded" in political, kin, or religious institutions, and therefore does not constitute an "economic" system per se.[3]
The gift economy has been called many names and is actually more ancient than the money economy. Money is the concentrated and abstract form of the gift—but when the way we connect with each other transcends fee-for-service, it’s more powerful than anything money can buy. Whether it’s called “sacred economics,” “pay-what-you-can,” or “the strategy of generosity,” the idea is catching on.”

xii. Barter economy
Barter economy (where goods and services are directly exchanged for other goods or services)
Barter is a system of exchange by which goods or services are directly exchanged for other goods or services without using a medium of exchange, such as money.[1] It is distinguishable from gift economies in that the reciprocal exchange is immediate and not delayed in time. It is usually bilateral, but may be multilateral (i.e., mediated through barter organizations) and usually exists parallel to monetary systems in most developed countries, though to a very limited extent. Barter usually replaces money as the method of exchange in times of monetary crisis, such as when the currency may be either unstable (e.g., hyperinflation or deflationary spiral) or simply unavailable for conducting commerce.
The act of trading goods and services between two or more parties without the use of money. Bartering benefits individuals, companies and countries that see a mutual benefit in exchanging goods and services rather than cash, and it enables those who are lacking hard currency to obtain goods and services.

H.Classification of economic systems based on Panopio (1994)

i.Agrarian to industrial
The Agrarian Age
For the first 10,000 years of civilization employment and wealth creation was primarily tied to agriculture. At the turn of the 20th century roughly 60% of the labor force was directly or indirectly tied to Agriculture – as a result of innovation, shifts in the economy, the industrialization of agriculture, mechanization and productivity gains that number is now is just below to 2%. This snapshot occurred during the transition from the Agrarian Age to the Industrial Age.
The Industrial Age
By the mid 20th century the tides had shifted. Just as the labor force had peaked at 60% during the Agrarian Age, approximately 50% of the labor force was employed in manufacturing during the Industrial Age; currently that number is just below to 12% due to the recession, automation, global shifts, and labor costs and off shoring! This snapshot occurred during the transition from the Industrial Age to the Creative Age.
Industrialization (or industrialization) is the period of social and economic change that transforms a human group from an agrarian society into an industrial one. It is a part of a wider modernization process, where social change and economic development are closely related with technological innovation, particularly with the development of large-scale energy and metallurgy production. It is the extensive organization of an economy for the purpose of manufacturing. Industrialization also introduces a form of philosophical change where people obtain a different attitude towards their perception of nature, and a sociological process of ubiquitous rationalization.
There is considerable literature on the factors facilitating industrial modernization and enterprise development.[3] Key positive factors identified by researchers have ranged from favorable political-legal environments for industry and commerce, through abundant natural resources of various kinds, to plentiful supplies of relatively low-cost, skilled and adaptable labor.
As industrial workers' incomes rise, markets for consumer goods and services of all kinds tend to expand and provide a further stimulus to industrial investment and economic growth.
The first country to industrialize was the United Kingdom during the Industrial Revolution, commencing in the 18th century.
By the end of the 20th century, East Asia had become one of the most recently industrialized regions of the world.

ii. Subsistence to mechanize

"Subsistence economy
Originally all peoples on the earth lived in what we now call subsistence economies, described by Indian Eco-feminist Vandana Shiva as economies in which you \"satisfy basic needs through self-provisioning.\"1 Instead of relying on money, subsistence economies depend on the riches of the natural world. People grow food, fish, and hunt to satisfy hunger, they build their own houses from natural materials, and they drink from the rivers and streams. Because they live intimately with nature, people living in subsistence economies are more able to view the benefits of respecting nature instead of exploiting it. They harvest plants and eat animals but they also plant new seeds and encourage animals to reproduce. They create little waste and they produce only what they need for a given period instead of storing things up. A subsistence economy depends on nature to reproduce it as well as human beings working in partnership with nature to ensure that plants, animals, and humans all survive. Within a subsistence economy, people value cooperation with nature and with each other.\"

Emergence of Mechanization
When the Industrial Revolution began, it was best defined by the ability to use machines to do work. Its specific purpose had been to replace human beings. When a businessman considered machines he could build, he asked the question "What would I ask a man to do, that I could have a machine do instead?" However, the gradual growth of larger and larger machines throughout the era led to larger and larger corporations and wealthier and wealthier business owners. These gradual changes were quantitative, not huge shifts; however, things were building to a massive qualitative shift. This was only accelerated by the advent of electricity, improved steel production, and advanced communications (the telephone and radio) after 1850.
The new captains of industry, or alternatively robber barons, had grown up with the idea of machine power, and their massive wealth gave the new upper class a swollen sense of self-importance. They took up the huge machines which their fathers and grandfathers had built to take advantage of economies of scale and production. With a marginal god-complex, these men grew up with a completely different conception of machines, and that was the trigger which launched the Mechanized Era. When this new generation thought about machines, man was nowhere in their calculations for they considered themselves far above that; they thought about machines by asking themselves "What would I ask a god to do?" And so they built skyscrapers, they launched ships even larger than their buildings, and they envisioned production for customers in the millions. They didn't build factories to compete in business, following the Civil War American industrialists like Carnegie, Armor, and Rockefeller built monopolies that controlled entire industries. When the White Star Line of ships launched its two newest and most famous ships, they named them Olympic and Titanic after the Greek gods.
This is just one of the terrible ironies of the early Mechanized Era; one of the very ships which so perfectly captured the hubris of these men would take several of them down to their deaths because they overestimated their own brilliance when a small iceberg sank the Titanic on a freezing night on the North Atlantic in 1912 AD. It was a sobering moment, and yet the power of the new mechanized processes was real, and factories would never go back the way they were before. Companies and factories would continue to operate on a scale quite literally unimaginable to the men who launched the Industrial Revolution in the late 1700s.
However, the most stunning achievement of the Mechanized Era was the splitting of the atom; on July 16, 1945 the first atomic bomb was detonated in New Mexico. This top secret US project culminated in two atomic weapons which were dropped on Japan, effectively ending World War II. Joining the US, the atomic bomb was soon developed by the other major superpower, the Soviet Union. This merely replaced the European-driven conflicts of the 19th and early 20th centuries with the US-Soviet conflict; however the fact that this conflict was a "Cold War" as opposed to "World War III" had little to do with the restraint of the combatants and everything to do with shocking power of nuclear weapons.

iii. Underdeveloped to super-developed

According to prof. Ragnar Nurkse, “ under- developed countries are those which compared with the advanced countries are under equipped with capital in relation to their population and natural resources” As Nurkse himself points out “ Economic development has much to do with human endowments , social attitudes, political conditions and historical accidents. Capital is necessary but not a sufficient condition of progress. Hence an economy will be considered under-developed:

The general nature of an under-developed economy may be gathered from common economic characteristics of such an economy. It may be too much to talk of the common economic characteristics of under-developed countries in view of the wide diversity of among under-developed countries as revealed by numerous case studies that have been made. While it would be very difficult to locate a representative under-developed country, it is much easier to bring out some fundamental characteristics common to under-developed countries. These main characteristics of under-developed countries are given below.

1. Low per Capita Income:
The average annual income in under-developed countries like India Pakistan and Srilanka is nearly $130 per head as compared with $6640 in the USA. Low per capita income is an outstanding feature of an under developed economy and is a significant measure of a country’s development.

2. Deficiency of Capital Equipment:
The insufficient amount of physical capital in existence is also a characteristic feature of all under-developed economies. Hence they are often called simply “capital poor” economies. One indication of the capital deficiency is the low amount of capital per head of population. Not only is the capital stock extremely small but the current of capital formation is also very low. In most under-developed countries investment is only 5 percent to 8 percent of the national income, where as in the USA, Canada and Western Europe it is generally from 15 percent to 18 percent.

3. Excessive Dependence on Agriculture:
Most under developed countries are predominantly agricultural. A great majority of their population is engaged in agriculture and allied occupations. This excessive dependence on agriculture is due to the fact that non-agricultural occupation have not grown at a rate of commensurate with the increase in population for lack of sufficient investment outside agriculture. 

4. Rapid Rate of Population Growth:
Although there is diversity among under-developed economies in respect of their population, there appears to be a common feature namely a rapid rate of population increase. 

5. Unemployment and Under-employment:
An important consequence of rapid rate of population growth without a corresponding increase in the level of economic development is that there is large scale unemployment in urban areas and disguised unemployment in rural areas. More and more people are thrown on land, since alternative occupations do not develop simultaneously to absorb surplus population. 

6. Under-utilization of Natural Resources:
The natural resources are an under-developed economy is either unutilized or under-utilized. Generally speaking under-developed countries are not deficient in land, water, mineral, forest or power resources, though they may be untapped. In other words they constitute only potential resources. 

7. Foreign Trade-Orientation:
An under-developed economy is generally foreign trade-oriented. They export raw materials instead of utilizing them at home and import manufactures instead of making them at home. 

8. Low Levels of Technology and Skills:
The under-developed countries employ primitive methods of production and inferior and less productive techniques. There is also a terrible death of skilled personnel. Poor techniques and lower skills result in inefficient and insufficient production, which cause general poverty.

9. Economic Backwardness:
The economic backwardness manifests itself in lower efficiency, illiteracy, poverty, factor-immobility, lack of entrepreneurship and ignorance in economic matters. Their value structure and social structure reduces incentives for economic change.

As foreseen by Carnegie endowment at 2050:
The world’s economic balance of power is shifting rapidly, and the trend has only been 
Accelerated by the global recession. China remains on a path to overtake the United States 
As the world’s largest economic power within a generation, and India will join both as a 
Global leader by mid-century. 
• Traditional Western powers will remain the wealthiest nations in terms of per capita 
Income, but will be overtaken as the predominant world economies by much poorer 
• The global economic transformation will shift international relations in unpredictable ways. 
Japan and Russia will seek new frameworks of alliances. The 
Largest emerging nations may come to see each other as rivals. 
• Absolute poverty will be confined to small pockets in sub-Saharan Africa and India, though 
Relative poverty will persist, and may even become more acute. 
• International organizations such as the IMF will be compelled to reform their governance 
Structures to become more representative of the new economic landscape. Those that fail to 
Do so will become marginalized.  
iv. Capitalistic to socialistic

The Capitalist System
Capitalists are men and women who are characterized by owning sufficient capital (wealth invested to gain more wealth) to enable them to live without having to work. The productive and distributive resources of capitalism do not belong to everyone in society, but to those who possess the right of ownership. In Western-type capitalism – sometimes called ‘private enterprise capitalism’ or ‘the market economy’, this ownership takes the legal form of written titles and deeds. In the state-run capitalism of countries like China, Cuba, and formerly Russia, ownership is officially vested in the whole population, but in practice the minority class of bureaucrats who control the political system there control production and distribution, and by virtue of that control they also effectively enjoy the right of ownership and reap the benefits from this.
Capitalism also generates conflict. It makes workers compete against one another and often divides them into competing groups. But the main conflict in capitalist society is between the class interests of the capitalists and the class interests of the workers. These interests are essentially antagonistic. The capitalists, who directly or indirectly control the media, the education system and the major political parties, try to camouflage this conflict. They pretend that there are no classes that we are all one national family that we are all in our rightful places, that buying and selling, working for wages and production for profit are as natural as the sun and the moon. Many people believe them, but experience does not support this belief, for historically workers have had to respond to their class condition by forming trade unions to negotiate with their employers over the price of the mental and physical energies they sell. This is a necessary defensive measure, but a severely limited one. To leave all the productive machinery in the hands of the capitalist class and then to demand higher wages and better conditions of employment from that class is to negotiate from a position of permanent weakness. It is to negotiate about the terms of exploitation rather than to strive to end it.

The next stage of society, socialism, will come as a welcome relief. It will bring comparative harmony to human relationships. Far from needing a special sort of behavior from people, socialism will run on the patterns of action, thought and feeling that have been the norms throughout most of human existence. Human beings will not become any more "good" or "kind" or "helpful" or "gentle"; but the pressures which now prevent them being all of these things at different times will have gone – shortage of money, fear of unemployment, fear of lawbreakers, fear of the law itself, fear of war, fear of the boss, even fear of the trade union, and so on. All of these pressures arise directly out of the capitalist organization of society. When we finish with capitalism, we shall have removed these influences upon the thoughts and actions of every member of the working class.
In a socialist world, the claims of any one proposal will have to be balanced against the claims of many others. And it will not be "they" who make the decisions and carry out the work; it will be "we". There will be a great deal of discussion, small-scale and large-scale, and the process of decision-making will be democratic. Television, which is at present taken up for the greater part of its time with what currently passes for "entertainment", could become a forum for much of the large-scale discussion and decision-making, providing us with vivid, well researched information and covering many points of view. Telephone conferencing, the internet and other growing means of telecommunication could unite groups scattered round the world so that they could discuss projects, share information and reach decisions on a democratic basis. Such means could also be used for ascertaining the level of demand for many goods and services.
The primary task of socialism will be to produce enough of all the things that people need and to get them to the right places at the right times. This will require a large part of the administrative organization already built up within capitalism; but it will require more. Firstly, in the world as a whole, not enough of the most useful things are ever produced. It is a system of artificial scarcity. In socialism we shall need to produce much more, so that everyone can have enough. And it will be quite possible to do this.

v. Third world to industrialized First World

The concept of the First World first originated during the Cold War, involving countries that were aligned with the United States. These countries were largely capitalistic and self-proclaimed democracies. After the fall of the Soviet Union and the end of the Cold War, the meaning "First World" took on a new meaning applicable to the times, coming to be largely synonymous with developed countries or highly developed countries (depending on which definition is intended). The concept has a strong evolutionist bias, envisioning "development" as a linear path with Western civilizations industrial and economic advancements as the ultimate goal.
During the Cold War, global dynamics between the First World and the other Worlds were essentially split into two. Relationships with the Second World were competitive, ideological and hostile. Relationships with Third World countries were normally positive in theory, while some were quite negative in practice (such as with the practice of proxy war). Present inter-world relationships are not so rigid, although there is a disparity in terms of the First World having more influence, wealth, information and advancements than the other worlds.
Globalization is an increasingly important phenomenon fueled largely by the First World and its connections with the other worlds. Multinational also provide examples of the First World's impact on globalization, as they have brought economic, political and social integration in many countries. With the rise of the multinational corporations, the problem of outsourcing has risen in many First World countries.
What makes a nation third world? 
Despite ever evolving definitions, the concept of the third world serves to identify countries that suffer from high infant mortality, low economic development, high levels of poverty, low utilization of natural resources, and heavy dependence on industrialized nations. These are the developing and technologically less advanced nations of Asia, Africa, Oceania, and Latin America. Third world nations tend to have economies dependent on the developed countries and are generally characterized as poor with unstable governments and having high rates of population growth, illiteracy, and disease. A key factor is the lack of a middle class — with impoverished millions in a vast lower economic class and a very small elite upper class controlling the country's wealth and resources. Most third world nations also have a very large foreign debt.

How the Third World Will Join the First World

The recent success of the Third World suggests we can have a solid hope that developing nations will develop. Let us go deeper and understand how, nations that seemed mired in poverty is now growing.
Over the last several decades light industry has been a major route into the First World. A major difficulty with this route has been that the people of the First World rarely wear more than one pair of underwear at a time. As there is limited demand for the products of low skill, light industry, most countries had to more or less wait while light industry transformed a few countries at a time, for example, China.

The rapid growth of India based on Internet outsourcing suggests there may be a second route. So while a large portion of the Third World can grow to First World status through light industry, another large portion can take this second route, the Internet, without hindering the first group.

In fact quite the contrary, if the countries that are growing through outsourcing buy the light industrial goods of the light industrial exporters then the new group, the outsourcers, will actually help the old group, the light industrial exporters, to grow.

Finally, the success of these two routes is pushing up natural resource prices which are providing a third route to the First World, the export of natural resources.
Several routes to success means that Third World nations may not have to wait their turn, or at least wait as long, to get on a path to rapid development. Furthermore, there is a race between the higher birth rate of the Third World as compared to the First World and the assent of Third World countries to First World status through economic growth. The opening of new routes to the First World, particularly through the Internet, may dramatically shift the advantage to economic growth. The population of the Third World will decline as the excess of births over deaths in Third World countries is more than matched by people physically moving to developed countries, and Third World economies achieving First World status.

III.Economic Ideologies

A. Definition 

An economic ideology distinguishes itself from economic theory in being normative (what economy is ought to be) rather than just explanatory in its approach. It expresses a perspective on the way an economy should run and to what end, whereas the aim of economic theories is to create accurate explanatory models. 

An ideology refers to systems of abstract thought applied to public matters and thus make this concept central to politics. Implicitly every political or economic tendency entails an ideology whether or not it is propounded as an explicit system of thought.

B. Examples

Capitalism is a broad economic system where competition in a free market determines the price, production and consumption of goods through the invisible hand of supply and demand reaching efficient market equilibrium. Capital, property and enterprise are privately owned and managed for a profit.
New enterprises may freely gain market entry without State restriction. Employment and wages are determined by a labour market that will result in some unemployment. Government and Judicial intervention are employed at times to change the economic incentives for people for various reasons. The capitalist economy will likely follow a business cycle of economic growth along with a steady cycle of small booms and busts.

Socialism refers to the various theories of economic organization which advocate either public or direct labor ownership and administration of the means of production and allocation of resources. In certain socialist models, government or state institutions approve of the prices and products grown or otherwise produced in the economy, subjecting the market system to direct external regulations. Alternatively, the state may oversee the production of goods but then sell them in competitive markets.
 A socialist state will primarily concern itself with the welfare of its citizens. Socialist doctrines essentially promote the collectivist idea that an economy's resources should be used in the interest all participants, and not simply for private gain. This notion historically alienated the market economy, and tended to favor central planning. Unfortunately, countries that favored excessive central controls experienced economic decline and collapse in the long run, as was the case with the Soviet Union.

Communism is the evolution of socialism so that the central role of the State has 'withered away' and is no longer necessary for the functioning of a planned economy. All property and capital are collectively owned and managed in a communal, classless and egalitarian society. Currency is no longer needed, and all economic activity, enterprise, labor, production and consumption is freely exchanged "from each according to his ability, to each according to his needs".

iv. Anarchism 
Anarchism is a political philosophy that advocates stateless societies based on non-hierarchical free associations. Anarchism holds the state to be undesirable, unnecessary, or harmful. While anti-statism is central, some argue that anarchism entails opposing authority or hierarchical organization in the conduct of human relations, including, but not limited to, the state system. 

C. Principles

Individual Rights: The most basic and widely understood principle of capitalism is that of individual rights to life, liberty, property and voluntary contractual exchange.
Limited Government : The limited role of government solely to the defense of the rights of individuals is also an important and almost universally understood principle of capitalism.
Spontaneous Order: The tendency for capitalist markets to order themselves naturally through the laws of supply and demand is one of the most familiar principles of capitalism.
Private Ownership: The principle of private ownership is the capitalist belief that property that is owned by the state, or is communally owned, is not respected or preserved as effectively as that property which is owned by private individuals or corporations.

Socialism is a world-wide social system in which the means of production will belong in common to mankind and will be controlled by them for their own benefit.
Socialism can only be achieved by political means. At present the capitalists are able to keep their privilege position because they control political power.
Socialism can only be achieved by a socialist class.
Socialists are opposed to all wars. Workers have no interest in fighting in wars since all wars are fought over the markets, trade routes and sources of raw materials of rival capitalist groups.
Socialists are opposed to nationalism. Socialists are materialists and are opposed to religion which has always been a prop to class society.

The expropriation of landed property and the use of rent from land to cover state expenditure
A high and progressively graded income-tax
abolition of the right of inheritance
confiscation of the property of all emigrants and rebels
centralization of credit in the hands of the state, by the establishment of a state bank with state capital and an exclusive monopoly
centralization of transport in the hands of the state
increase in the state ownership of factories and instruments of production, and the redistribution and amelioration of agricultural land on a general plan
public education of all children. Abolition of factory labour for children in its present form. Unification of education with economic production
unification of agricultural with industrial labour, and the gradual abolition of the differences between town and country

iv. Anarchism
Equal access to political decision-making for all.
Equal access to society's common wealth for all.

IV. Corporation and their powers

A. Definition

A corporation is a separate legal entity that has been incorporated through a legislative or registration process established through legislation. Incorporated entities have legal rights and liabilities that are distinct from their employees and shareholders,[1] and may conduct business as either a profit-seeking business or not for profit business. Early incorporated entities were established by charter (i.e. by an ad hoc act granted by a monarch or passed by a parliament or legislature). Most jurisdictions now allow the creation of new corporations through registration. In addition to legal personality, registered corporations tend to have limited liability, be owned by shareholders[2][3] who can transfer their shares to others, and controlled by a board of directors who are normally elected or appointed by the shareholders. The word "corporation" derives from corpus, the Latin word for body, or a "body of people."


Mercantilism is an economic doctrine based on the theory that a nation benefits by accumulating monetary reserves through a positive balance, especially of finished goods. Mercantilism dominated Western European economic policy and discourse from the 16th to late-18th centuries.[1] Mercantilism was a cause of frequent European wars in that time and motivated colonial expansion. Mercantilist theory varied in sophistication from one writer to another and evolved over time. Favors for powerful interests were often defended with mercantilist reasoning.
High tariffs, especially on manufactured goods, are an almost universal feature of mercantilist policy. Other policies have included:
Building a network of overseas colonies;
Forbidding colonies to trade with other nations;
Monopolizing markets with staple ports;
Banning the export of gold and silver, even for payments;
Forbidding trade to be carried in foreign ships;
Export subsidies;
Promoting manufacturing with research or direct subsidies;
Limiting wages;
Maximizing the use of domestic resources;
Restricting domestic consumption with non-tariff barriers to trade.

Labeled by both contemporaries and historians as "the grandest society of merchants in the universe", the British East India Company would come to symbolize the dazzlingly rich potential of the corporation, as well as new methods of business that could be both brutal and exploitative.[13] On 31 December 1600, the English monarchy granted the company a 15-year monopoly on trade to and from the East Indies and Africa.[14] By 1611, shareholders in the East India Company were earning an almost 150% return on their investment. Subsequent stock offerings demonstrated just how lucrative the Company had become. Its first stock offering in 1613–1616 raised £418,000 and its second offering in 1617–1622 raised £1.6 million.[1
A corporation is created (incorporated) by a group of shareholders who have ownership of the corporation, represented by their holding of common stock. Shareholders elect a board of directors (generally receiving one vote per share) who appoint and oversee management of the corporation. Although a corporation does not necessarily have to be for profit, the vast majority of corporations are setup with the goal of providing a return for its shareholders. When you purchase stock you are becoming part owner in a corporation.

C. Modern corporations

By the end of the 19th century the Sherman Act, New Jersey allowing holding companies, and mergers resulted in larger corporations with dispersed shareholders. (See the Modern Corporation and Private Property)[24] The well-known Santa Clara County v. Southern Pacific Railroad decision began to influence policymaking and the modern corporate era had begun.
The 20th century saw a proliferation of enabling law across the world, which helped to drive economic booms in many countries before and after World War I. Starting in the 1980s, many countries with large state-owned corporations moved toward privatization, the selling of publicly owned (or 'nationalized') services and enterprises to corporations. Deregulation (reducing the regulation of corporate activity) often accompanied privatization as part of a laissez-faire policy. Another major postwar shift was toward the development of conglomerates, in which large corporations purchased smaller corporations to expand their industrial base. Japanese firms developed a horizontal conglomeration model, the keiretsu, which was later duplicated in other countries as well.[

D. Ownership and control

A corporation is, at least in theory, owned and controlled by its members. In a joint-stock company the members are known as shareholders and each of their shares in the ownership, control and profits of the corporation is determined by the portion of shares in the company that they own. Thus a person who owns a quarter of the shares of a joint-stock company owns a quarter of the company, is entitled to a quarter of the profit (or at least a quarter of the profit given to shareholders as dividends) and has a quarter of the votes capable of being cast at general meetings.
In another kind of corporation the legal document which established the corporation or which contains its current rules will determine who the corporation's members are. Who is a member depends on what kind of corporation is involved. In a worker cooperative the members are people who work for the cooperative. In a credit union the members are people who have accounts with the credit union.[26]
The day-to-day activities of a corporation are typically controlled by individuals appointed by the members. In some cases this will be a single individual but more commonly corporations are controlled by a committee or by committees. Broadly speaking there are two kinds of committee structure.
A single committee known as a board of directors is the method favored in most common law countries. Under this model the board of directors is composed of both executive and non-executive directors, the latter being meant to supervise the former's management of the company.
A two-tiered committee structure with a supervisory board and a managing board is common in civil law countries. 

E. Formation

Historically, corporations were created by a charter granted by government. Today, corporations are usually registered with the state, province, or national government and regulated by the laws enacted by that government. Registration is the main prerequisite to the corporation's assumption of limited liability. The law sometimes requires the corporation to designate its principal address, as well as a registered agent (a person or company designated to receive legal service of process). It may also be required to designate an agent or other legal representative of the corporation.
Generally, a corporation files articles of incorporation with the government, laying out the general nature of the corporation, the amount of stock it is authorized to issue, and the names and addresses of directors. Once the articles are approved, the corporation's directors meet to create bylaws that govern the internal functions of the corporation, such as meeting procedures and officer positions.[
The law of the jurisdiction in which a corporation operates will regulate most of its internal activities, as well as its finances. If a corporation operates outside its home state, it is often required to register with other governments as a foreign corporation, and is almost always subject to laws of its host state pertaining to employment, crimes, contracts, civil actions, and the like.[

F. Naming
Corporations generally have a distinct name. Historically, some corporations were named after their membership: for instance, "The President and Fellows of Harvard College." Nowadays, corporations in most jurisdictions have a distinct name that does not need to make reference to their membership. In Canada, this possibility is taken to its logical extreme: many smaller Canadian corporations have no names at all, merely numbers based on a registration number (for example, "12345678 Ontario Limited"), which is assigned by the provincial or territorial government where the corporation incorporates.
In most countries, corporate names include a term or an abbreviation that denotes the corporate status of the entity (for example, "Incorporated" or "Inc." in the United States) or the limited liability of its members (for example, "Limited" or "Ltd."). These terms vary by jurisdiction and language. In some jurisdictions they are mandatory, and in others they are not.[28] Their use puts everybody on constructive notice that they are dealing with an entity whose liability is limited: one can only collect from whatever assets the entity still controls when one obtains a judgment against it.
Some jurisdictions do not allow the use of the word "company" alone to denote corporate status, since the word "company" may refer to a partnership or some other form of collective ownership (in the United States it can be used by a sole proprietorship but this is not generally the case elsewhere).
A legal entity that is separate and distinct from its owners. Corporations enjoy most of the rights and responsibilities that an individual possesses; that is, a corporation has the right to enter into contracts, loan and borrow money, sue and be sued, hire employees, own assets and pay taxes. 

The most important aspect of a corporation is limited liability. That is, shareholders have the right to participate in the profits, through dividends and/or the appreciation of stock, but are not held personally liable for the company's debts. 

Corporations are often called "C Corporations.
A corporation is created (incorporated) by a group of shareholders who have ownership of the corporation, represented by their holding of common stock. Shareholders elect a board of directors (generally receiving one vote per share) who appoint and oversee management of the corporation. Although a corporation does not necessarily have to be for profit, the vast majority of corporations are setup with the goal of providing a return for its shareholders. When you purchase stock you are becoming part owner in a corporation. 

Wikipedia, the free encyclopedia

G. Advantages of a Corporation

The shareholders have limited responsibility with regard to the debts or trials against the corporation.
Generally, shareholders are liable only for investment in shares in the company. (However, it is important to mention that managers could be subject to responsibility for their actions, such as not to retain and pay the taxes on their employees).
Corporations can obtain more capital through the sale of their actions.
A corporation can deduct the cost of benefits (benefits package) that offers to its managers and employees.
If you meet certain requirements, you can opt for declared as a corporation S. This selection allows that the company is subject to a payment of taxes similar to that of a society. 

H. Disadvantages of a Corporation

The process of integration requires more time and money to compare to other models of organization.
The corporations are supervised and subject to rules of entities: federal, state and some local, and therefore might have to comply with many more requirements and administrative documents to demonstrate compliance.
The incorporation of a company could result in the payment of more taxes. The dividends paid to shareholders are not deductible as a corporate spending; therefore, that income may be subject to a double taxation.

I. Different Types of Corporations

Anyone who operates a business, alone or with others, may incorporate. This is also true for anyone or any group engaged in religious, civil, non-profit or charitable endeavors. You do not have to be a business giant to be able to have the financial and other benefits of operating a corporation. Given the right circumstances, the owner(s) of a business of any size can benefit from incorporating.

o General Corporation 

This is the most common corporate structure. The corporation is a separate legal entity that is owned by stockholders. A general corporation may have an unlimited number of stockholders that, due to the separate legal nature of the corporation, are protected from the creditors of the business. A stockholder's personal liability is usually limited to the amount of investment in the corporation and no more.

o Close Corporation

There are a few minor, but significant, differences between general corporations and close corporations. In most states where they are recognized, close corporations are limited to 30 to 50 stockholders. In addition, many close corporation statutes require that the directors of a close corporation must first offer the shares to existing stockholders before selling to new shareholders.

This type of corporation is particularly well suited for a group of individuals who will own the corporation with some members actively involved in the management and other members only involved on a limited or indirect level.

o S Corporation

An S Corporation is not really a different type of corporation. It is a special tax designation applied for and granted by the IRS to corporations that have already been formed. Many entrepreneurs and small business owners are partial to the S Corporation because it combines many of the advantages of a sole proprietorship, partnership and the corporate forms of business structure.

S Corporations have the same basic advantages and disadvantages of general or close corporation with the added benefit of the S Corporation special tax provisions. When a standard corporation (general, close or professional) makes a profit, it pays a federal corporate income tax on the profit. If the company declares a dividend, the shareholders must report the dividend as personal income and pay more taxes.

S Corporations avoid this "double taxation" (once at the corporate level and again at the personal level) because all income or loss is reported only once on the personal tax returns of the shareholders. However, like standard corporations (and unlike some partnerships), the S Corporation shareholders are exempt from personal liability for business debt.


o Defining and measuring oligopoly

An oligopoly is a market structure in which a few firms dominate. When a market is shared between a few firms, it is said to be highly concentrated. Although only a few firms dominate, it is possible that many small firms may also operate in the market. For example, major airlines like British Airways (BA) and Air France operate their routes with only a few close competitors, but there are also many small airlines catering for the holidaymaker or offering specialist services.

o Key characteristics

The main characteristics of firms operating in a market with few close rivals include:


Firms that are interdependent cannot act independently of each other. A firm operating in a market with just a few competitors must take the potential reaction of its closest rivals into account when making its own decisions. 


Strategy is extremely important to firms that are interdependent. Because firms cannot act independently, they must anticipate the likely response of a rival to any given change in their price, or their non-price activity. In other words, they need to plan, and work out a range of possible options based on how they think rivals might react.
Oligopolists have to make critical strategic decisions, such as:
Whether to compete with rivals, or collude with them.
Whether to raise or lower price, or keep price constant.
Whether to be the first firm to implement a new strategy, or whether to wait and see what rivals do. The advantages of ‘going first’ or ‘going second’ are respectively called 1st and 2nd-mover advantage. Sometimes it pays to go first because a firm can generate head-start profits. 2nd mover advantage occurs when it pays to wait and see what new strategies are launched by rivals, and then try to improve on them or find ways to undermine them.

o Barriers to entry

Oligopolies and monopolies frequently maintain their position of dominance in a market might because it is too costly or difficult for potential rivals to enter the market. These hurdles are called barriers to entry and the incumbent can erect them deliberately, or they can exploit natural barriers that exist.

Natural entry barriers include:

o Economies of large scale production.
If a market has significant economies of scale that have already been exploited by the incumbents, new entrants are deterred.
o Ownership or control of a key scarce resource.
Owning scarce resources that other firms would like to use creates a considerable barrier to entry, such as an airline controlling access to an airport.
High set-up costs.
o High R&D costs
Spending money on Research and Development (R & D) is often a signal to potential entrants that the firm has large financial reserves. In order to compete, new entrants will have to match, or exceed, this level of spending in order to compete in the future. This deters entry, and is widely found in oligopolistic markets such as pharmaceuticals and the chemical industry.

Artificial barriers include:

o Predatory pricing.
Predatory pricing occurs when a firm deliberately tries to push prices low enough to force rivals out of the market.

o Limit pricing.
Limit pricing means the incumbent firm sets a low price, and a high output, so that entrants cannot make a profit at that price.  This is best achieved by selling at a price just below the average total costs (ATC) of potential entrants. This signals to potential entrants that profits are impossible to make.
o Superior knowledge
An incumbent may, over time, have built up a superior level of knowledge of the market, its customers, and its production costs. This superior knowledge can deter entrants into the market.
o Predatory acquisition
Predatory acquisition involves taking-over a potential rival by purchasing sufficient shares to gain a controlling interest, or by a complete buy-out. As with other deliberate barriers, regulators, like the Competition Commission, may prevent this because it is likely to reduce competition.
o Advertising
Advertising is another sunk cost - the more that is spent by incumbent firms the greater the deterrent to new entrants.
o A strong brand
A strong brand creates loyalty, ‘locks in’ existing customers, and deters entry.
Loyalty schemes
Schemes such as Tesco’s Club Card, help oligopolists retain customer loyalty and deter entrants who need to gain market share.
o Exclusive contracts, patents and licenses
These make entry difficult as they favor existing firms who have won the contracts or own the licenses. For example, contracts between suppliers and retailers can exclude other retailers from entering the market.
o Vertical integration
Vertical integration can ‘tie up’ the supply chain and make life tough for potential entrants, such as an electronics manufacturer like Sony having its own retail outlets (Sony Centers), and a brewer like Heineken owning its own chain of UK pubs, which it acquired from the brewers Scottish and Newcastle in 2008.

K. Collusive oligopolies

Another key feature of oligopolistic markets is that firms may attempt to collude, rather than compete. If colluding, participants act like a monopoly and can enjoy the benefits of higher profits over the long term.

Types of collusion
Overt collusion occurs when there is no attempt to hide agreements, such as the when firms form trade associations like the Association of Petrol Retailers.
Covert collusion occurs when firms try to hide the results of their collusion, usually to avoid detection by regulators, such as when fixing prices.
 Collusion arises when firms act together, called acting in concert, but where there is no formal or even informal agreement. For example, it may be accepted that a particular firm is the price leader in an industry, and other firms simply follow the lead of this firm. All firms may ‘understand’ this, but no agreement or record exists to prove it. If firms do collude, and their behavior can be proven to result in reduced competition, they are likely to be subject to regulation. In many cases, tacit collusion is difficult or impossible to prove, though regulators are becoming increasingly sophisticated in developing new methods of detection.

L. Competitive oligopolies

When competing, oligopolists prefer non-price competition in order to avoid price wars. A price reduction may achieve strategic benefits, such as gaining market share, or deterring entry, but the danger is that rivals will simply reduce their prices in response.
This leads to little or no gain, but can lead to falling revenues and profits. Hence, a far more beneficial strategy may be to undertake non-price competition.

M. Pricing strategies of oligopolies

Oligopolies may pursue the following pricing strategies:
Oligopolists may use predatory pricing to force rivals out of the market. This means keeping price artificially low, and often below the full cost of production.
They may also operate a limit-pricing strategy to deter entrants, which is also called entry forestalling price.
Oligopolists may collude with rivals and raise price together, but this may attract new entrants.
Cost-plus pricing is a straightforward pricing method, where a firm sets a price by calculating average production costs and then adding a fixed mark-up to achieve a desired profit level. Cost-plus pricing is also called rule of thumb pricing.

N. Non-price strategies

Non-price competition is the favored strategy for oligopolists because price competition can lead to destructive price wars – examples include:
Trying to improve quality and after sales servicing, such as offering extended guarantees.
Spending on advertising, sponsorship and product placement - also called hidden advertising – is very significant to many oligopolists. The UK's football Premiership has long been sponsored by firms in oligopolies, including Barclays Bank and Carling.
Sales promotion, such as buy-one-get-one-free (BOGOF), is associated with the large supermarkets, which is a highly oligopolistic market, dominated by three or four large chains.
Loyalty schemes, which are common in the supermarket sector, such as Sainsbury’s Nectar Card and Tesco’s Club Card.

O. Theory of oligopoly

The theory of oligopoly suggests that, once a price has been determined, will stick it at this price. This is largely because firms cannot pursue independent strategies. For example, if an airline raises the price of its tickets from London to New York, rivals will not follow suit and the airline will lose revenue - the demand curve for the price increase is relatively elastic. Rivals have no need to follow suit because it is to their competitive advantage to keep their prices as they are.

V. Multinationals (MNC’s and TNC’s)

A. Definition
Are corporations that have its facilities and other assets in at least one country other than its home country. Such companies have offices and/or factories in different countries and usually have a centralized head office where they co-ordinate global management. Very large multinationals have budgets that exceed those of many small countries. It is also referred to as “transnational corporation”.

B. MNC’s “Things-giving-identity”

“Ownership criterion”: some argue that ownership is a key criterion. A firm becomes multinational only when the headquarter or parent company is effectively owned by nationals of two or more countries. For example, Shell and Unilever, controlled by British and Dutch interests, are good examples. 
“Nationality mix of headquarter managers”: An international company is multinational if the managers of the parent company are nationals of several countries. Usually, managers of the headquarters are nationals of the home country. This may be a transitional phenomenon. Very few companies pass this test currently. 

“Business Strategy”: global profit maximization.

C. Benefits

Create wealth and jobs around the world. Inward investment by multinationals offer much needed foreign currency for developing economies. They also create jobs and help raise expectations of what is possible.

Their size and scale of operation enables them to benefit from economies of scale enabling lower  average costs and prices for consumers. This is particularly important in industries with very high fixed costs, such as car manufacture and airlines.

Large profits can be used for research & development. For example, oil exploration is costly and risky; this could only be undertaken by a large firm with significant profit and resources. It is similar for drug manufacturers.

Ensure minimum standards. The success of multinationals is often because consumers like to buy goods and services where they can rely on minimum standards. i.e. if you visit any country you know that the Starbucks coffee shop will give something you are fairly familiar with. It may not be the best coffee in the district, but it won’t be the worst. People like the security of knowing what to expect.

D. Criticisms
Companies are often interested in profit at the expense of the consumer. Multinational companies often have monopoly power which enables them to make excess profit. For example, Shell made profits of £14 b last year
Their market dominance makes it difficult for local small firms to thrive. For example, it is argued that big supermarkets are squeezing the margins of local corner shops leading to less diversity.
In developing economies, big multinationals can use their economies of scale to push local firms out of business.
In the pursuit of profit, multinational companies often contribute to pollution and use of non renewable resources which is putting the environment under threat.
MNCs have been criticised for using ‘slave labour’ – workers who are paid a pittance by Western standards

E. Top ten Biggest MNC in the world

1. HSBC Holdings 

HSBC Holdings plc is a British multinational banking and financial services company headquartered in London, England, United Kingdom. It is one of the world's largest banks. It was founded in London in 1991 by the Hongkong and Shanghai Banking Corporation to act as a new group holding company. The origins of the bank lie in Hong Kong and Shanghai, where branches were first opened in 1865.  The HSBC name is derived from the initials of the Hongkong and Shanghai Banking Corporation. 
HSBC has around 7,200 offices in 85 countries and territories across Africa, Asia, Europe, North America and South America, and around 89 million customers. As of 31 December 2012 it had total assets of $2.693 trillion, of which roughly half were in Europe, the Middle East and Africa, and a quarter in each of Asia-Pacific and the Americas. As of 2012, it was the world's largest bank in terms of assets and sixth-largest public company, according to a composite measure by Forbes magazine. 
HSBC is organised within four business groups: Commercial Banking; Global Banking and Markets (investment banking); Retail Banking and Wealth Management; and Global Private Banking.

2. General Electric 

General Electric, or GE, is an American multinational conglomerate corporation incorporated in Schenectady, New York and headquartered in Fairfield, Connecticut, United States. The company operates through five segments: Energy, Technology Infrastructure, Capital Finance and Consumer & Industrial.

3. Bank of America 

The Bank of America Corporation is an American multinational banking andfinancial services corporation headquartered in Charlotte, North Carolina. It is the second largest bank holding company in the United States by assets. As of 2010, Bank of America is the fifth-largest company in the United States by total revenue, and the third-largest non-oil company in the U.S. (after Walmart and General Electric). In 2010, Forbes listed Bank of America as the third biggest company in the world. 
The bank's 2008 acquisition of Merrill Lynch made Bank of America the world's largest wealth management corporation and a major player in the investment banking market.

4. JPMorgan Chase 

JPMorgan Chase & Co. is an American multinational banking and financial servicesholding company. It is the largest bank in the United States by assets, and as of 2012, it ranks as the second largest bank in the world by assets (after HSBC) with total assets of $2.509 trillion. It is a major provider of financial services and according to Forbes magazine is the world's second largest public company based on a composite ranking. The hedge fund unit of JPMorgan Chase is one of the largest hedge funds in the United States. It was formed in 2000, when Chase Manhattan Corporation merged with J.P. Morgan & Co.

5. ExxonMobil 

Exxon Mobil Corp., or ExxonMobil, is an American multinational oil and gascorporation headquartered in Irving, Texas, United States. It is a direct descendant ofJohn D. Rockefeller's Standard Oil company, and was formed on November 30, 1999, by the merger of Exxon and Mobil (formerly Standard Oil of New York and Standard Oil of New Jersey.) It is affiliated with Imperial Oil which operates in Canada. The company's largest shareholder is the Bill and Melinda Gates Foundation.

6. Royal Dutch Shell 

Royal Dutch Shell plc (LSE: RDSA, RDSB), commonly known as Shell, is an Anglo–Dutch multinational oil and gas company incorporated in the United Kingdom and headquartered in the Netherlands. Created by the merger of Royal Dutch Petroleum and UK-based Shell Transport & Trading, it is the largest company in the world 

in terms of revenue and one of the six oil and gas "supermajors".

7. BP 

BP plc, sometimes referred to by its former name British Petroleum, is a Britishmultinational oil and gas company headquartered in London, England, United Kingdom. It is the fifth-largest energy company by market capitalization, fifth-largest company in the world measured by 2012 revenues, and the sixth largest oil and gas company measured by 2012 production. It is one of the six oil and gas "supermajors". BP is vertically integrated and operates in all areas of the oil and gas industry, includingexploration and production, refining, distribution and marketing, petrochemicals, power generation and trading. It also has renewable energy activities in biofuels and wind power. 

8. Toyota Motor 

Toyota Motor Corporation  is a Japanese automaker headquartered in Toyota, Aichi, Japan. In 2010 the multinational corporation consisted of 325,905 employees worldwide and, as of March 2013, is the thirteenth-largest company in the world by revenue. Toyota was the largest automobile manufacturer in 2012 (by production), and in July of that year, the company reported the production of its 200-millionth vehicle. 

9. ING Group 

The ING Group (Dutch: ING Groep) is a Dutch multinational banking and financial services corporation headquartered in Amsterdam. Its primary businesses are retail banking, direct banking, commercial banking, investment banking, asset management, and insurance services. ING is an abbreviation for Internationale Nederlanden Groep(English: International Netherlands Group).

10. Berkshire Hathaway

Berkshire Hathaway Inc. is an American multinational conglomerate holding company headquartered in Omaha, Nebraska, United States, that oversees and manages a number of subsidiary companies. The company wholly owns GEICO, BNSF, Lubrizol,Dairy Queen, Fruit of the Loom, Helzberg Diamonds and NetJets, owns half of Heinz, owns an undisclosed percentage of Mars, Incorporated and has significant minority holdings in American Express, The Coca-Cola Company, Wells Fargo, and IBM. Berkshire Hathaway averaged an annual growth in book value of 19.7% to its shareholders for the last 48 years (compared to 9.4% from S&P 500 with dividends included for the same period), while employing large amounts of capital, and minimal debt. Berkshire Hathaway stock produced a total return of 76% from 2000–2010 versus a negative 11.3% return for the S&P 500.

VI.The Philippine Economy and its Contemporary Problem

Y. Overview

The Economy of the Philippines is the 40th largest in the world, according to 2012 International Monetary Fund statistics and it is also one of the emerging markets in the world.[26] The Philippines is considered as a newly industrialized country, it has been transitioning from one based on agriculture to one based more on services and manufacturing. According to the CIA Factbook, the estimated 2012 GDP (purchasing power parity) was 424.355 billion.[6] Goldman Sachs estimates that by the year 2050, the Philippines will be the 14th largest economy in the world, Goldman Sachs also included the Philippines in its list of the Eleven economies. According to HSBC, the Philippine economy will become the 16th largest economy in the world, 5th largest economy in Asia and the largest economy in the Southeast Asian region by 2050.[27]
Primary exports include semiconductors and electronic products, transport equipment, garments, copper products, petroleum products, coconut oil, and fruits. Major trading partners include the United States, Japan, China, Singapore, South Korea, the Netherlands, Hong Kong, Germany, Taiwan, and Thailand.
The Philippines has been named as one of the Tiger Cub Economies together with Indonesia, Malaysia and Thailand.

Wikipedia, the free encyclopedia

Philippine economy ranks as world's 31st most competitive

     The Philippine economy ranks as the world's 31st most competitive among a list of 46 led by United States, according to a Swiss management school in their report on world competitiveness.
     In the World Competitiveness Yearbook presented, Lausanne International Institute for Management Development listed the Philippines behind Spain and Thailand but ahead of Argentina and Colombia.
     Of the 14 Asian countries in the list, the Philippines only came ahead of India (38), Greece (40), and Indonesia (41).
     Three other Asian countries -- Singapore, Hong Kong and Japan -- took the second, third and fourth, respectively behind the United States.
     The Russian economy was the last in the list, following South Africa and Venezuela.
     The rest of the countries in the top 20 are Denmark, Norway, Holland, Luxembourg, Switzerland, Germany, New Zealand, Canada, Chile, Sweden, Finland, Austria, Belgium, Taiwan and Great Britain and France.
     Australia, Ireland, Malaysia, Israel, China, Korea, Italy, Spain and Thailand complete the list of countries which have economies more competitive than the Philippine economy.
     Bringing up the rear are Argentina, Colombia, the Czech Republic, Turkey, Portugal, Brazil, India, Hungary, Greece, Indonesia, Mexico, Poland, South Africa, Venezuela and Russia.

Z. Composition by sector

As a newly industrialized country, the Philippines are still an economy with a large agricultural sector; however, services have come to dominate the economy. Much of the industrial sector is based on processing and assembly operations in the manufacturing of electronics and other high-tech components, usually from foreign multinational corporations.
Filipinos who go aboard to work–-known as Overseas Filipino Workers or OFWs—are a significant contributor to the economy but are not reflected in the below sectoral discussion of the domestic economy. OFW remittances is also credited for the Philippines' recent economic growth resulting to investment status upgrades from credit ratings agencies such as the Fitch Group and Standard & Poor's.


The agriculture sector makes up 12% of the GDP and employs 33% of the workforce. The type of activity ranges from small subsistence farming and fishing to large commercial ventures with significant export focus, such as major multinational corporations like Dole Food Company and Del Monte Foods.
The Philippines is the world's largest producer of coconuts producing 19,500,000 tons in 2009. Coconut production in the Philippines is generally concentrated in medium-sized farms. By 1995, the production of coconut in the Philippines had experienced a 6.5% annual growth and later surpassed Indonesia in total output in the world.[36] The Philippines is also the world's largest producer of pineapples, producing 2,198 thousand metric tons in 2009.[37] Rice production in the Philippines is important to the food supply in the country and economy. The country is the 8th largest rice producer in the world, accounting for 2.8% of global rice production. However, the country is also the world's largest rice importer in 2010. Rice is the most important food crop, a staple food in most of the country. It is produced extensively in Luzon, the Western Visayas, Southern Mindanao, and Central Mindanao.
The Philippines is also one of the largest producer of sugar in the world according to Food and Agriculture Organization of the United Nations Statistics Division.[40] At least 17 provinces located in 8 regions of the country have grown sugarcane crops, of which Negros island accounts for half of the country’s total production. As of Crop Year 2012-2013, 29 mills are operational divided as follows: 6 mills in Luzon, 13 mills in Negros, 4 mills in Panay, 3 mills in Eastern Visayas and 3 mills in Mindanao.[41] A range from 360,000 to 390,000 hectares are devoted to sugarcane production. The largest sugarcane areas are found in Negros which accounts for 51% of sugarcane areas planted. This is followed by Mindanao which accounts for 20%; Luzon, 17%; Panay islands, 7% and Eastern Visayas, 4%.

Shipbuilding and repair

The Philippines is a major player in the global shipbuilding industry with shipyards in Subic, Cebu, General Santos City and Batangas. [It became the fourth largest shipbuilding nation in 2010. Subic-made cargo vessels are now exported to countries where shipping operators are based. South Korea's Hanjin started production in Subic in 2007 of the 20 ships ordered by German and Greek shipping operators. The country’s shipyards are now building ships like bulk carriers, container ships and big passenger ferries. General Santos' shipyard is mainly for ship repair and maintenance.
Being surrounded by waters, the country has abundant natural deep-sea ports ideal for development as production, construction and repair sites. On top of the current operating shipyards, two additional shipyards in Misamis Oriental and Cagayan province are being expanded to support future locators. It has a vast manpower pool of 60,000 certified welders that comprise the bulk of workers in shipbuilding.
In the ship repair sector, the Navotas complex in Metro Manila is expected to accommodate 96 vessels for repair.

The ABS used in Mercedes-Benz, BMW, and Volvo cars is made in the Philippines. Ford, Toyota, Mitsubishi, Nissan and Honda are the most prominent automakers manufacturing cars in the country. Kia and Suzuki produce small cars in the country. Isuzu also produces SUVs in the country. Honda and Suzuki produce motorcycles in the country. A 2003 Canadian market research report predicted that further investments in this sector were expected to grow in the following years. Toyota sells the most vehicles in the country. By 2011, China's Chery Automobile Company is going to build their assembly plant in Laguna that will serve and export cars to other countries in the region if monthly sales would reach 1,000 units. Automotive sales in the Philippines moved up from 165,056 units in 2011 to over 180,000 in 2012. Japan’s automotive manufacturing giant Mitsubishi Motors has announced that it will be expanding its operations in the Philippines.

Aerospace products in the Philippines are mainly for the export market and include manufacturing parts for aircraft built by both Boeing and Airbus. Moog is the biggest aerospace manufacturer with base in Baguio in the Cordillera region. The company produces aircraft actuators in their manufacturing facility.
In 2011, the total export output of aerospace products in the Philippines reached US $3 billion.

A Texas Instruments plant in Baguio has been operating for 20 years and is the largest producer of DSP chips in the world.[56] Texas Instruments' Baguio plant produces all the chips used in Nokia cell phones and 80% of chips used in Ericsson cell phones in the world.[57] Until 2005, Toshiba laptops were produced in Santa Rosa, Laguna. Presently the Philippine plant's focus is in the production of hard disk drives. Printer manufacturer Lexmark has a factory in Mactan in the Cebu region.

Mining and extraction
The country is rich with mineral and geothermal energy resources. In 2003, it produced 1931 MW of electricity from geothermal sources (27% of total electricity production), second only to the United States, and a recent discovery of natural gas reserves in the Malampaya oil fields off the island of Palawan is already being used to generate electricity in three gas-powered plants. Philippine gold, nickel, copper and chromite deposits are among the largest in the world. Other important minerals include silver, coal, gypsum, and sulphur. Significant deposits of clay, limestone, marble, silica, and phosphate exist.
About 60% of total mining production is accounted for by non-metallic minerals, which contributed substantially to the industry's steady output growth between 1993 and 1998, with the value of production growing 58%. In 1999, however, mineral production declined 16% to $793 million. Mineral exports have generally slowed since 1996. Led by copper cathodes, Philippine mineral exports amounted to $650 million in 2000, barely up from 1999 levels. Low metal prices, high production costs, lack of investment in infrastructure, and a challenge to the new mining law have contributed to the mining industry's overall decline.
The industry rebounded starting in late 2004 when the Supreme Court upheld the constitutionality of an important law permitting foreign ownership of Philippines mining companies. However, the DENR has yet to approve the revised Department Administrative Order (DAO) that will provide the Implementing Rules and Regulations of the Financial and Technical Assistance Agreement (FTAA), the specific part of the 1994 Mining Act that allows 100% foreign ownership of Philippines mines

Offshoring and outsourcing

Business process outsourcing in the Philippines and Call center industry in the Philippines
According to an IBM Global Location Trends Annual Report, as of December 2010 the Philippines have surpassed India as the world leader in business process outsourcing. The majority of the top ten BPO firms of the United States operate in the Philippines. Total jobs in the industry grew to 100,000 and total revenues were placed at $960 million for 2005. In 2012, BPO sector employment ballooned to over 700,000 people and is contributing to a growing middle class. BPO facilities are located mainly in Metro Manila and Cebu City although other regional areas such as Baguio, Bacolod, Cagayan de Oro, Clark Freeport Zone, Dagupan, Davao City, Legazpi, Dumaguete, Lipa, Iloilo City, and CamSur are now being promoted and developed for BPO operations.
Call centers began in the Philippines as plain providers of email response and managing services and is now a major source of employment. Call center services include customer relations, ranging from travel services, technical support, education, customer care, financial services, and online business to customer support, and online business to business support. Business process outsourcing (BPO) is regarded as one of the fastest growing industries in the world. The Philippines is also considered as location of choice due to its many outsourcing benefits such as less expensive operational and labor costs and high proficiency in spoken English and highly educated labor pool. In 2011, the business process outsourcing industry in the Philippines generated 700 thousand jobs[61] and some US$11 billion in revenue,[62] 24 percent higher than 2010. By 2016, the industry is projected to reach US$27.4 billion in revenue with employment generation to almost double at 1.3 million workers.
BPOs and the call center industry in general is also credited for the Philippines' recent economic growth resulting to investment status upgrades from credit ratings agencies such as Fitch and S&P.[34]

The Philippines’ economic freedom score is 58.2, making its economy the 97th freest in the 2013 Index. Its score is 1.1 points higher than last year, with notable improvements in investment freedom and freedom from corruption outweighing a decline in business freedom. The Philippines ranks 17th out of 41 countries in the Asia–Pacific region, and its overall score are slightly below the world average.

Weathering the ongoing global economic slowdown with a high degree of resilience, the Philippine economy has been on a steady path of economic expansion, growing at an average annual rate above 4.5 percent over the past five years. The government has pursued a series of legislative reforms to enhance the entrepreneurial environment and develop a stronger private sector to generate broader-based job growth.

Nevertheless, institutional challenges require deeper commitment to reform. Although the perceived level of corruption has declined in recent years, more effective anti-corruption measures need to be institutionalized. The inefficient judiciary remains susceptible to political interference and does not provide strong and transparent enforcement of the law, undermining prospects for long-term economic development.

AA. Contemporary problems of the Philippine Economy

Disparity in distribution of wealth
There is great unevenness in the distribution of wealth in the Philippines. A small percentage of the population is very wealthy while the majority of the people are very poor. The richest 10% of the population share over one third of the wealth while the poorest 10% share only 2.3% with 40% living below the poverty line. 
-Global Education

“Also, Latest classification of social classes in the Philippines: AB (1%); C (13%); D (52%); E (34%) So you can see that majority are poor (D&E) that means the wealth is mostly concentrated with those who belong to AB&C classes--only 14% of the population. The fact governments, including the Philippines’s, do not want to accept is that economic policy has been responsible for creating much of the current global wealth inequality. Oligarchies exist because government policy shelters their businesses, if not actually supporting closed industry sectors. Breaking the Philippine Airlines monopoly was successful in establishing new carriers in this country. Breaking the Philippine Long Distance Telephone Co.’s telecommunications monopoly was not so successful, but even here the failure may rest on government policy.
We know that the “rich” have always controlled more of the global and national wealth than the not-so-rich. However, this is not a social problem as long as both ends of the economic food chain are seeing their wealth growing at the same rate. We will not be overly upset if our rich neighbor can buy a new Mercedes every few years, as long as we can also get that new Toyota at the same time.
If the not-rich can grow wealthier at a faster rate than the rich that is good, too, as long as the existing wealth of the rich is not confiscated or stolen by the government to give away.”

Gross inefficiency

Gross negligence is a just cause for termination of employment by employer under Article 282 of the Labor Code of the Philippines.
Gross negligence has been defined as the want or absence of or failure to exercise slight care or diligence, or the entire absence of care. It evinces a thoughtless disregard of consequences without exerting any effort to avoid them.

Lack of dynamism in manufacturing sector
Various studies showed that total factor productivity (TFP) has not been a source of growth in the Philippines. It seems that factor accumulation, which is not a sustainable source of growth, has underpinned Philippine economic growth. Studies have also shown that the sustained growth of developed countries has ridden on the back of technological advances rather than on increasing use of factor inputs. Total factor productivity improvement is the only route to sustain economic growth in the long 

Persistent balance of payments deficit
MANILA - The Philippines' balance of payments (BOP) -- a summary of the country's economic transactions with the rest of the world -- registered a deficit in August, which means dollar expenditures exceeded receipts for the period.
Data from the Bangko Sentral ng Pilipinas (BSP) showed the BOP incurring a deficit of $318 million last month, a reversal of the $1.099 billion surplus in July. Year-on-year, the August deficit likewise was a deterioration from the $582 million surplus of the same month in 2012.
“This was due to financial market volatility arising from the uncertainty about US Fed taper,” BSP Governor Amando M. Tetangco Jr. said, referring to "hot money" outflows triggered by investor worries that the US Federal Reserve would wind down its stimulus for the world's largest economy.
The Philippines last month suffered from net outflows of foreign portfolio investments worth $441.85 million, a reversal of the net inflows of $387.39 million a year ago.
Last month's BOP deficit was the first in six months and indicated that the Philippines were vulnerable to portfolio outflows. The government has been pointing to the country's BOP surplus as proof of immunity from volatile capital flows. 

Recurrent huge public sector deficit
In principle, the public debt can be understood as the accumulated difference between what government spends and what it earns. It would be a great error, however, to focus only on the visible part of government spending and revenue, namely the national government’s budget deficit, and therefore attribute the causes of the problem entirely to that quarter. In fact, the two largest failures that have led to the present critical state of public finances are first, the failure of the tax structure and bureaucracy, and second, the inefficiency and lack of accountability on the part of public corporations.
Slow economic growth and rapid population growth

Various studies have suggested that population growth can be detrimental to economic development, or beneficial,
Depending on circumstances. More recently, the neutralist view that rapid population growth neither promotes nor impedes economic growth has held sway. The emergence of this view has coincided with a declining interest in family planning as an instrument of economic development. The latest evidence suggests, however, that the debate may have been framed too narrowly

Low real wages and little job opportunities
THE decline in the value of real wages has been touted by the World Bank in its latest Philippine Economic Update report as the reason for the increase in the number of underemployed Filipinos.
The final Labor Force Survey data from the National Statistics Office (NSO) showed that one in five Filipino workers were underemployed. This means some 7.16 million Filipinos are looking for better paying jobs representing an underemployment rate of 19 percent nationwide.
The NSO defines underemployed Filipinos as employed persons who expressed desire to have additional work hours, an additional job or a new job with longer working hours.
“The high share of food expenditure to total consumption—around 36 percent, the highest among comparator countries in the region—suggests that falling real wages, and not job mismatches, is the primary reason for the rise in underemployment,” the World Bank said.

Huge foreign and domestic debts
Philippine external debt is the amount of money owed by the Filipinos to foreign creditors such as Asian Development Bank (ADB) and the World Bank. This includes the principal amount borrowed from banks and institutions and the interest that had accumulated over the years. By the end of 2010, the total outstanding foreign debt of the country is US$ 60 billion, which accounts for 31.8% of the Gross Domestic Product (GDP) of that same year. The external debt portfolio consists mostly of medium to long-term loans, used to finance the economic activities and reforms of the government.[1]
Most of this debt can be traced back to the Marcos government, which had borrowed a big lump sum of money from the United States. Over time, more loans were acquired by every administration that passed and the interest from these loans grew and grew, adding to the total amount of money owed by the Philippines. Because of this high external debt, reaching an outstanding of US$ 57.6 billion in 2003, the Philippines experienced a fiscal crisis the following year. Now, measures are being taken by every administration faced with the same problem of reducing the external debt of the country.

Graft and corruption
Graft and corruption in the Philippines has long been a topic of concern for those interested in improving the conditions in the area. The corruption of government officials and the failure of governmental leaders to use their position of power wisely has led to ongoing financial hardship throughout the nation and restricted its economic growth and cultural development. Since its inception, the 
Philippines have been known as an area suffering from such severe corruption, with conditions run so afoul, that experts began describing it as a "kleptocracy." A kleptocracy is a government that suffers from kleptomania, or from which consistently and continuously robs its citizens because of corruption in its upper ranks. The origin of graft and corruption stems from colonial times, when colonial governments were organized for the purposes of plunder- an organizational scheme which persists today. Today it is common for governmental officials to embezzle tax dollars in order to accumulate personal wealth. In an independent evaluation of the countries graft and corruption practices by Transparency International 's Perception interest, the Philippines were rated 2.6 on a corruption scale of one to ten, where one was most corrupt and ten was least corrupt. Many activists in the Philippines urge fellow citizens to fight corruption and discontinue simple acquiescence with corrupt officials, saying that the people who are suffering have the responsibility to change the way things are done from a grass-roots level. Efforts to check graft and corruption have been underway for decades, yet the situation has not achieved a functional state. Innumerable laws defining plunder, establishing punishments for corrupt officials, creating independent third-party accountability agencies, in addition to increased international attention in recent years, have all contributed to some amendments of conduct and reformation of behavior. However the country still loses billions of dollars of tax revenue each year to transactions relating to graft and corruption. 
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Inefficient tax collection
Tax administration in the Philippines has traditionally been perceived as both corrupt and inefficient. The government tax collection agencies are considered “flagships of corruption.” In spite of the efforts of administrators to change this unsavory image, public perception has remained largely the same. Inefficiency and corruption have resulted in the non-collection of significant amounts of government revenue.

Colonial mentality
If the Philippines continue its dependence on the West, it runs the risk of contagion in terms of economic malaise, something our nation obviously cannot afford as a developing country. Fortunately, nothing could be further from the truth. Despite our affinity with all things American, the Philippines maintain closer economic ties (imports and exports) with its Asian brethren – China, Japan and Singapore in particular. Although the US accounts for a significant share of Philippine trade, the majority of our country’s international business is conducted within the Asian region. Once again, this is due in part to China being both the fastest growing economy and the world’s factory. This essay was published in the Manila Standard Today on 31 October 2011

Peso devaluation
      In the beginning, the Philippine Peso was equivalent to US$ 1.00.  According to official sources, the Philippines first experienced devaluation of its currency in 1934 when the United States was undergoing the worst economic crisis in history - the Great Depression.  Since our currency was pegged to the US dollar then, when the US government passed the Gold Reserve Act of 1934 which devalued the US dollar, the peso was consequently devalued at P 2.00 to US$ 1.00.
Then, on November 8, 1965, the International Monetary Fund officially reduced the gold contents of the peso by half, thereby depreciating its value to P 3.95 per dollar.  This action by the IMF was best described by Filipino economist Dr. Gregorio S. Miranda: "For quite some time, the Philippines was in a state of monetary crisis brought about, among others, by government overspending especially for purposes of political expediency or economic imperatives..  In order to save itself from bankruptcy, the government had to buoy itself up by seeking loans for loans about to mature by the end of 1969.  The government did, and in so doing, in effect, surrendered its monetary sovereignty to the International Monetary Fund from which it sought and got a third tranche, or a loan to cover a previous loan about to mature then.  The floating rate is thereby the product of the IMF's effort to restructure our foreign obligations premised on certain conditions".
Thus, on February 21, 1970, the Central Bank promulgated CB Circular No. 289 which allowed the peso to float and seek its true market value.  This created an increase in the prices of imported goods, and locally produced goods with imported components.  Eventually, by June 1983, the Central Bank devalued the peso to P 11.00 to a dollar.  After four months, on October 5, 1983, the peso was further devaluated with a rate of P 14.00 per US$ 1.00.  This later depreciation was decided upon, when the balance of payments deficit increased unexpectedly by $800 million by the third quarter of 1983, and the Central Bank could no longer afford to finance further deficits.
There was no clear cause as to the devaluation of the peso from P 14.00 to P 25.75 during the Aquino Administration, but the US stock market crisis in 1987 may hold the key to our understanding.  Called the Black Monday, a fall in stock market prices in the United States on October 29, 1987 created turbulences in the world capital markets.  It triggered a financial crisis around the world including London and Tokyo.  It was a world economic crisis.  The same thing happened in 1997-1998 when Asia experienced a financial crisis which shook and rocked prices of half the world's currencies, and brought the peso value down to P 28.00 per US dollar.
 The recent P 50.00 per dollar exchange rate is the effect of the maturing of our IMF and World Bank loans which had already ballooned to $ 66 Billion in 2004.
These are just the direct explanations as to why the value of the peso is gradually depreciating.  However, there are still some underlying factors that had brought about these events.

Military threats and coup d’ etat
As a sovereign nation, we really need to strengthen our military capabilities and join other nations in protecting the territorial rights of each and every nation. Our country’s strategic location — dubbed as the “gateway to Asia” due to its accessibility as the crossroads of international maritime lanes — makes us in fact a major player in all these disputes. The opening up of Subic Bay for the use of US Naval ships is a good strategic move.
But the real message for all these actions are clear: No country should be allowed to aggressively annex territories or claim them for its own without going through legal processes, and that all peace loving nations should never allow aggressors to undermine economic wellbeing and upset the geopolitical balance of the entire world.
The lessons of recent history have shown that a country’s act of aggression against another will ultimately be the start of its own undoing — something that Saddam Hussein’s Iraq learned quickly when he decided to invade Kuwait. Good will ultimately triumph over evil.

Unemployment and Underemployment
The labor force is composed of employed and unemployed working age individuals. The “unemployed” is defined as jobless people who are looking for work and excludes those who are not seeking job opportunities.
The NSO also reported that the underemployment rate stood at 19.2 percent in July, better than the 22.8 percent recorded in the same month last year. “Underemployed” is officially defined as people who desire additional work hours.
Balisacan acknowledged that the labor situation in the country, as reflected by the unemployment and underemployment rates, indicated that efforts at creating more jobs had to be sustained.
Labor Secretary Rosalinda Baldoz admitted that while the challenge of overcoming the unemployed Filipinos remained formidable, “we are optimistic about the prospects particularly about high-quality jobs under a regime of sustained economic growth despite a weak global economy.”

VII.Government’s Solutions to Economic Problems

There are obviously many ways to overcome economic problems in any specific country. The only things that hinder an economic boom are the people within the country. 
Government in the Philippines is known for its corrupt practices. Although some are not, its only of little percentage compared to those who insist on doing vile acts that tend to make our country’s downfall. 
Ofcourse the primary thing that may cause the Philippines’ rise is the total disintegration of corruption here. Once it is claimed, then wealth may follow.
Another thing to keep in mind is the rightful allocation of its funds. Right allocation may give the country a big boost towards a wealthier life. Road construction s here in the Philippines is quite poor compared to other prosperous countries. Health and education would also be grateful if their budgets would be risen to a higher level. 
Another to be considered is unemployment in the Philippines. It is quite high as of today and needed be resolved. If ever unemployment would be exterminated, then Philippines would be at an all time high morale to be one of the wealthiest counties in the world.
Lastly, the prosperity of the Philippines in terms of nature must be used to uplift our country. If we won’t make the most out of our resources then we would surely be downed and doomed for all eternity until these problems are solved.

VIII.Nationalist Alternatives

Filipino First policy
The Philippines was facing a most serious shortage of foreign exchange and long-term capital and that we needed to moderate the very strong tendencies among a large number of the Commissioners to “Filipinize the economy.” Opening the economy to more foreign capital, in my opinion then (and now),  was  the patriotic thing to do if we were to define the good of the nation in terms of  helping the teeming masses who were poor by generating employment and income for them through larger doses of foreign investments. I have explained this in another paper entitled “Economic Patriotism.” My success in this advocacy was quite limited because a large number of Commissioners were strongly influenced by decades of “Filipino First” and “nationalist industrialization” policies. This can be seen in the numerous restrictions against foreign investments still encrusted in the 1987 Constitution.

Industrialization of agriculture
Farming is in the midst of a major transformation—not only in technology and production practices, but also in size of business, resource (land) control and operation, business model and linkages with buyers and suppliers. The forces driving this transformation are many and widespread including increased quality, safety and traceability demands of processors and consumers of food products; implementation of information and process control technologies that facilitate biological manufacturing of crop and livestock products; adoption of technologies and business practices that exploit economies of size; increased use of leasing and other outsourcing strategies to foster growth and expand options for resource control; and wider adoption of contracting, strategic alliance and cooperative business models to facilitate more effective and efficient vertical coordination in the production/distribution value chain (Boehlje, et. al. (2006)). Both the livestock and grain sectors are changing from an industry dominated by family-based, small and modest size, relatively independent firms to one of generally larger businesses following an industrial business model that are more tightly aligned across the value chain.

Development of national steel industry
Steel constitutes a basic industry prerequisite in a 
Country’s pursuit of development and industrialization.    The  central role  of  the  industry  stems  from  its  linkages with numerous sectors, where its products serve asan essential input to countless uses, such as building and construction, automotive, shipbuilding and repair, electronics, packaging, etc. and its equally important contributions  to  employment  generation,  growth,  and  promotion  of  industrial activity, etc.   Therefore, ensuring a strong domestic steel and steel‐based industry is vital in 
Developing the competitive edge of a country in meeting the challenges of globalization.

Free education for all
The Education for All (EFA) is a global commitment which was first launched in Jomtien, Thailand in 1990 to bring the benefits of education to “every citizen in every society.” National governments, civil society groups, and development agencies like UNESCO and the World Bank are part of the commitment. 
As a response, the Philippines crafted and implemented the 10-year EFA Philippine Plan of Action covering 1991-2000. The EFA plan articulated the country’s national goals, objectives, policies and strategies, as well as the regional programs for implementation for the first decade of the EFA movement. Under the 1991-2000 Plan (EFA 1), the thrusts included:
Early Childhood Development
Expansion of self-sustaining community-based ECCD
Use of innovative approaches to parent education
Promotion of preparatory education
Accreditation of private pre-school programs and institutions
Differentiated approaches for special categories of children.
Strengthening of health, nutrition and other allied services.
Socio-cultural adaptation of curriculum, materials and approaches.
Single agency to coordinate programs for ECCD
Universalization of Quality Primary Education
Enhancing the holding power or student retention of schools
Using alternative teaching-learning delivery modes
Strengthening home-school partnership
Emphasis on higher-level thinking skills
Upgrading teacher competencies
Alternative Learning Systems
Eradication of illiteracy in selected areas
Promotion of continuing education and development
Implementation of integrated programs

Country side and regional development
Salceda, a noted economist and chairman of the Bicol Regional Development Council (RDC), said DBP must lend to tourism, housing, college financing, mass transport and countryside enterprises to maximize its role as a pillar of the country’s development. “Finance the countryside, otherwise delete development from your name,” Salceda dared DBP officials from Southern Tagalog, Mimaropa and Bicol who attended the business conference. DBP is a government finance arm established some 50 years ago purposely to help hasten the pace of national development.
Salceda said that “while the country’s environment, social-services infrastructure and micro, small and medium enterprises [MSMEs] remain valid, the trading character of the new economy results in less demand for industrial capital expenditure and higher net capital exports.”
He added that the “character” of the new economy caters to export of medium- priced services to high-value markets undergoing demographic transition and importing cheap finished goods from China and India.”

Moratorium and repudiation of debt
With fixed income instruments it is always possible that the borrower may default, dispute the validity of the contract or otherwise refuse to pay. If the borrower does repudiate the contract, the corresponding investors may lose their entire investment unless they are able to take recourse against the borrower. In the case of sovereign debt, however, there is often not any method of recourse against the borrowing nation. Disputing the validity of a contract and refusing to honor its terms. In investing, repudiation is most relevant in fixed income securities, particularly sovereign debt. Fixed income instruments are fundamentally contracts where the borrower lends a certain amount of principal in return for payments of interest and principal on a preset schedule. Repudiation occurs if the borrower refuses to honor this contract and stops making the agreed upon payments.

Intensive tax collection
The World Bank voiced out concerns for a unified policy to make the Philippine tax system “simpler” and “transparent” to attract business opportunities that would further raise and sustain the country’s economic performance.
Rogier van den Brink, World Bank Philippines lead economist, said that other foreign investors that would wish to put up businesses or other opportunities to expand in the country are restrained due to “many” and  “complicated” tax system of the country.
Van den Brink also told reporters that tax rates among businesses should also be looked at and be uniform as “other firms also feel that they have disadvantage compared to others because they don’t get the tax rates that other firms get.”
“Government should really start looking at the administration of the taxes first and assessing them…Basically making taxation simple, closing loopholes, [and] by looking at tax rates,” van den Brink said, referring to the nearing Congress discussion of the Philippine taxation sometime this year.
“We haven’t singled out a tax rates policy, but we think the first step is to make taxes system simpler and transparent,” the World Bank economist said.
The concern for the country’s taxation came to the assessment of the World Bank and economists that the Philippines’ 7-percent gross domestic product growth is not enough for the country to grow in an inclusive manner.
According to the World Bank, the Philippines should maintain or even surpass the 7-percent growth to be able to create more jobs and make growth inclusive. The financial institution also noted that the country would need “more resources” other than government funds by intensive, simpler and transparent tax collection and system, as well as foreign direct investment flows in the country.
On Monday, the World Bank raised their Philippine GDP projections: 7-percent GDP growth for 2013 and 6.7 percent for 2014.
The increase in GDP trajectory was driven by the increased investment in infrastructure, domestic consumption, healthy banking system and strong macroeconomic fundamentals of the country which make the Philippines resistant to external shocks of established markets worldwide. 

Political will to stop graft and corruption

MANILA, Philippines—The Philippines is still perceived as one of the most corrupt countries in the world, getting a score of 34 on a scale of 1 to 100 with 100 being very clean, according to the latest Corruption Perceptions Index of Transparency International.

“Governments need to integrate anti-corruption actions into all public decision-making. Priorities include better rules on lobbying and political financing, making public spending and contracting more transparent, and making public bodies more accountable to people,” 
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Scrap Protectionism policy
The Bangko Sentral ng Pilipinas is concerned about the growing protectionism in many advanced economies, particularly on employment in the services sector, describing it as a threat on investments in the country’s business process outsourcing sector.
Such a stance may reduce overseas employment opportunities for Filipinos, and affect the country’s remittances.
According to BSP Deputy Governor Diwa Guinigundo, governments of some advanced economies, and a few from the Middle East, have been discouraging employers in their countries from outsourcing jobs or from hiring migrant workers.
He said the Philippines, as well as other developing economies affected by protectionist policies on the services sector, should speak up against such policies.
The Philippines has submitted several papers on protectionist policies in the services sector to international bodies, including the Association of Southeast Asian Nations (Asean), Guinigundo said.
“The wave of protectionism seems to be rising,” Guinigundo told reporters. “This is going to affect countries like the Philippines.”

If protectionist policies in the services sector intensify, Guinigundo said, this will significantly affect growth of the Philippines and other developing or emerging economies.
In the case of the Philippines, a significant portion of the estimated $1 billion to $2 billion in foreign direct investments every year is accounted for by investments in the BPO sector.
Also, remittances from Filipinos based abroad, which amounted to about $20 billion last year, helped fuel consumption of at least 10 percent of households in the country.
The Philippines is the fourth biggest recipient of remittances in the world, next to China, India and Mexico.
Guinigundo said protectionist policies would not only harm developing countries, but also employers from those countries that have adopted these policies.
Some firms in the United States, for instance, are able to withstand its sluggish economic performance because they are able to reduce operation costs through outsourcing. Labor costs in the Philippines and other developing countries are much lower than in the advanced economies, he noted.
The adoption of such policies is not the way to move the global economy forward, he added.

Regulation on commodities’ prices
The Department of Trade and Industry intensifies its price monitoring activities in all wet markets, supermarkets, and hardware stores of the country.  Undersecretary Maglaya assures the public that the increase in prices of petroleum products has minimal effects on the cost of basic and prime goods. The Department of Trade and Industry warned traders not to overprice basic commodities or they will be summoned if caught selling goods higher than the suggested retail price. Also in the photo is DTI-National Capital Region Provincial Director Ma. Gracia R. Soller. (DTI-PRO)

Strict adherence on provisions about natural resources
The exploitation of developing countries that the critics of MNCs point to includes not only indigenous people but also the natural resources of the developing country. The extraction of resources causes economic loss through environmental degradation such as deforestation, soil erosion and desertification, and the pollution of water supplies. This leads to infertile soil needed for food production; the loss of homeland for indigenous people as forests are over logged or flooded; wood used for fuel disappears with deforestation; rivers and wells are polluted with toxic wastes and these same rivers and wells are clogged with the topsoil no longer held down by the trees felled.

Genuine land reform
Land reform in the Philippines has long been a contentious issue rooted in the Philippines's Spanish Colonial Period. Some efforts began during the American Colonial Period with renewed efforts during the Commonwealth, following independence, during Martial Law and especially following the People Power Revolution in 1986. The current law, the Comprehensive Agrarian Reform Program, was passed following the revolution and recently extended until 2014.

Fool proof laws against abuses of MNC’s and TNC’s and use its costs and benefits
It is argued the social welfare of a developing country is the responsibility of the government itself. MNCs by nature undermine or weaken governmental regulations through attempts to lower national investment restrictions, for less stringent international regulations, lower environment, labor, and consumer standards and the abolition of unitary tax policies.

More trade and commercial relations with Asian neighbor countries
  Investing in the Philippines gives you a distinct advantage. In this era of stiff global competition, getting ahead means cutting down on costs, obtaining superior service, and earning good returns. The Philippines gives you this edge. These are the operative factors:
     1. Strategic location. The Philippine archipelago is located at the southern rim of the Asia mainland. It lies at the crossroads of eastern and western business, trade and culture.
     2. Highly educated professionals and workers. Filipinos are among the best educated and most easily trainable people in Asia. They are universally conversant in English and are capable of performing the simplest to the most complicated tasks with ease.
     3. A democratic government. The country's leaders are committed to free enterprise and are highly receptive to foreign participation in the country's development.
     4. Growing markets. This land of over 70 million people is a large and demanding local market. The export market - practically the rest of the world - remains insufficiently served. Both offer vast opportunities for your productive undertakings.
     5. Rich natural resources. Still vast and not fully exploited, the country's wealth is being carefully managed.
     6. Liberal policies and procedures. Business regulations are among the most flexible and receptive to the entry of foreign investments. The Philippines allows 100% foreign ownership of many enterprises and assures full repatriation of earnings and capital.
     7. Expanding infrastructure. Programs to rapidly expand transportation, communication, and other support facilities are underway.
     8. World-class living conditions. You can obtain the best living areas, business facilities, leisure and recreational amenities, and other requirements, at the most reasonable costs.

Part Two

IX. Economic globalization in the Philippines

Economic globalization is the increasing economic interdependence of national economies across the world through a rapid increase in cross-border movement of goods, service, technology, and capital. Whereas globalization is centered around the rapid development of science and technology and increasing cross-border division of labor,economic globalization is propelled by the rapid growing significance of information in all types of productive activities and marketization, and the advance of science and technologies. Depending on the paradigm, economic globalization can be viewed as either a positive or a negative phenomenon.

Globalization has 3 elements;
1. Privatization 
2. Deregulation
3. Liberalization

-Privatization is the process where all government own corporations are privatized, and maintained by the private sector. We cannot deny that when a business is in the hands of private institution it is oriented for profit. These GOCC's are basically State's inherent corporations because their services are for the public consumption like the electricity, water, transportation, telecommunications, and the like. They are essentials for the well being of the State.

-Second element that is deregulation. To deregulate meaning the government has no legislative intervention over the certain corporation which main industry is for public consumption, as long as the company submitted reason of the their actions.

Best example of this is the Philippine Oil Deregulation Law or Republic Act (R.A.) 8479. Before, oil price is under controlled of the government by means of its quasi-agency, Oil Price Stability Fund (OPSF). This quasi-agency hold the price of oil. Logically the fair market value. It is possible because when the price of oil in the world market is low the OPSF remain its price to the local market as it was brought high, the remaining stocks were sold higher than the world market. The government gained huge profit from this scheme. And when the price of oil in the world market go up the government reimburse it from the profit they gained when it was low. So it's a circle as long as the price of oil is stable and affordable.
-Lastly, the liberalization meaning to liberalize. This process is done by means of amending or worst abolish the laws regarding restriction or limitation of import products, for example the tariff and quota. When a certain economy is liberalized, product of developed countries basically can enter to the developing and least develop nation. It's obvious that these products are surplus from their market, simply outsource the surplus.
In the developed countries like the United States there are also economic struggle, but not in negative sense. The problem is the surplus products and surplus capital. Hence, US government today is more than willing to do tax reimbursement or refund: to circulate the market.


A. Definition

The state or condition of having little or no money, goods, or means of support; condition of beingpoor. Synonyms: privation, neediness, destitution, indigence, pauperism, penury. Antonyms: riches, wealth, plenty.deficiency of necessary or desirable ingredients, qualities, etc.: poverty of the soil. Synonyms: thinness, poorness, insufficiency.
Scantiness; insufficiency: Their efforts to stamp out disease were hampered by a poverty of medicalsupplies. Synonyms: meagerness, inadequacy, sparseness, shortage, paucity, dearth. Antonyms: abundance, surfeit, sufficiency, bounty, glut.

i. Synonym Study 
1. POVERTY, DESTITUTION, NEED, WANT imply a state of privation and lack of necessities. POVERTY denotesserious lack of the means for proper existence: living in a state of extreme poverty. DESTITUTION,  a somewhatmore literary word, implies a state of having absolutely none of the necessities of life: widespreaddestitution in countries at war. NEED emphasizes the fact that help or relief is necessary: Most of the peoplewere in great need. WANT emphasizes privations, especially lack of food and clothing: Families were sufferingfrom want.

Poverty is the state of one who lacks a certain amount of material possessions or money.[1] Absolute poverty or destitution refers to the deprivation of basic, which commonly includes food, water, sanitation, clothing, shelter, health care and education. Relative poverty is defined contextually as economic inequality in the location or society in which people live.
For much of history, poverty was considered largely unavoidable as traditional modes of production were insufficient to give an entire population a comfortable standard of living. After the Industrial revolution, mass production in factories made production goods increasingly more inexpensive and accessible. Of more importance is the modernization of agriculture, such as fertilizers, to provide enough yields to feed the population.[5] The supply of basic needs can be restricted by constraints on government services such as corruption, tax avoidance, debt and loan conditionalities and by the brain drain of health care and educational professionals. Strategies of increasing income to make basic needs more affordable typically include welfare, economic freedoms, and providing financial services.
Poverty reduction is a major goal and issue for many international organizations such as the United Nations and the World Bank. The World Bank estimated 1.29 billion people were living in absolute poverty in 2008. Of these, about 400 million people in absolute poverty lived in India and 173 million people in China. In terms of percentage of regional populations, sub-Saharan Africa at 47% had the highest incidence rate of absolute poverty in 2008. Between 1990 and 2010, about 663 million people moved above the absolute poverty level. Still, extreme poverty is a global challenge; it is observed in all parts of the world, including developed economies.

The word poverty comes from old French poverté (Modern French: pauvreté), from Latin paupertās, from pauper (poor).[8]
The English word "poverty" via Anglo-Norman povert. There are several definitions of poverty depending on the context of the situation it is placed in, and the views of the person giving the definition.
United Nations: Fundamentally, poverty is the inability of getting choices and opportunities, a violation of human dignity. It means lack of basic capacity to participate effectively in society. It means not having enough to feed and clothe a family, not having a school or clinic to go to; not having the land on which to grow one’s food or a job to earn one’s living, not having access to credit. It means insecurity, powerlessness and exclusion of individuals, households and communities. It means susceptibility to violence, and it often implies living in marginal or fragile environments, without access to clean water or sanitation.[9]
World Bank: Poverty is pronounced deprivation in well-being, and comprises many dimensions. It includes low incomes and the inability to acquire the basic goods and services necessary for survival with dignity. Poverty also encompasses low levels of health and education, poor access to clean water and sanitation, inadequate physical security, lack of voice, and insufficient capacity and opportunity to better one’s life. [10]
Copenhagen Declaration: Absolute poverty is a condition characterized by severe deprivation of basic human needs, including food, safe drinking water, sanitation facilities, health, shelter, education and information. It depends not only on income but also on access to social services.[11] The term 'absolute poverty' is sometimes synonymously referred to as 'extreme poverty.'[12]
Poverty is usually measured as either absolute or relative (the latter being actually an index of income inequality).

C.2 types of Poverty

i. Absolute poverty

Absolute poverty refers to a set standard which is consistent over time and between countries. 
Relative poverty views poverty as socially defined and dependent on social context, hence relative poverty is a measure of income inequality.

BB. Effects

The effects of poverty may also be causes, as listed above, thus creating a "poverty cycle" operating across multiple levels, individual, local, national and global.
One third of deaths – some 18 million people a year or 50,000 per day – are due to poverty-related causes: in total 270 million people, most of them women and children, have died as a result of poverty since 1990
Rises in the costs of living making poor people less able to afford items. Poor people spend a greater portion of their budgets on food than richer people. As a result, poor households and those near the poverty threshold can be particularly vulnerable to increases in food prices. For example, in late 2007 increases in the price of grains led to food riots in some countries.[
Poverty increases the risk of homelessness.[99] Slum-dwellers, who make up a third of the world's urban population, live in poverty no better, if not worse, than rural people, who are the traditional focus of the poverty in the developing world, according to a report by the United Nations.
Water utility subsidies tend to subsidize water consumption by those connected to the network, which typically includes the richer segment of the population. 
According to experts, many women become victims of trafficking, the most common form of which is prostitution, as a means of survival and economic desperation.[

CC. Poverty reduction
Increasing the supply of basic needs
Removing constraints on government services
Reversing brain drain
Controlling overpopulation
Increasing personal income
Income grants
Economic freedoms
Financial services
Source: Wikipedia

DD. Poverty at Philippines

Poverty remains the most critical social problem that needs to be addressed. Philippines' poverty line marks a per capita income of 16,841 pesos a year.[1] According to the data from the National Statistical Coordination Board, more than one-quarter (27.9%) of the population fell below the poverty line the first semester of 2012, an approximate 1 per cent increase since 2009.[2] This figure is a much lower figure as compared to the 33.1% in 1991.[3] The decline has been slow and uneven, much slower than neighboring countries who experienced broadly similar numbers in the 1980s,[4] such as People's Republic of China (PRC), Thailand, Indonesia (where the poverty level lies at 8.5%) or Vietnam (13.5%). This shows that the incidence of poverty has remained significantly high as compared to other countries for almost a decade. The unevenness of the decline has been attributed to a large range of income brackets across regions and sectors, and unmanaged population growth. The Philippines poverty rate is roughly the same level as Haiti. 
The government planned to eradicate poverty as stated in the Philippines Development Plan 2011-2016 (PDP). The PDP for those six years are an annual economic growth of 7%-8% and the achievement of the Millennium Development Goals (MDGs). Under the MDGs, Philippines committed itself to halving extreme poverty from a 33.1% in 1991 to 16.6% by 2015.[4] Wikipedia

EE. Causes of Poverty

The main causes of poverty in the country include the following:

low to moderate economic growth for the past 40 years;
low growth elasticity of poverty reduction;
weakness in employment generation and the quality of jobs generated;
failure to fully develop the agriculture sector;
high inflation during crisis periods;
high levels of population growth;
high and persistent levels of inequality (incomes and assets), which dampen the positive impacts of economic expansion; and
Recurrent shocks and exposure to risks such as economic crisis, conflicts, natural disasters, and “environmental poverty.”

FF. Key Findings

Further research on chronic poverty is needed.
The report comprehensively analyzes the causes of poverty and recommends ways to accelerate poverty reduction and achieve more inclusive growth. In the immediate and short term there is a need to enhance government’s poverty reduction strategy and involve key sectors for a collective and coordinated response to the problem. In the medium and long term the government should continue to pursue key economic reforms for sustained and inclusive growth.

XI. How Pork Barrel Issue Affected the Philippine Economy?

Basically, this event had turned our country’s foul side up. This showed how vile and ugly our country’s government was. Pork barrel or PDAF truly gives significant and helpful effects, although it depends on how it was used. 
A senator’s pork barrel may be used to uplift education in the Philippines, one of its major problems. Yet the corrupt members of the government insists on using it for their own personal necessities. This makes the Philippines a worst place to live at.
Although some of it were used improperly, some were fruitful and productive. They laid some of the allocated money to them to health and education, partially. Scholars are prospered also by these funds for their education.
Indeed there are many of us Filipinos who pushes pork barrel to its abolition. But to think of it, it’s quite helpful in a way. It just have to be placed under the rights hands in order for it to be laid to rightful projects. Once it is done, then many national problem would be resolved.

Yes people who pay taxes are of the mostly affected in this issue. For they are the ones who tired themselves out to gain money yet the taxes they pay for doesn’t seem to go where they expect it to go.

To sum it all up, Philippines wouldn’t be hurt if the pork barrel system would be terminated, nor would it be hurt if the said system would still flourish. The only thing we must keep within us is that we must choose the rightful leader who would certainly take our country to the top.

XII. Labor Code of the Philippines

A. Overview

Labor Code of the Philippines stands as the law governing employment practices and labor relations in the Philippines. It was enacted on Labor Day of 1974 by President Ferdinand Marcos, in the exercise of his then extant legislative powers. The Labor Code prescribes the rules for hiring and termination of private employees; the conditions of work including maximum work hours and overtime; employee benefits such as holiday pay, thirteenth month pay and retirement pay; and the guidelines in the organization and membership in labor unions as well as in collective bargaining.

The Labor Code contains several provisions which are beneficial to labor. It prohibits termination from employment of Private employees except for just or authorized causes as prescribed in Article 282 to 284 of the Code. The right to trade union is expressly recognized, as is the right of a union to insist on a closed shop. Strikes are also authorized for as long as they comply with the strict requirements under the Code, and workers who organize or participate in illegal strikes may be subject to dismissal. Moreover, Philippine jurisprudence has long applied a rule that any doubts in the interpretation of law, especially the Labor Code, will be resolved in favor of labor and against management.

Labor Code of the Philippines
Here are some provisions given by the law:
1. “Regular” employment 
Article 280 of the Labor Code of the Philippines (LCP) describes different types of employment 
Namely: regular, casual, project or seasonal. These distinctions are important because some rights 
And benefits attach only to regular employees, especially the right to security of tenure. 
The most common type of employment now is the fixed term employment or contractual. Most 
Companies prefer this to save labor costs because if they hire regular employees, they cannot 
Terminate their employment expediently without valid and legal cause and the payment of 
Separation pay and other benefits. 
So if you do not intend to consider the person hired as a regular employee, you must inform him on 
The day he starts to work – that is, whether he is a casual, seasonal, project or a fixed term 
Employee. If not, then he will be considered regular even if the employment contract says 
Otherwise. Also in some instances, even if it is expressly stipulated to be a non-regular type, if the 
Nature of the work is usually necessary and desirable to your business, and then he will still be 
Considered regular. 
2. Probationary employment
The period should not exceed six (6) months from the date the employee started working, unless it 
Is covered by an apprenticeship agreement stipulating a longer period. (Article 281) A probationary 
Employee may be dismissed for a just cause or when he fails to qualify as a regular employee in 
Accordance with reasonable standards made known to him at the time he is hired. If he is not 
Informed of these reasonable criteria, he will be considered a regular employee. So, employers 
Should watch out for this requirement. Also, a probationary employee may become regular if he is 
Allowed to work after the probationary period. 3. Minimum employable age
The minimum employable age in the Philippines is fifteen years, with the exception of some 
Instances when a child below 15 may be hired after complying with certain conditions. (See RA 
7610, Sec 12, as amended by RA 7658 and RA 9231; see also DOLE Department Order No. 65-04). 
4. Prohibition against stipulation of marriage 
You cannot require as a condition of employment or continuation of employment that a woman 
Employee shall not get married. It is also unlawful to stipulate expressly or tacitly that upon getting 
Married, a woman employee shall be deemed separated, or to actually dismiss, discharge, 
Discriminate or otherwise prejudice a woman employee merely by reason of her marriage. (Article 
136, LCP)
5. Anti-sexual Harassment law 
An employer commits sexual harassment when a sexual favor is made as a condition for hiring and 
For continued employment or reemployment. (Section 3, RA 7877) 
6. Minimum wage and other benefits
You must comply with the minimum wage rates prescribed by your respective Regional Tripartite 
Wages and Productivity Boards authorized by the state to fix the minimum wage. Note that there 
Are civil and criminal violations for non-compliance with these wage orders? 
The employer must also pay the employees the compensation and other benefits to which they are 
entitled under the Labor Code such as overtime pay, night shift pay, holiday pay, etc. as well as 
Those provided under special laws such as 13th month pay. 
7. Form, payee, time and place of payment of wages 
Form. You should, as a rule, pay in cash. Payment by promissory notes, vouchers, coupons, tokens, 
Tickets or chits are prohibited. This is illegal even if both the employee and employer agreed. You 
May, however, pay by check or money order but you must comply with guidelines prescribed by the 
Department of Labor. (See Article 102, LCP; also Sec 2, Rule VIII, Book III, IRR)
Time. Wages should be paid at least once every 2 weeks or twice a month at intervals not 
Exceeding 16 days. The only exception is when there is force majeure or circumstances beyond the 
Employer’s control, but he should pay immediately after such force majeure or circumstances have 
Ceased. (See Article 103, LCP) 
Place. As a rule, the employer should pay at or near the place of work, except in cases of 
Deteriorating peace and order situation and emergencies or calamities which makes payment in the 
Workplace impossible. But the employer is required to provide transportation and the time for 
Traveling should be considered as compensable hours worked. (See Article 104, LCP; also Sec 4a, 
Rule VIII, Book III, IRR)
Payment may also be made through banks or through an ATM facility, but guidelines provided by 
The Department of Labor must be complied with (See Article 104, LCP; also Sec 4, Rule VIII, Book 
III and Labor Advisory on Payment of Salaries through ATM) 
 8. Other prohibited acts or practices
Gender discrimination 
“It shall be unlawful for any employer to discriminate against any woman employee with respect to 
Terms and conditions of employment solely on account of her sex.” (Article 135, LCP)
Compulsory Patronage
You cannot compel employees to purchase your goods or services or to patronize any store or 
Products of any other person. (Article 112, LCP). It is unlawful for the employer to interfere with 
The employee’s freedom to spend his wages. Similar acts are punished criminally under Article 288 
Of the Revised Penal Code of the Philippines. 
No wage deductions
It is a common practice in the Philippines that creditors demand that the debtor-employee’s wage be 
Paid directly to them. Some employers allow deductions from the wage or payment of the entire 
Amount to these creditors not knowing that this is illegal. Under Article 105 of our Labor Code, 
Payment should be made directly to the employee and under Article 113, no deductions from the 
Wages are allowed. 
There are however exceptions to these provisions: 
1. When the employee authorized his employer in writing to pay his wages to a member of his 
2. Payment to another person of any part of the employee’s wages is authorized by existing law 
Such as that under the SSS law where remittance is a duty of the employer, 
3. Payment for insurance premiums of the employee 
4 payment for union dues where the right to check-off has been recognized by the employer in 
Accordance with a collective agreement or authorized in writing by the individual employees 
Concerned; or 
5. In case of death of the employee, payment may be made to his heirs 
6. Deductions for facilities – These are goods or services provided by the employer to the employee 
For the benefit of the employee and his family. 
7. Deductions for loss or damages – This is allowed if the practice is recognized in the industry 
(Such as deductions for car washing expenses for taxis) or necessary or desirable to the business. 
But the employer must prove clearly that it is indeed the employee who is responsible for the loss or 
9. Unfair Labor Practices 
These are acts which violate the constitutional right workers to organize and are considered inimical 
To the legitimate interests of both the worker and the employer, especially their right to bargain 
Collectively and deal with each other peacefully. Unfair labor practices may be committed by 
Employers (Art 248, LCP) and by labor organizations or unions (Art 249, LCP). 10. Employee’s right to self-organization and the right to strike
These rights are expressly provided by the 1987 Constitution and the Labor Code. Employers 
Should not interfere with or deny their employees their right to form organizations for their mutual 
Aid or protection and to form unions for the purpose of negotiating the terms and conditions of 
Employment with their employer. Employees also have the right to strike but this may only be 
Exercised after complying with guidelines provided by the DOLE. Otherwise, the strike may be 
Considered illegal and may be a cause for terminating their employment. 
11. Valid termination of employment
If you want to dismiss an employee from his job, it should be for a cause provided by law and you 
Must comply with procedural requirements. Just causes which are voluntary acts of the employee 
Are enumerated in Article 282 (LCP) while authorized causes, which are attributed to the employer, 
Are provided by Article 283 and 284. 
For a valid dismissal, substantive (Art. 282, 283, 284) and procedural requirements (Article 277b; 
Also Department Order No. 9, June 21, 1997) must be complied with. 
Just causes
a. Serious misconduct or willful disobedience by the employee of the lawful orders of his employer 
Or representative in connection with his work; 
b. Gross and habitual neglect by the employee of his duties; 
c. Fraud or willful breach by the employee of the trust reposed in him by his employer or duly 
Authorized representative; 
d. Commission of a crime or offense by the employee against the person of his employer or any 
Immediate member of his family or his duly authorized representatives; and 
e. Analogous or similar causes 
Procedure for termination due to just causes: (Twin Notice Rule)
(1) Serve the first written notice on the employees containing the specific ground/s for termination 
And a directive that they are given the opportunity to submit their written explanation within a 
Reasonable period. 
(2) After serving the first notice, the employers should schedule and conduct a hearing or 
Conference wherein the employees will be given the opportunity to: 
(a) Explain and clarify their defenses to the charge against them; 
(b) Present evidence in support of their defenses; and 
(c) Rebut the evidence presented against them by the management. 
 During the hearing or conference, the employees are given the chance to defend themselves 
Personally, with the assistance of a representative or counsel of their choice. Moreover, this 
Conference or hearing could be used by the parties as an opportunity to come to an amicable 
Note however, that in a recent case decide by the Supreme Court, a hearing or conference is not 
Mandatory. It is enough that the employee is given an opportunity to be heard, which could be 
Through submission of position papers or other evidence. 
(3)After determining that termination of employment is justified, the employers shall serve the 
Employees had written notices of termination indicating that: 
(a) All circumstances involving the charge against the employees have been considered; and 
(b) Grounds have been established to justify the severance of their employment 
Authorized causes
1. Installation of labor saving device 
2. Redundancy 
3. Retrenchment to prevent losses 
4. Closure due to serious business losses 
5. Disease 
Procedure for termination due to authorized causes: 
(1) Serve a written notice upon the worker at least one month or 30 days before the intended date of 
The termination. This is to inform the employee of the impending loss of his employment so he 
Could at the earliest opportunity look for prospective jobs. 
(2) Serve a written notice on the DOLE at least one month or 30 days before the intended date of 
The termination. This is in order for the DOLE to: 
a. Determine the validity of the dismissal; and 
b. To intervene for a possible conciliation or mediation 
(3) To give separation pay such as when termination is due to redundancy, but not when the 
Employer is suffering from severe financial losses. 
If you do not comply with procedures, even you have a valid cause for terminating the employment; 
You may still be required to pay damages: Fifty thousand pesos (P50, 000) if the cause was 
Attributed to you as employer or thirty thousand pesos (P30, 000) if the cause was attributed to the 

XIV. The Philippine Stock Exchange

E. Overview

The Philippine Stock Exchange (Filipino: Pamilihang Sapi ng Pilipinas) (PSE: PSE) is the national stock exchange of the Philippines, one of the oldest stock exchanges in Southeast Asia, having been in continuous operation since its inception in 1927. It currently maintains two trading floors, one at its headquarters at the PSE Plaza Ayala Triangle, Ayala Tower One in Makati City's Central Business District, and one at the Philippine Stock Exchange Centre (Tektite Towers), Ortigas Center in Pasig City. The PSE is composed of a 15-man Board of Directors, chaired by José T. Pardo.
The main index for PSE is the PSE Composite Index or PSEi, which is composed of thirty (30) listed companies. The selection of companies in the PSEi is based on a specific set of criteria. There are also six additional sector-based indices.
Trading on the PSE trading starts at 9:30 am PHT and ends at 12:00 pm, pauses for a 1 hour 30 minute break, and resumes trading from 1:30 pm to a 3:30 pm session closure.


The Philippine Stock Exchange was formed from the country’s two former stock exchanges, the Manila Stock Exchange (MSE), established on August 8, 1927, and the Makati Stock Exchange (MkSE), which was established on May 27, 1963.
Although both the MSE and the MkSE traded the same stocks of the same companies, the bourses were separate stock exchanges for nearly 30 years until December 23, 1992, when both exchanges were unified to become the present-day Philippine Stock Exchange.
In June 1998, the Securities and Exchange Commission (SEC) granted the PSE a "Self-Regulatory Organization" (SRO) status, which meant that the bourse can implement its own rules and establish penalties on erring trading participants (TPs) and listed companies.
In 2001, one year after the enactment of the Securities Regulation Code, the PSE was transformed from a non-profit, non-stock, member-governed organization into a shareholder-based, revenue-earning corporation headed by a president and a board of directors. The PSE eventually listed its own shares on the exchange (traded under the ticker symbol PSE) by way of introduction on December 15, 2003.

On January 4, 1993, the former Manila Stock Exchange started the computerization of its operations using the Stratus Trading System (STS) with a company called Equicom. On June 15, the former Makati Stock Exchange adopted the MakTrade trading system. Both systems were linked on March 25, 1994 to produce a One Price-One Market exchange. Two years later, on November 13, 1995, the implementation of the Unified Trading System (UTS) allowed the use of a single-order-book system on a MakTrade software where all the orders are posted and matched in one computer.
In October 2004, the Securities Clearing Corporation of the Philippines (SCCP), a clearing and settlement agency for depository eligible trades, became a wholly owned subsidiary of the PSE. The SCCP acts as the settlement coordinator and risk manager for broker transactions as well as administrator of the trade guaranty fund.
In 2005, the PSE adopted an online daily disclosure system (ODiSy) to improve the transparency of listed companies and ensure full, fair, timely and accurate disclosure of material information from all listed companies. The ODiSy provides a 24/7 online system access for the submission of all types of disclosures.
On July 26, 2010, the PSE launched its new trading system, PSEtrade, which replaced the MakTrade system. The system was acquired from the New York Stock Exchange.

D.Record highs
On March 2, 2012, the PSE Composite hits 5,000 mark the highest record close. However, in December 12, 2012, almost ten months after, it neared the 5,800 mark closing in 6,000 near the end of the year.
On January 7, 2013, the PSE Composite gets to all time record at 6,000 marks. In March it again broke another record by ending the trading day at 6,847.47 after Fitch Group upgraded the Philippines for the first time to investment grade status.[2] On May 10, 2013, it achieved its 29th record close for the year closing at 7,262.38, surpassing the previous record of 7,215.35 on May 3.[3]
A stock market or exchange is the center of a network of transactions where securities buyers meet sellers at a certain price. A stock market or exchange is not necessary a physical facility and with the advancement of information technology are increasingly rare those traders that exchange their stocks in the floor of a major stock exchange. The main stock market in the United States is New York Stock Exchange (NYSE). In Europe, examples of stock exchanges include the London Stock Exchange, the Paris Bourse, and the Deutsche Bourse. In Asia, the main stock exchanges include the Tokyo Stock Exchange, the Hong Kong Stock Exchange, and the Bombay Stock Exchange. In Latin America, there are such exchanges as the BOVESPA in Brazil and the MERVAL in Argentina.

The PSE Composite Index, commonly known previously as the PHISIX and presently as the PSEi, is the main stock market index of the Philippine Stock Exchange.
The PSEi is the most watched index on the PSE and is also home to most major Philippine companies listed on the PSE. The PSEi is also the PSE's only broad-base index. It is also one of the indicators on the general state of the Philippine economy.
The PSEi was one of the indices kept intact during the reclassification of the PSE's indices on January 2, 2006. Other similarly-kept indices included the PSE All Shares Index and the PSE Property Index.

Definition of Terms
Absolute advantage - The ability to produce something with fewer resources than other producers would use to produce the same thing  
Alternatives - Options among which to make choices.  
Balance of trade - The part of a nation's balance of payments that deals with merchandise (or visible) imports or exports.  
Bank, commercial - A financial institution accepts checking deposits, holds savings, sells traveler's checks and performs other financial services.  
Barter - The direct trading of goods and services without the use of money.  
Benefit - The gain received from voluntary exchange.  
Bond - A certificate reflecting a firm's promise to pay the holder a periodic interest payment until the date of maturity and a fixed sum of money on the designated maturity date.  
Business (firm) - Private profit-seeking organizations that use resources to produce goods and services.  
Capital - All buildings, equipment and human skills used to produce goods and services.  
Capital resources - Goods made by people and used to produce other goods and services. Examples include buildings, equipment, and machinery.  
Choice - What someone must make when faced with two or more alternative uses of a resource (also called economic choice).  
Circular flow of goods and services (or Circular flow of economic activity) - A model of an economy showing the interactions between households and business firms as they exchange goods and services and resources in markets.  
Collateral - Anything of value that is acceptable to a lender to guarantee repayment of a loan.  
Command economy - A mode of economic organization in which the key economic functions--what, how, and for whom--are principally determined by government directive.  Sometimes called a "centrally planned economy."  
Comparative advantage - The principle of comparative advantage states that a country will specialize in the production of goods in which it has a lower opportunity cost than other countries.  
Competition - The effort of two or more parties acting independently to secure the business of a third party by offering the most favorable terms.  
Complements - Products that are used with one another such as hamburger and hamburger buns  
Consumers - People whose wants are satisfied by consuming a good or a service.  
Consumption - In macroeconomics, the total spending, by individuals or a nation, on consumer goods during a given period.  Strictly speaking, consumption should apply only to those goods totally used, enjoyed, or "eaten up" within that period.  In practice, consumption expenditures include all consumer goods bought, many of which last well beyond the period in question --e.g., furniture, clothing, and automobiles.  
Consumer spending - The purchase of consumer goods and services.  
Corporation - A legal entity owned by stockholders whose liability is limited to the value of their stock.  
Costs of production - All resources used in producing goods and services, for which owners receive payments.  
Craftsperson - A worker who completes all steps in the production of a good or service.  
Credit - (1) In monetary theory, the use of someone else's funds in exchange for a promise to pay (usually with interest) at a later date.  The major examples are short-term loans from a bank, credit extended by suppliers, and commercial paper.  (2) In balance-of-payments accounting, an item such as exports that earns a country foreign currency.  
Criteria - Standards or measures of value that people use to evaluate what is most important.  
Decision making - Choosing from alternatives the one with the greatest benefit net of costs.  
Deflation - A sustained and continuous decrease in the general price level.  
Demand - A schedule of how much consumers are willing and able to buy at all possible prices during some time period.  
Demand decrease - A decrease in the quantity demanded at every price; a shift to the left of the demand curve.  
Demand increase -  An increase in the quantity demanded at every price; a shift to the right of the demand curve.  
Determinants of demand - Factors that influence consumer purchases of goods, services, or resources.  
Determinants of supply - Factors that influence producer decisions about goods, services, or resources.  
Distribution - The manner in which total output and income is distributed among individuals or factors (e.g., the distribution of income between labor and capital).  
Division of labor -  The process whereby workers perform only a single or a very few steps of a major production task (as when working on an assembly line.)  
Durables - Consumer goods expected to last longer than three years. 
Earn - Receive payment (income) for productive efforts.  
Economic growth - An increase in the total output of a nation over time.  Economic growth is usually measured as the annual rate of increase in a nation's real GDP.  
Economic system - The collection of institutions, laws, activities, controlling values, and human motivations that collectively provide a framework for economic decision making.  
Economic wants - Desires that can be satisfied by consuming a good or a service.  Some economic wants range from things needed for survival to things that are nice to have.  
Entrepreneur - One who organizes, manages, and assumes the risks of a business or enterprise.  
Entrepreneurship - The human resource that assumes the risk of organizing other productive resources to produce goods and services.  
Equilibrium price - The market clearing price at which the quantity demanded by buyers equals the quantity supplied by sellers.  
Exchange - Trading goods and services with others  for other goods and services or for money (also called trade).  When people exchange voluntarily, they expect to be better off as a result.  
Exchange rates - The rate, or price, at which one country's currency is exchanged for the currency of another country.  
Excise Tax - Taxes imposed on specific goods and services, such as cigarettes and gasoline.  
Exports - Goods or services produced in one nation but sold to buyers in another nation. 
Factors of production -  Resources used by businesses to produce goods and services.  
Federal Reserve System - The central bank and monetary authority of the United States.  
Final goods - Products that end up in the hands of consumers.  
Fiscal policy - A government's program with respect to (1) the purchase of goods and services and spending on transfer payments, and (2) the amount and type of taxes.  
Functions of money - The roles played by money in an economy.  These roles include medium of exchange, standard of value, and store of value.  
Full employment - A  term that is used in many senses.  Historically, it was taken to be that level of employment at which no (or minimal) involuntary unemployment exists.  Today economists rely upon the concept of the natural rate of unemployment to indicate the highest sustainable level of employment over the long run.  
Goods - Objects that can satisfy people's wants.  
Government - National, state and local agencies that use tax revenues to provide goods and services for their citizens.  
Gross domestic product (GDP) - The value, expressed in dollars, of all final goods and services produced in a year.  
Gross domestic product (GDP), real - GDP corrected for inflation. 
Households - Individuals and family units which, as consumers, buy goods and services from firms and, as resource owners, sell or rent productive resources to business firms.  
Human capital - The health, strength, education, training, and skills which people bring to their jobs.  
Human resources - The quantity and quality of human effort directed toward producing goods and services (also called labor). 
Incentives - Factors that motivate and influence the behavior of households and businesses.  Prices, profits, and losses act as incentives for participants to take action in a market economy.  
Imports - Goods or services bought from sellers in another nation.  
Income - The payments made for the use of borrowed or loaned money.  
Increase in productivity - When the same amount of an output can be produced with fewer inputs; more output can be produced with the same amount of inputs; or a combination of the two.  
Inflation - A sustained and continuous increase in the general price level.  
Investment - The purchase of a security, such as a stock or bond.  
Investment in capital resources - Business purchases of new plant and equipment.  
Investment in human capital - An action taken to increase the productivity of workers.  These actions can include improving skills and abilities, education, health, or mobility of workers. 
Labor force - That group of people 16 years of age and older who are either employed or unemployed.  
Labor market - A setting in which workers sell their human resources and employers buy human resources.  
Labor union - A group of employees who join together to improve their terms of employment.  
Land - Natural resources or gifts of nature that are used to produce goods and services.  
Law of demand - The principle that price and quantity demanded are inversely related.  
Law of supply - The principle that price and quantity supplied are directly related.  
Loss - Business situation in which total cost of production exceeds total revenue; negative profit. 
Market - A setting where buyers and sellers establish prices for identical or very similar products, and exchange goods and/or services.  
Market economy - An economic system where most goods and services are exchanged through transactions by private households and businesses.  Prices are determined by buyers and sellers making exchanges in private markets.  
Medium of exchange - One of the functions of money whereby people exchange goods and services for money and in turn use money to obtain other goods and services.  
Mixed economy - The dominant form of economic organization in noncommunist countries.  Mixed economies rely primarily on the price system for their economic organization but use a variety of government interventions (such as taxes, spending, and regulation) to handle macroeconomic instability and market failures.  
Monetary policy - The objectives of the central bank in exercising its control over money, interest rates, and credit conditions.  The instruments of monetary policy are primarily open-market operations, reserve requirements, and the discount rate.  
Money - Anything that is generally accepted as a medium of exchange with which to buy goods and services, a good that can be used to buy all other goods and services, that serves as a standard of value, and has a store of value.  
Money market - A term denoting the set of institutions that handle the purchase or sale of short-term credit instruments like Treasury bills and commercial paper. 
National debt - The net accumulation of federal budget deficits.  
National income - The amount of aggregate income earned by suppliers of resources employed to produce GNP; net national product plus government subsidies minus indirect business taxes.  
Natural resources - "Gifts of nature" that are used to produce goods and services.  They include land, trees, fish, petroleum and mineral deposits, the fertility of soil, climatic conditions for growing crops, and so on.  
Non-durables - Consumer goods expected to last less than three years.  
Non-price determinants of supply - The factors that influence the amount a producer will supply of a product at each possible price.  The non-price determinants of supply are the factors that can change the entire supply schedule and curve.  
Normal profit - The minimum payment an entrepreneur expects to receive to induce the entrepreneur to perform entrepreneurial functions.  
Normative economics - Normative economics considers "what ought to be"--value judgments, or goals, of public policy.  Positive economics, by contrast, is the analysis of facts and behavior in an economy, or "the way things are." 
Opportunity cost - The next best alternative that must be given up when a choice is made. 
Physical capital - Manufactured items used to produce goods and services.  
Price - The money value of a unit of a good, service, or resource  
Prices - The amounts that people pay for units of particular goods or services.  
Private goods - A commodity that benefits the individual.  An example is bread, which, if consumed by one person, cannot be consumed by another person. 
Producers - People who use resources to make goods and services (also called workers).  
Production - The making of goods available for use; total output especially of a commodity or industry.  
Productive resources - All natural resources (land), human resources (labor), and human-made resources (capital) used in the production of goods and services.  
Productivity - The ratio of output (goods and services) produced per unit of input (productive resources) over some period of time.  
Profit - The difference between total revenues and the full costs involved in producing or selling a good or service; it is a return for risk taking.  
Property tax - Taxes paid by households and businesses on land and buildings.  
Public goods - A commodity whose benefits are indivisibly spread among the entire community, whether or not particular individuals desire to consume the public good.  For example, a public-health measure that eradicates smallpox protects all, not just those paying for the vaccinations.  These goods are often provided by the government.  To be contrasted with private goods. 
Quantity demanded - The amount of a product consumers will purchase at a specific price.  
Quota - A legal limit on the quantity of a particular product that can be imported or exported.  
Quantity supplied - The amount of a product producers will produce and sell at a specific price. 
Resources - All natural, human, and human-made aids to production of goods and services (also called productive resources).  
Revenue - Payments received by businesses from selling goods and services. 
Sales tax - Taxes paid on the goods and services people buy.  
Save - Set aside earnings (income) for a future use.  
Saving - Occurs when individuals, businesses, and the economy as a whole do not consume all of current income (or output).  
Scarcity - The condition that results from the imbalance between relatively unlimited wants and the relatively limited resources available for satisfying those wants.  
Services - Activities that can satisfy people's wants.  
Shortage - The situation resulting when the quantity demanded exceeds the quantity supplied of a good or service, usually because the price is for some reason below the equilibrium price in the market.  
Specialists - People who produce a narrower range of goods and services than they consume (also called specialized workers).  
Specialization - The situation in which people produce a narrower range of goods and services than they consume.  
Spend - Use earnings (income) to buy goods and services.  
Standard of living - A minimum of necessities, comforts, or luxuries held essential to maintaining a person or group in customary or proper status or circumstances.  
Standard of value - One of the functions of money whereby the value of goods and services is expressed in money terms (prices).  
Stock - A certificate reflecting ownership of a corporation.  
Store of value - One of the functions of money allowing people to save current purchasing power to buy goods and services in a future time period.  
Substitutes - Products that can replace one another such as butter and margarine.  
Supply - A schedule of how much producers are willing and able to sell at all possible prices during some time period.  
Supply decrease - A decrease in the quantity supplied at every price; a shift to the left of the supply curve.  
Supply increase - An increase in the quantity supplied at every price; a shift to the right of the supply curve.  
Surplus - The situation resulting when the quantity supplied exceeds the quantity demanded of a good or service, usually because the price is for some reason below the equilibrium price in the market. 
Tariff - A tax on an imported good.  
Taxes - Required payments of money made to governments by households and business firms.  
Total cost - Cost of resources used in producing a product multiplied by the quantity produced.  
Total revenue - Selling price of a product multiplied by the quantity demanded.  
Trade agreement - An international agreement on conditions of trade in goods and services.  
Trade-off - Giving up some of one thing to get some of another thing.  
Traditional economy - A mode of economic organization which borrows economic decisions made at an earlier time or by an earlier generation 
Unemployment - The situation in which people are willing and able to work at current wage rates, but do not have jobs. 
Wages - The payment resource earners receive for their labor.  
Work - Employment of people in jobs to make goods or services.  

The End.

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