HISTORY

The first big economic change was the Agricultural Revolution. Farming helped societies build
surpluses. This led to major developments such as the following:

1. Surplus Food Production and Trade – the switch from a hunter-gatherer to an

agricultural society permitted societies to produce more food than they needed at that time.
Opportunities for commerce and exchange with nearby towns were made possible by this
surplus. Trade in agricultural goods became an important factor in the early economic
integration of areas as agricultural practices spread and were improved.

2. Rise of Early Civilizations – the surplus food production made possible by agriculture
allowed for the growth of larger and more complex societies. This laid the groundwork for the
development of early civilizations, which further expanded trade networks and fostered
economic ties between regions.

3. Impact on World Population – the Agricultural Revolution significantly contributed to

population growth. As societies transitioned from nomadic to settled agricultural lifestyles, the
population increased, leading to larger labor forces, increased productivity, and greater
economic potential.

INDUSTRIAL REVOLUTION

The second major economic revolution accelerated economic growth transformed societies and
set the stage for the modern interconnected global economy we see today.

1. Increased Productivity – the industrial revolution brought about significant improvements

in production processes, with the mechanization of industries leading to higher productivity.
Factories replaced manual labor with machines, enabling faster and more efficient production of
goods. This increased productivity contributed to higher volumes of goods available for trade on
the global market.

2. Expansion of International Trade – with increased production capacity and improved

transportation, international trade flourished during the Industrial Revolution. Countries with
industrial capabilities could produce goods more efficiently, leading to the exchange of goods on
a global scale. Raw materials from one region could be processed in another and then
distributed globally.

3. Economic Interdependence – the industrial revolution deepened economic

interdependence among countries as they became reliant on each other for trade and access to
goods. This interdependence strengthened the ties between economies and fostered
international cooperation.
INFORMATION REVOLUTION

This is characterized by rapid advancements in information technology and the internet that
reshaped businesses and how individuals interact and trade.

1. Global Communication and Connectivity – the advent of the internet and widespread
adoption of digital communication technologies have connected the world like never before.
With this instantaneous communication across borders, businesses can collaborate with
partners and customers worldwide, enabling real-time interactions and coordination.

2. E-commerce and Online Markets – the rise of e-commerce platforms has revolutionized
how goods and services are bought and sold. Online marketplaces allow businesses to reach a
global customer base, breaking down geographical barriers and facilitating cross-border
transactions.

3. Global Supply Chains – companies can manage their supply chains in real-time,
optimizing production and logistics, and efficiently coordinating with suppliers and partners
across the globe.

4. Globalization of Services – companies can offer services remotely, such as software

development, customer support, and consulting, breaking down physical barriers to service
provision.

FREE TRADE - The removal or reduction of trade barriers such as tariffs, quotas, and
restrictions on imports and exports. Free trade promotes the exchange of goods and services
between countries, leading to increased market access, competition, and specialization.

MULTINATIONAL corporations (MNCs) - are companies that have operations, subsidiaries, or

affiliates in multiple countries. They play a significant role in global market integration by
leveraging their global presence to coordinate production, marketing, and distribution activities
across borders.

INFORMATION AND COMMUNICATION TECHNOLOGY (ICT) - The development and

widespread adoption of ICT, such as the internet, mobile devices, and communication networks,
have played a crucial role in global market integration. ICT enables rapid dissemination of
information, facilitates global communication, and supports e-commerce, allowing businesses to
operate globally with ease.

PROS

1. Trade Opportunities – global market opens trade opportunities by reducing

international trade, such as tariffs and quotas. This allows countries to specialize in
producing goods and services with a comparative advantage, leading to increased
efficiency and productivity.
 2. Economic Growth - global market integration plays a crucial role since it
increases investment due to the availability of foreign investment opportunities that
can attract capital from abroad, boosting investment and fostering economic growth

3. Access to Foreign Investment - global market integration attracts foreign

direct investment (FDI) to countries with favorable business environments. Foreign
investment injects capital into the domestic economy, supporting the growth of
businesses. Foreign investors may use their existing network and connections to
access international markets, opening up export opportunities for domestic
businesses.

CONS

1. Job Displacement - advancements in technology and automation can replace certain

manual tasks, leading to reduced demand for labor in specific industries or sectors, and
changes in consumer preferences and global supply chains may result in the decline of
certain industries, leading to job losses in those sectors
2. Income Inequality - workers in sectors facing global competition may experience
stagnant or declining wages, while those in high-skilled industries benefiting from
international demand may see wage growth. Income inequality may also result from
unequal access to education, training, and resources, which impacts individuals’ ability
to compete in the global market.
3. Threats to National Industries - the influx of foreign goods and services may lead to
cultural challenges as traditional industries and practices are affected. Domestic
industries may face unfair competition from foreign companies with lower production
costs or government subsidies.

Rights of Capitalism

1. Private Ownership - capitalism upholds the right to private ownership of property and
assets. This includes tangible assets like land, buildings, and machinery as well as
intangible assets like intellectual property. Private ownership provides individuals and
businesses with the incentive to invest, innovate, and create wealth.
2. Free Trade - capitalism promotes the principle of free trade, allowing goods, services,
and capital to move freely across national borders without significant barriers like tariffs
or quotas. Free trade enhances efficiency, fosters competition, and expands market
opportunities for businesses worldwide.
3. Economic Freedom - capitalism emphasizes the importance of economic freedom,
which includes the absence of exercise government interference in the economy.
Economic freedom allows markets to function efficiently and promotes individual initiative
and responsibility.
What happens when the Rights of Capitalism clash with regulations, labor standards, and
consumer protection?

Regulations are necessary to protect public interests, prevent market failures and ensure fair
competition.

● Proponents of capitalism argue for minimal regulations.

● Advocates for regulations assert that certain industries should require oversight to
prevent market abuses and protect consumers.

Capitalism seeks to maximize profits, which can sometimes lead to pressure on labor standards
and workers' rights.

● Wage Disparities - in pursuit of cost-cutting measures, some businesses may keep

wages low, leading to income inequality and potential exploitation of workers
● Working Conditions - the pursuit of profit may lead some companies to prioritize cost
reductions over ensuring safe and favorable working conditions for employees
● Collective Bargaining - labor unions play a critical role in advocating for workers' rights.
However, some businesses may resist unions’ efforts, viewing them as impediments to
their ability to operate freely

Capitalism relies on consumer demand and choice to drive competition and innovation.
however, unregulated markets may not adequately protect customers from potential harm.

● Product Safety - in the pursuit of profit, some companies might compromise on product
safety and quality, putting consumers at risk
● Information Assymetry - consumers may lack complete information about products and
services, leading to information asymmetry, which can result in exploitative practices
● Monopolies and Anti-Competitive Behavior - capitalist economies may witness the
emergence of monopolies or anti-competitive behavior, which can limit consumer choice
and increase prices.

Types of Corporations

1. C Corporations - A C Corporation is a legal entity that the government taxes separately

from its owners. Many large companies structure themselves as C corporations for
federal income tax purposes, and they’re also eligible to receive an unlimited number of
both foreign and domestic shareholders. Big American companies like Microsoft and
Walmart are C corporations are examples of C corporations.
2. S Corporations - are entities that elect to pass their corporate income, losses, credits,
and deductions directly to their shareholders for tax purposes.
3. Non-Profit Corporations - rather than relying on profits, these entities usually rely on
funding from donors or the government, typically through grants. They use their funds to
support their designated cause and are exempt from taxes.

Characteristics of Corporations

1. Capital Acquisitions - it can be easier for a corporation to acquire debt and equity since it
is not constrained by the financial resources of a few owners. A corporation can sell
 shares to new investors, and larger entities can issue bonds to obtain a significant
amount of debt financing.
2. Dividends - a corporation pays its investors by issuing dividends to them. This differs
from the distributions made from a partnership or sole proprietorship to pay their owners.
3. Double Taxation - a corporation pays income tax on its earnings. If it also pays a
dividend to its investors, the investors must pay income tax on the dividends received.
4. Life span - a corporation can theoretically operate forever, outlasting its owners.
Conversely, the owners may decide to terminate the corporation at any time.
5. Limited liability - any liabilities incurred by a corporation are not also transferred to its
shareholders. Instead, anyone trying to enforce a liability can only pursue the corporate
entity for satisfaction.
6. Ownership - ownership in a corporation is based on the number of shares owned.
Buying or selling these shares shifts the ownership of a corporation to a different
investor.
7. Professional Management - in many cases, the company's investors are not actively
engaged in its management. Instead, they hire professional managers to handle the
oversight of the business on their behalf.
8. Separate entity - a corporation is considered an entirely separate operating and legal
entity. It operates separately from its owners and has many of the rights and
responsibilities of a person.

MONOPOLY

Causes:

a. One created by the government, like patents - holding patents or strong intellectual
property rights can grant exclusive rights to produce certain products or technologies,
preventing others from entering the market and creating competition.
b. The large economy of scale or a network externality - corporations that benefit from
economies of scale can produce goods or services at lower costs than potential
competitors.
c. Control of an essential, or a sufficiently valuable, input to the production process -
corporations that control essential distribution channels or resources can limit access for
competitors, consolidating their market power.

Effects:

a. Higher prices thus fewer consumers can afford the goods or services - with limited or no
competition, monopolies can set higher prices for their goods and services, leading to
increased costs for consumers.
b. Economies of Scale - as a result, they can outprice and outcompete smaller businesses,
leading to a monopolistic position.
c. Reduced Consumer Welfare - monopolies limit the variety of products and services
available to consumers, reducing their ability to choose alternatives
Recommendations:

a. Promote Competition - Encourage competition in markets by creating a conducive

environment for new entrants. Reduce barriers to entry and support startups and small
businesses through incentives.
b. Market Transparency - Ensure corporations disclose relevant information, especially
concerning pricing, product quality, and terms of service to consumers and competitors.
c. Increase Consumer Choice - Encourage diversity and choice by supporting alternative
products and services. This can be done through public awareness campaigns that
promote diverse offerings.