Case Study

How to Manage the Top Five Global

Economic Challenges

In partial fulfillment in
Managerial Economics
San Beda Alabang College
Graduate School

Submitted to:
Dr. Cecilia A. Navarro PhD

Submitted by:
Riangelli P. Exconde
MBA1-AR

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 Table of Contents

I. Facts on the Global Economic Challenges ...................................................................... 2-3

II. Statement of the Problem ................................................................................................. 4-5
A. Global Income Inequality .................................................................................................4
B. Technology Driving Change in Jobs ................................................................................4
C. Rising Protectionism ........................................................................................................4
D. Increasing Migration .......................................................................................................5
E. Growing Influence of Social Media and the Post – truth World ......................................5
III. Course of Action – Best Solution – Discussion ............................................................ 6-10
A. Global Income Inequality ............................................................................................. 6-7
B. Technology Driving Change in Job ..................................................................................7
C. Rising Protectionism ........................................................................................................8
D. Increasing Migration ................................................................................................... 8-9
E. Growing Influence of Social Media and the Post – truth World ............................ 9-10
IV. Recommendation ......................................................................................................... 11-12
V. References ..........................................................................................................................13

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 Facts

 Global private wealth reached a record $166.5 trillion in 2016 according to the report of
Boston Consulting Group (BCG) - but also according to the report, this record is not spread
equally around the globe. Asia – Pacific regions are the top contributor to this, but EU
countries are being left behind resulting to income inequality.

 Just eight men now own the same wealth as 3.6 billion people globally, more than half of
humanity, according to a January 2017 Oxfam report. – this maybe fortunate for those eight
men but it has a bad effect in the economy. This entails that there is a growing gap between
upper and middle class that affects different families and societies.

 Inequality paradox – Inequality among countries has been decreasing but within countries
it increases explaining the fact why many voters across the western world feel as they do
or in other terms experience poverty.

 Today’s five largest global companies are: Apple, Alphabet (Google), Microsoft, Amazon,
and Facebook - 720,000 people – as of 2017 data. – These are all technology and digital
companies and their market capitalization is 30% higher than that of the top five a decade
ago; they achieve that with a whopping 44% less staff.

 A decade ago, the big five were completely different: Petro-china, Exxon Mobile, General
Electric, China Mobile, and Bank of China. They employed around 1.3 million people. –
These companies are labor intensive companies as they require number of people to
produce their product and services. Technology is a big factor why they are not today’s big
five anymore.

 Around 45% of the global working age population is underutilized, either unemployed –
this is because mismatched qualities with job opportunities open, sudden technology
emerging that kills a lot of jobs and generations gaps and differences.

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 Rise of harmful protectionist measures – implemented trade measures by G20 countries –
resources and territorial treats are considered the main factors of this protectionism. It is
done to hold each countries rights, resources and power to an acceptable level but as years
past, each country is rising their protectionism due to Global trade alertness and awareness.

 Top 10 protectionist measures by USA, India, Russia, Brazil, China, Japan, EU - these are
Trade defense measures, local content requirements. Sub-national government measures,
export subsidy, investment measures, bail out/state aid measures, Trade Finance, Public
procurement, export taxes or restrictions and non-tariff barrier.

 The recent refugee crisis in Syria and the resulting arrival of more than one million
migrants in 2015-2016 in Germany presented a formidable challenge to political and social
stability. - Since the Syrian civil war officially began March 15, 2011, families have
suffered under a brutal conflict that has killed hundreds of thousands of people, torn the
nation apart, and set back the standard of living by decades. About 13.1 million people in
the country need humanitarian assistance.

 Rise in asylum applications from non-EU citizens in EU-28 – Top 10 origins of people
applying for these mental institutions are the following: Syria, Afghanistan, Iraq, Kosovo,
Albania, Pakistan, Eritrea, Nigeria, Iran and Ukraine.

 Around 51% of people with online access use social media as a news source – as it is the
fastest way to get information nowadays. Most of the reporters and news deliverers give
their latest news update to social media such as Facebook, Twitter and Instagram.

 In November 2016 U.S. elections, top fake election news stories generated more total
engagement on Facebook than the top election stories from the 19 major news outlets
combined. – this is a treat to information policies as it disrupts the peace and can cause
serious test on many fronts, including combating terrorism and securing the proper
functioning of democratic institutions

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Statement of the Problems

The problem stated in the article are the Five Major Shifts that Shaken the World. These
issues are the main Global Economic Challenges that we are facing and affecting millions of
families, business entities, individuals, future generations and the whole society. Each issue has an
economic impact that results to ripple effect and can widely damage number of lives.

These issues we are Globally facing are the following:

1. Growing Income Inequality

This is the unequal distribution of incomes across various groups of individuals and
households in an economy. Variation in income of different socio-economic groups
in an economy results to income gap between the highest and lowest class of a
country, region or the whole world.

2. Technology Driving Change in Jobs

As technology keeps on rapidly rising and taking over the world, jobs and labor-
intensive work are in a phase of destruction and chaos. Automation and robots are
evolving which slays job as it is lower in cost, reduces human error and enhances
quality.

3. Rising Protectionism
Scarce in raw materials and natural resources are increasing due to different factors
resulting to a rise in protectionism of countries around the globe. Protectionism is
one way to defend a countries power and benefits but could also do harm in trade
and activity.

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4. Increasing Migration
Wars in the middle east are continuous resulting to increase in immigrants around
the world especially in the nearby countries in Europe. Increased migration is one
of the most visible and significant aspects of globalization: growing numbers of
people move within countries and across borders, looking for better employment
opportunities and better lifestyles. Although migration is usually seen as
problematic, it contributes to sustainable development.

5. Growing Influence of Social Media and the Post – truth World

The increase in use of Social Media has affected not just individuals but markets
and economy. It caused a Post-truth World wherein alternative facts and fake news
compete on an equal footing with extensive researches and studies. This is an issue
because it shifts the information with just the ends of our fingers.

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 Courses of Action - Best Solutions - Discussions

The issues presented above are undervalued and under-addressed both nationally and
internationally. The results shook our world with an unforeseeable force. What are the possible
solutions or the course of actions that must be done in order to resolve these issues?

Global Income Inequality

Policies and implementation can be done to address the Global Income Inequality. The
following can be done by Global groups or countries to bring back balance to the economy:
1. Increase the minimum wage - Research shows that higher wages for the lowest-paid
workers has the potential to help nearly 4.6 million people out of poverty and add
approximately $2 billion to the nation's overall real income. Additionally, increasing the
minimum wage does not hurt employment nor does it retard economic growth.
2. Expand the Earned Income Tax – This has positive impact to families lifting roughly 4.7
million children above the poverty line on an annual basis. The expansion can pull more
children out of poverty while providing more economic support for the working poor
especially single parents entering workforce.
3. Build assets for working families – Policies that encourage higher savings rates and lower
the cost of building assets or land for working- and middle-class households can provide
better economic security for struggling and poor families. Have mandated retirement plans
and provide savings credit for retirement savings account that could help lower income
household to build wealth.
4. Invest in Education - Investments in education, beginning in early childhood with programs
like Head Start and Universal Pre-K, can increase economic mobility, contribute to
increased productivity and decrease inequality.
5. Make the Tax code more progressive – Implement bigger taxes for those who earn a higher
income. We have created bad tax policy by giving capital gains profits from the sale of
property or investments, special privileges in our country's tax code privileges that give
investment income more value than actual work. Capital gains tax rates must be adjusted
so that they are in line with income tax rates.
6. End residential segregation - Higher levels of racial residential segregation within a
metropolitan region are strongly correlated with significantly reduced levels of

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 intergenerational upward mobility for all residents of that area. Segregation by income,
particularly the isolation of low-income households, also correlates with significantly
reduced levels of upward mobility. Eliminating residential segregation by income and race
can boost economic mobility for all.

Technology Driving Change in Jobs

We are living in the era where technology is fast and in just a blink of an eye, it keeps on
evolving and innovating. The rise of digitalization has complications for every job, and the
transition to a digital economy will carry its share of pain. At the same time, embracing the
forces of change can also open new opportunities.
1. Invest in new skills that will lead to new opportunities - Digital technologies demand a
range of skills, from cloud architecture to social media. Many occupations, such as
scientists, now require some level of programming skills.
2. Use technology resources for entrepreneurial occasions and innovation thinking -
Many tasks are being automated, but machines will never be able to identify the
opportunities that will help a business grow or change market perceptions. People will
always be the organizing force behind technology bringing together technology
resources and directing those resources to solve business problems and opportunities.
3. Evolve education systems and learning for a changed workplace - Policy makers
working with education providers could do more to improve basic STEM skills through
the school systems, put a new emphasis on creativity and technology and robotics
intensive facilities as well as critical and systems thinking, and foster adaptive and life-
long learning.
4. Create New Jobs - Robots will displace 75 million jobs globally by 2022 but create 133
million new ones according to World Economic Forum in 2018. Robots and algorithms
would "vastly improve" the productivity of existing jobs and lead to many new ones in
the coming years. As a result, we would see more data analysts, software developers
and social media specialists, as well as job roles based on "distinctively human traits"
such as customer service workers and teachers.

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Rising Protectionism

Protectionist pressures around the world are on the rise. G20 leaders have made a strong
commitment to maintaining an open global economy and to resisting the temptation to resort to
protection in these difficult times. Yet one participant at the G20 Summit argued for an extensive
increase in the common external tariffs of the regional trade arrangement it is a party to. This sort
of protectionism can be contagious. To halt this, world leaders should take three steps.
1. Make solid progress in the Doha Round - The Doha Round is the latest round of trade
negotiations among the WTO membership. Its aim is to achieve major reform of the
international trading system through the introduction of lower trade barriers and revised trade
rules. The work program covers about 20 areas of trade. The Round is also known semi-
officially as the Doha Development Agenda as a fundamental objective is to improve the
trading prospects of developing countries.
2. Keep the economy growing and strengthen safety nets - Protectionist pressures at home
tend to increase with a rise in the feeling of helplessness that overcomes the population in
an unfolding economic crisis. To be able to maintain open economies policies governments
must show that they have enough instruments and resources to keep the economy growing
at a reasonable rate and that, especially in developing economies, effective safety nets are
in place.
3. Make effective use of regional cooperation arrangements - Regional arrangements can help
defuse protectionist pressures. Collective actions in a regional setting can often be useful
in supporting individual governments in their efforts to implement politically difficult
policy measures.

Increasing Migration

Across the world, migrants contribute to the labor force, pay taxes, enrich societies with cultural
diversity, and humble us with their stories of persistence and triumph. But the most important
contribution migrants make to the world is one that most of us overlook: they are innovators who
possess an intangible ability to think outside the box. The following are the suggested solutions to
increasing migration issue:

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 1. Address the drivers of involuntary migration and create more legal avenues of migration -
The ideal would be to have migrant processing centers. Some of the migrants will qualify
for refugee protection and some will be identified as economic migrants. Increase
opportunities for regular migration, or even short-term protection for migrants that need
them. If migrants are not needed, employers would not be hiring migrants in irregular
situations who are often exploited and abused because of irregular status. These are actions
that can help solve the short-term issue
2. Go back to the basics, to the historically positive nature of migration - Migration has been
historically positive. Migrants bring new ideas and high motivation. They contribute to the
economy of their host countries and even more to the economy of their countries of origin
by sending remittances to their families. We also need better systems to manage migration
so that people migrate under safer and better conditions, thereby allowing them to
contribute optimally to the development of the communities where they belong.
3. Dismiss the stereotypes - Countries that are not traditional destinations for migrants are
going to have to learn to manage an extremely growing economic, social, religious and
ethnic diversity. People are going to arrive who don’t look or speak exactly as we do, but
who might be brought to share the same values if they are properly welcomed and
integrated. Governments must take the lead in this long but crucial process. They must
implement public education and create information programmers. They must act, before it
is too late. It takes political courage. Unfortunately, right now it is in short supply.

Growing Influence of Social Media and the Post – truth World

The rise of ‘fake news’ sites, internet filter bubbles, and the ever-increasing division of society has
given rise to the idea that we are entering a ‘post-truth’ world. This is a scary prospect. When there
is no truth, fear reigns. Disputes become unresolvable, politics become zero sum, and societies
become cruel. We have long understood that freedom of expression is essential to the functioning
of liberal democracies. But now we are beginning to understand that a capacity to determine the
truth is also necessary. The following are the possible solutions to the issue of increasing of fake
news in our society:

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1. Establish a correction mechanism - One element of an effective strategy against misreporting
and fake news would be to make sure that clearly factually wrong news and deliberate
misinformation cannot be spread as easily through social networks. This is already happening,
with Germany set to be the second country after the US to benefit from Facebook’s new ‘disputed’
model for reducing the power of fake news. One possibility would be to legislate a procedure under
which anyone who has seen factually false information about them being spread through social
media can ask for a correction to be displayed as prominently as the original post to all those who
saw it.

2. Increase Transparency - One of the best ways of establishing any given source’s credibility
should be to understand its business model and, particularly, its funders. There is nothing
inherently wrong with this. It makes perfect sense for people and institutions to compete in the
important marketplace of ideas. But just as we need for national security reasons to understand
who is moving money across borders even when it is legal, we need to understand precisely who
is moving information. Regulation should be in place to make sure that information sources of a
certain size provide information about their funding.

3. Encourage quality journalism - One of the most effective counters for bad news is good news.
And since markets are clearly failing to provide quality information, it makes sense for the
government to invest in creating that infrastructure. This means new policies for promoting quality
journalism, such as publicly funding foundations which finance independent reporting, funding
standards bodies that promote best practices, and creating independent bodies that grade news
outlets on their quality and responsibility.

4. More information education - A final element would be to improve the population’s awareness
about misinformation and fake news. The users need to learn the difference between high-quality
and low-quality information. To this end, education about how to evaluate the quality of
information found on the internet should be added to all school curriculum.

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 Recommendations

After discussing the choices and solutions to solve the Global Economic challenges we
experience today. I therefore conclude that we should encourage the application of 4ps to each
country and the whole nation in order eliminate these threats and bring back the balance in our
economy.

4Ps stand for Repair, Rebalance, Reform and Rebuild

Repair
Before anything else, we must relieve some of the balance pressures that risk smothering the
recovery on countries, on society, on households, on banks. Repair the system in terms of income
and compensations to remove and minimized the gap between different classes. Of course, the
precise path is different for each country. Some have no choice but to cut deficits today, especially
if they are under market pressure. Others should stick to their adjustment plans but be ready to
change course if growth falters further. Others still are probably pushing too hard today and could
slow down a bit.

Rebalance
This has two meanings. First, it means shifting back demand from the public to the private sector,
when the private sector is strong enough to carry the load. This hasn’t happened yet. The second
rebalancing involves a global demand switch from external deficit to external surplus counties.
The idea here is straightforward with lower spending and higher savings in the advanced
economies, key emerging markets must take up the slack and start providing the demand needed
to power the global recovery. But any rebalancing so far is largely due to lower growth.

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Reform
If repair was about getting the economy moving today, reform is about laying the foundations for
a more stable economic future tomorrow. A priority here is financial sector reform. On the plus
side, we have broad agreement on higher quality capital and liquidity standards with appropriate
phase-in arrangements. But substantial gaps remain in areas like supervision, cross-border
resolution, too-important-to-fail, and shadow banking systems. We need international cooperation
across all dimensions to avoid regulatory buy and sell.

Rebuild
Here I am thinking mainly of the low-income countries that need to rebuild their economic policy
buffers including fiscal positions that served them so well during the crisis, to protect themselves
against future storms. This will also help provide the space for growth-enhancing public
investment and social safety nets for example, allowing countries to deploy well-targeted subsidies
to protect the poor from commodity price swings with minimal damage to fiscal sustainability.

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 References
Book and Research Sources
 New technologies: A jobless future or golden age of job creation? By Irmgard Numbler
 Navigating the New Client Landscape by The Boston Consulting Group
 Rising protectionism: challenges, threat and opportunities for Australia – Productivity
Commission Research Paper by the Australian Government
 The Link Between Migration, Globalisation and Sustainable Development by Cecilia
Tacoli
 Post Truth: Hegenomy on Social Media and Implications for Sustainability
Communication by Cecilia Jasques, Mine Islar and Gavin Lord
 Carnegie Edowment for International Peace by Uri Dadush
 What World Leaders Should Do to Halt the Spread of Protectionism by Richard Baldwin
and Simon J Evenett

Online Sources

 https://investrends.ch/fileadmin/pdf/BCG-Navigating-the-New-Client-
Landscape_June_2016.pdf
 https://www.worldvision.org/refugees-news-stories/syrian-refugee-crisis-facts
 https://ourworldindata.org/income-inequality-since-1990
 https://marketbusinessnews.com/financial-glossary/income-inequality/
 https://haasinstitute.berkeley.edu/six-policies-reduce-economic-inequality
 https://www.forbes.com/sites/joemckendrick/2016/12/29/5-ways-digital-technology-is-
changing-your-job/#6bdf575d64bd
 https://www.bbc.com/news/business-45545228
 https://www.ecfr.eu/article/commentary_how_to_avoid_a_post_truth_world
 https://www.imf.org/en/News/Articles/2015/09/28/04/53/sp091511

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