LESSON 3

MARKET INTEGRATION
PREPARED BY

JOSE CRUZ MORALES, M.B.A.

 CONNECTING
• The students are
expected to:

• Explain the role of

international financial
institutions in the
creation of a global
economy
• Identify the attributes
of global corporations
 CONFIGURING

Globalization and Labor Market Integration

in Late Nineteenth-
and Early Twentieth-Century Asia
• By: Gregg Huff and Giovanni Caggiano
• Gregg Huff & Giovanni
Caggiano, 2007.
"Globalization and Labor
Market Integration in Late
Nineteenth- and Early
Twentieth-Century
Asia," Working
Papers 2007_14, Business
School - Economics, University
of Glasgow.
 Abstract
• This article uses new data sets
to analyze labor market
• from South India to
integration between 1882 and Southeastern China
1936 in an area of Asia and encompassing
stretching from South India to
Southeastern China and the three Southeast
encompassing the three Asian countries of
Southeast Asian countries of
Burma, Malaya and Thailand.
Burma, Malaya and
Thailand.
 Abstract
• mass migration • We find that by the late
nineteenth century,
of Indians and globalization, of which a
principal feature was the
Chinese to mass migration of Indians and
Chinese to Southeast Asia,
Southeast Asia gave rise to both an
integrated Asian labor market
and a period of real wage
convergence.
 Abstract
• showed • Integration did not,
however, extend beyond
divergent Asia to include core
industrial countries. Asian
trends in and core areas, in contrast
to globally integrated
unskilled real commodity markets,
showed divergent trends
wages in unskilled real wages
• Beginning in the late
nineteenth century,
• globalization
globalization swept swept
through Asia, through Asia
transforming its
product and labor
markets.
• steamships • By the 1880s steamships
had largely replaced
had largely sailing vessels for
transport within Asia as
replaced well as to Western
markets, and shipping
sailing fares had begun to fall
sharply.
vessels
• mass • Also already underway was
the mass migration of Indian
and Chinese workers,
migration of principally from the labor-
Indian and abundant areas of Madras in
India and the provinces of
Chinese Kwangtung (Guangdong) and
Fukien (Fujian) in
workers Southeastern China, to land-
abundant but labor-scarce
parts of Asia.
• Burma,
• Chief among the immigrant-
receiving countries were Burma,
Malaya and Thailand (Siam) in
Malaya and Southeast Asia. Indian and
Chinese labor inflows to these
countries constituted the bulk of
Thailand two of three main late nineteenth-
and early twentieth-century global
(Siam) migration movements, the other
being European immigration to the
New World.
• in response • Immigration to Southeast
Asia was almost entirely
to its in response to its growing
demand for workers
growing which, in turn, derived
from rapidly expanding
demand for demand in core industrial
countries for Southeast
workers Asian exports.
 • integrated
• Studies by Latham and Neal
(1983) and by Brandt (1985,
1989) establish the
development of an integrated
Asian rice market beginning Asian rice
in the latter part of the
nineteenth century (see also,
.Myung, 2000).
market
• internationall • Furthermore, a series of articles
and books by Williamson and his
co-authors reveal internationally
y integrated integrated commodity markets and
relative factor price convergence in
commodity conjunction with pre-World War II
globalization. ( Williamson, 2000,
2002; O’Rourke and Williamson,
markets 1999; Hatton and Williamson,
2005).
• integrated • But in contrast to work on
product market
integration, the possible
Asian emergence of an
integrated Asian labor
labor market has attracted less
attention. In part this
market reflects the lack of Asian
wage data.
• Analysis of • As Harley (2000, p. 928)
observes, “Analysis of the
low-wage periphery, which is
the low-wage most relevant to modern
[globalization] debate, is
periphery restricted by data availability”.
This article makes available
for the first time the data
needed to test for labor
market integration over a
large part of Asia.
• The article has two main aims.
• an integrated
• One is to analyze whether as
part of pre-World War II
Asian market
globalization an integrated Asian
market for unskilled labor
for unskilled
existed to encompass Asia’s
chief emigrant-sending regions
labor
of South India and Southeastern
China and the principal
Southeast Asian receiving
countries for Indian and Chinese
immigrants.
• that a correction • Our metric for integration, following
both econometric works on GDP
convergence and Robertson’s
mechanism recent analysis of integrated labor
pushes wages markets, comprises three
complementary criteria: (i) that
towards wages do not diverge from a
common trend; (ii) that over time
equilibrium wage dispersion does not
increase; and (iii) that a correction
relationship mechanism pushes wages towards
equilibrium relationship
aftershocks.
• Markets are • It can be misleading, as
integrated if Robertson (2000, p.728)
warns, to rely on price as
adjustment a criterion for integration.
mechanisms operate Markets are integrated if
to correct deviations adjustment mechanisms
from a wage operate to correct
deviations from a wage
differential or “gap”. differential or “gap”.
 • compare
• Second, the article aims to
compare wage trends in the
area of Asia from South India
to South China and including
Burma, Malaya and Thailand wage
with an industrial core of the
global economy, defined as
the United Kingdom, United
trends
States, Germany and France.
• markets in • Were unskilled labor
markets in Asia and the
Asia and the industrial core similarly
affected by globalization
industrial core such that in these two
parts of the world wages
similarly followed a common trend?
affected by
globalization
• in contrast • Or, in contrast to
commodity markets,
to was globalization in
commodity Asia and the
industrial core
markets associated with a
drifting apart of real
unskilled wages?
• We argue that by the
late nineteenth century
South India, • had become
Southeastern China integrated and
and the three
Southeast Asian constituted a
countries had become unified labor
integrated and
constituted a unified market
labor market.
 • Furthermore, Asian
evidence reveals a period
• real wage of real wage convergence
prior to the 1930s. But
convergence labor market integration
that characterized Asia,
and also obtained in the
industrial core, stopped at
the geographical frontiers
of each of these two
regions.
• hardly • Unlike Asia’s export of
primary commodities,
penetrated flows of Asian labor
either the core hardly penetrated
either the core
industrial industrial countries, or
countries the wider Atlantic
economy.
 DECODING
• 1. What do you think
is the purpose of the
article?
10-MINUTE BREAK
OPEN eBOOK-PDF OF TCWD (1ST GMAIL SENT TO LIAISONs)
TURN TO PAGE 30 OF THE eBOOK FOR THE QUESTIONS
WRITE-DOWN YOUR ANSWER and READ AS YOU ARE CALLED
 TO LOOK INTO…
• an integrated • compare
Asian market
for unskilled
wage
labor trends
 DECODING
• 2. From the article
read, define what
market integration is.
• Markets are integrated if
adjustment mechanisms operate
to correct deviations from a wage
differential or “gap”.
 DECODING
• 3. Extract the
statements that prove
that there was market
integration in Asia.
• mass migration
of Indian and
• integrated
Chinese workers Asian labor
• To Burma, market
Malaya and
Thailand
(Siam)
• real wage
convergence
 DECODING
• 4. Describe the labor
market integration in the
late 19th century and in
the early 20th century.
• integrated • real wage
Asian labor convergence
market
• labor market integration that
characterized Asia, and also obtained in
the industrial core, stopped at the
geographical frontiers of each of these
two regions.
 ADVANCING

The Rise of the Global

Corporation
By: Deane Neubauer
• The Rise of the Global Corporation
• By: Deane Neubauer
• In:The SAGE Handbook of
Globalization
• Chapter
DOI:http://dx.doi.org/10.4135/97814
73906020.n17
• Subject:Globalization
• Keywords:commodity
chains; corporate social
responsibility; corporation; emerging
economies; global structure; gross
domestic product; value chains
 Part One: The historic rise of the global
corporation—three periods
• As indicated throughout this
text, global corporations are • globalization
inseparable from the more
general phenomenon of serves to
globalization itself. It follows
that how one identifies
“locate” global
globalization serves to
“locate” global corporations,
corporations
both in the complex
interactive pattern defined by
globalization and within given
historical periods.
• The approach to the study of
globalization sometimes termed • Moore and Lewis
“historical globalization” locates the 2000.) In early
phenomenon itself in early patterns of historical periods as
trade and exchange (Bentley, J. 2003;
Gills, 2006; Moore and Lewis 2000.) In
early historical periods as both cities
both cities and
and countries extended their reach countries extended
beyond their own borders, this view
holds, a form of globalization was
their reach beyond
initiated which then followed complex their own borders
patterns of interactive engagements
organized through trade and directly
influenced by the emergent and
subsequently dominant technologies,
especially in shipping and navigation
(Harvey, 1990).
• As Moore and Lewis contend,
the entities operating within this • foreign direct
environment were functionally
and organizationally not so very investment and
different from contemporary
organizations, being possessed
value-added
of “head offices, foreign branch
plants, corporate hierarchies,
activity (Moore
extraterritorial business law, and
even a bit of foreign direct
and Lewis,
investment and value-added 2000; 31-32).
activity (Moore and Lewis, 2000;
31-32).
• The vast heterogeneity of this
long period, however, leads a
majority of scholars to situate
• modern
the direct antecedents of the
contemporary global corporation
nation state
within the dynamics of a two
plus-centuries long duration
system
spanning the period prior to the
end of WW II in which the
emerged
modern nation state system
emerged in ways that allowed
invention and social
organization to combine that
vastly increased world capital
and the wealth of nation states.
• Coupled with an extraordinary
rise in global population that • invent new ways
attended the industrial
revolution, the societies that
to organize the
arose would invent new ways to world itself
organize the world itself through
colonialism and imperialism that through
vastly attenuated their
interactions between peoples,
colonialism and
states and regions such that a imperialism
clearly differentiated era of
global interaction can be said to
exist (Harvey, 1990).
• Many of the characteristics of the
global corporation that we examine • patterns of equity
directly in this chapter date from
this period (e.g. patterns of equity
ownership, corporate
ownership, corporate ownership ownership and
and management of subsidiaries,
the relationship of “central” management of
organizational functions to supply subsidiaries, the
and distribution chains, etc.) as
attributes of corporate structures in relationship of “central”
the most prosperous and globally-
engaged nations (largely through organizational
colonial and imperialist functions to supply and
relationships).
distribution chains
• As the world emerged from the • led overwhelming by
vast destructions of WWII, American corporations
economic recovery and
expansion were led
overwhelming by American
corporations which for a period • re-entry of Japanese
from the end of the war until the and European
re-entry of Japanese and corporations onto the
European corporations onto the
global scene essentially stood global scene
for what by then had come by
then to be viewed as
multinational corporations
(MNCs) (Barnet and Muller,
1974).
• This period from the end of WWII to • the transformations of
the present can be viewed, the global corporation
therefore, as a third and distinct
period in the transformation of the occurring within this
global corporation. As the next third period have been
parts of this chapter detail, the far reaching and
transformations of the global
corporation occurring within this distinctive
third period have been far reaching
and distinctive, reflecting changes
taking place within the broader
structural dimensions of
globalization itself and at the same
time significantly contributing to
those continuing changes.
 Part Two: How do global corporations function?
What constitutes a global corporation?
• The contemporary global
corporation is simultaneously
• multinational
and commonly referred to either corporation (MNC),
as a multinational corporation
(MNC), a transnational a transnational
corporation (TNC), an corporation (TNC),
international company, or a
global company. While much of an international
the remainder of this chapter will
serve to clarify some of these
company, or a
distinctions, those offered by global company
Iwan (2012) are practically
useful.
• importers • International companies are
importers and exporters,
typically without investment
and outside of their home country;

exporters
• adapting their • Multinational companies have
investment in other countries,
but do not have coordinated
products and product offerings in each
services to country. They are more
focused on adapting their
each products and services to each
individual local market.
individual
local market
• an • More formally the
“enterprise transnational corporation has
been defined by the United
Nations Centre on
that engages Transnational Corporations
(UNCTC) as an “enterprise
in activities that engages in activities
which add value
(manufacturing, extraction,
which add services, marketing, etc) in
more than one country
value (UCTC, 1991).”
• “global • “global corporation” refer to
all of these types

corporation”
• An understanding of how global
corporations operate within
contemporary globalization
• US corporations
requires a brief recounting of some
of the major changes that have
taken place over the almost
operating
seventy years since the end of
WWII. As indicated above, US internationally
corporations operating
internationally had enormous
advantages in the immediate post-
had enormous
war period as they—virtually alone
in the world—emerged from the advantages in
war with their productive,
organization and distributional
capacities intact.
the immediate
post-war period
• contemporary • What would take shape as
the beginning of
globalization contemporary globalization,
however, dates from the
economic recovery of capital
structures in Japan and
Europe and the re-entry into
global markets of their
national corporations.
• The overall structure of this
system would stay in place
• 1970s and
and continue to develop 1980’s—a period
throughout the 1970s and
1980’s—a period that stands that stands
chronologically just prior to chronologically
three fundamental
innovations that have just prior to three
substantially changed the
character of the global
fundamental
corporation: innovations
• the advent and
impact of
digitalization and
instantaneous
global
communications;
• producer-
• the structural transformation of global
commerce from producer-driven
commodity chains to buyer-driven;
driven
commodity
chains to
buyer-driven;
• and the increasing
role performed
through the global
system by financial
elements and the
emergence of the
global financial
firm.
• Investment-based • The post-war period can be
delineated in a number of
globalization (1950- ways. Geriffe for example
1970); Trade-based emphasizes three structural
periods: Investment-based
globalization (1970- globalization (1950-1970);
1995); Digital Trade-based globalization
(1970-1995); Digital
globalization (1995 globalization (1995 onwards.
onwards
• Within this analysis the nature
of the global corporation • extended
changes accordingly, being
driven in each case by its
evolving purposes and by its
reach and
extended reach and abilities
(Geriffe 2001: 1616-18).
abilities
• Foreign
• Another method of projecting this
growth is to examine the sources and
levels of Foreign Direct Investment

Direct (FDI) most of which was of corporate

origin.

Investment
• (FDI)
• As Hedley indicates,
in 1900 only
European
corporations were
major investors, to be
joined by some
American firms in the
1930s.
• FDI would • Citing UN data he dates
1960 as the major turning
triple point for FDI as the major
driver of extended global
corporate development. In
each subsequent decade
until the turn of the
century, FDI would triple
(Hedley 1999).
• foreign direct investment (FDI),
defined initially and primarily as the
entry of private capital from a source
external to a country into a receiving
country
• Usually referred to in terms of
“out-ward” and “in-ward” flows, • “essential” for
supplies of FDI were viewed as
the major elements of global
the development
economic development, and of what was then
during various policy periods as
“essential” for the development viewed as the
of what was then viewed as the
“third” world, even if in reality the
“third” world
vast majority of FDI into the
1990s was between countries of
the “developed” world—primarily
North America, Europe and
Japan.
• Since 1964 the United
Nations Conference
on Trade and
Development
(UNCTAD) has
focused on the
various roles that FDI
plays in the
development process
• “a qualitatively • During the period 1985-1990 FDI grew at
an average rate of 30% a year. One
result, unsurprisingly, was the landscape
different set of of corporate units and their relationship to
each other. DeAnne Julius indicates that
linkages” was the expansion of FDI, inter-corporate
alliances, and intra-firm trade during this
created among period reached a level at which “a
qualitatively different set of linkages” was
advanced created among advanced economies
(Julius 1990). It was estimated that some
20,000 new corporate alliances were
economies formed just in the period 1996-1998
(Gilpin, 2000: 170).
• The investment-based period was
dominated by producer-driven • older manufacturing
commodity or value chains, which in companies wrought by
turn tended to be dominated by firms what was viewed as
characterized by large amounts of
concentrated capital focused on large- the progressive “de-
scale or capital-intensive
manufacturing or extractive industries. industrialization”
The organization of the dominant
global firms during this period was
powerfully influenced by the
transformation within national
economies of the older manufacturing
companies wrought by what was
viewed as the progressive “de-
industrialization” of these economies
through wide-scale off-shoring of labor
applications and its related costs.
 • This progressive shift in the silting
• “national firms of manufacture transformed the
dominant manufacturing firms of
operating these older developed companies
into more fully extended and

internationally”
integrated organizational forms that
moved many such firms from a
self-conscious understanding of
themselves as “national firms
into more operating internationally” into more
authentically global firms that
authentically required extensive corporate
integration of their activities
throughout the world.
global firms
• Many corporate structures,
especially those in the United • “fordist”
States, operating within the
frame of the producer-driven
commodity chain had been
management
organized by what came to be
recognized as “fordist”
principles
management principles. U.S.
firms in particular had sought
to transport these models
abroad to their international
manufacturing holdings.
• new models of • The emergence of Japan as a
major producer nation,
effective production especially of automobiles and
focused especially consumer electronics from the
1970’s on, brought onto the
on quality and scene new models of effective
regimes of flexible production focused especially
production on quality and regimes of
flexible production—a move that
was echoed within European
firms rejoining the global
commodity chains.
• These activities were experienced by U.S.
firms as unwelcome challenges to their • “re-inventing” of the
previously virtually unchallenged positions
on product design, production efficiency,
American business
and quality—and ultimately on the ability of model, especially the
these corporate structures to maintain their
accustomed returns on investment. The industrial model
result was a progressive “re-inventing” of
the American business model, especially
the industrial model —a challenge that
would dominate the curricula of U.S.
business schools for over two decades
(Risi 2005) and which is also continuously
associated with the global value shift from
manufacturing capital to finance and
human capital in progressively networking
societies (Castells, 2009).
Part Three: What is different about this
phase of global corporate development?
• The so-called “developing
economies”, and especially • Brazil, India and
those of Brazil, India and
China—the so-called BRICS
China—the so-
economies, have become the called BRICS
most dynamic sector of global
corporate growth,
represented in part by their
significant FDI over the three
decades.
• The fact that the global
economic slowdown
resulting from the financial
crisis of 2007 has had a
lesser impact on many
developing economies,
especially the BRICS,
indicates the extent to
which they have become a
new and important source
of capital within the global
system.
• Capital flows in general over
the past decade and a half • South-North
have begun to change from
the dominant North- capital flows
North/North-South dynamic to
one in which South-South and are significant
South-North capital flows are
significant (Rajan 2010) with
most of the South-North
capital flows coming from
China and India
• Examples
include China’s
Lenovo
corporation’s
purchase of
IBM’s PC
business
• India’s investment
in various
historically British
firms including
Jaguar Land Rover
(Economist, 2011)
• The importance of global
corporations in Brazil, India • 40% of the
world’s
and China to the current and
projected global economy is
singular. With 40% of the
world’s population the BRICS
represent a primary force in
population
both global production and
consumption.
• Hawksworth and
Cookson predict that
“middle class”
consumers in China and
India will grow from
some 1.8 billion in 2010
to 3.2 billion in 2020 and
4.9 billion by 2030
(2008).
• The relative import of their global
corporate cultures can be gauged in
part by the fact that in 2012 global
• account for a
corporations in China made up 73 of
the largest in the Fortune 500 list
(CNN Money 2012), and whereas
near doubling of
Brazil and India with 8 apiece currently
account for a small share of such their share of
corporations, emergent market
countries are projected to account for
a near doubling of their share of world
world trade over
trade over the next 40 years, reaching
nearly 70% by 2050 (Ahern, 2011). In the next 40 years ,
1998 only one of the top 100 global
corporations was located outside the
US, Europe or Japan (Oatley 2008).
reaching nearly
70% by 2050
 CANVAS ACTIVITY
• ACTIVITY #3 - WATCH THE FILM CLIP MARKET
INTEGRATION. What are the possible effects to the Philippines
if the whole of Asia will become a Free-Trade Area? REFER TO
THE FILM FOR YOUR ANSWER. 50 Points. Submission is up to
WITHIN OUR TIME.
END