MARKET
INTEGRATION
GE 3 The Contemporary World
Christian Cel W. Julian, Instructor
Objectives
• At the end of this lesson, you are expected to:
– Explain the role of international financial
institutions in the creation of a global
economy;
– Narrate a short history of global market
integration in the twentieth century; and
– Identify the attributes of global corporations.
Introduction
• The social institution that has one of the
biggest impacts on society is the economy.
➢We often talk about economy in terms of numerical terms, but
economy is composed of people.
• It is the social institution that
organizes all production, consumption,
and trade of goods in the society.
Introduction
• There are many ways in which products can
be made, exchanged, and used.
• Socialism or capitalism.
• These economic systems shape the way
people live their lives.
Introduction
• Economic systems vary from one society to
another.
• In any given economy, production typically
splits into three sectors.
– Primary Sector
– Secondary Sector
– Tertiary Sector
Introduction
• Primary Sector
–extracts raw materials
from natural environments
–Workers: miners or
farmers
Introduction
• Secondary Sector
–gains the raw materials
and transforms them into
manufactured goods
Introduction
• Tertiary Sector
–involves services rather
than goods
– It offers services by doing
things rather than making
things.
Market
Integration
Market Integration
Market Integration
History of Market
Integration
History of Market Integration
• The first big
economic
revolution was
the Agricultural
Revolution.
History of Market Integration
History of Market Integration
History of Market Integration
This in turn, led to major developments like
permanent settlements, trade networks, and
population growth.
History of Market Integration
• The second major
economic revolution
is the Industrial
Revolution of the
1800.
History of Market Integration
History of Market Integration
History of Market Integration
History of Market Integration
History of Market Integration
History of Market Integration
• Inspired by Marxist
principles, labor unions
gave way for minimum
wage laws, reasonable
working hours, and
regulations to protect
the safety of workers.
• This is what economist Adam
Smith in the 1770s called the
“invisible hand” of the market.
• The idea is that if one leaves a
capitalist economy alone,
consumers will regulate things
themselves by selecting goods
and services that provide the
best value.
• In practice, however, an economy
does not work very well if it is left
completely on autopilot.
• There are many sectors where a
hands-off approach can lead to
what economists call market
failures, where an unregulated
market ends up allocating goods
and services inefficiently.
–A monopoly, for example, is a kind
of market failure.
• When a company has no competition for
customers, it can charge higher prices without
worrying about losing customers.
• As allocations go, monopoly becomes
inefficient at least on the consumer end.
• In situations like these, a government might
step in and force the company to break into
smaller companies to increase competition.
• These companies that
extend beyond the
borders of one country are
called multinational or
transnational
corporations (MNCs or
TNCs).
• They are also referred to
as global corporations.
They intentionally surpass
national borders and take
advantage of opportunities in
different countries to
manufacture, distribute, market,
and sell their products.
INTERNATIONAL
FINANCIAL
INSTITUTIONS
a. The Bretton Woods System
a. The Bretton Woods System
THE ESTABLISHMENT
The major economies in the world had suffered because of the World War I, the
Great Depression in the 1930s, and the World War II. Because of the fear of the
recurrence of lack of cooperation among nation-states, political instability, and
economic turmoil (especially after the Second World War), reduction of barriers to
trade and free flow of money among nations became the focus to restructure the world
economy and ensure global financial stability.
a. The Bretton Woods System
What was the Bretton Woods Agreement?
The Bretton Woods Agreement was a
1944 meeting of the Allied nations, in which the
nations agreed to peg their currencies to the
dollar while the dollar was pegged to gold. The
agreement went into effect in 1958 but lasted
less than 20 years.
a. The Bretton Woods System
Elements of the Bretton Woods System:
Expression of currency of in terms of gold or gold value to establish a par value;
The official monetary authority in each country (a central bank or its equivalent) would agree to
exchange its own currency for those of other countries at the established exchange its own currency,
plus or minus one percent margin;
The establishment of an overseer for these exchange rates (the International Monetary Fund (IMF);
and
Eliminating restrictions on the currencies of member states in the international trade.
Significance of the Bretton Woods Agreement
• creation of the International Monetary Fund (IMF)
and the World Bank
– Both institutions remain vital to the global economy to this
day.
• unified 44 nations from around the world, bringing
them together to solve a growing global financial
crisis
– It helped to strengthen the overall world economy and
maximize international trade profit.
b. The General Agreement on Tariffs and
Trade (GATT) and the World Trade
Organization (WTO
b. The General Agreement on Tariffs and Trade
(GATT) and the World Trade Organization (WTO
One of the systems born out
of Bretton Woods was the
General Agreement on
Tariffs and Trade (GATT).
Established in 1947
b. The General Agreement on Tariffs and Trade
(GATT) and the World Trade Organization (WTO
GATT was a forum for the meeting of
representatives from 23 member
countries. It focused on trade goods
through multinational trade agreements
conducted in many “rounds” of negotiation.
b. The General Agreement on Tariffs and Trade
(GATT) and the World Trade Organization (WTO
However, “it was of the Uruguay Round
(1986-1993) that an agreement was
reached to create the World Trade
Organizations (WTO).
b. The General Agreement on Tariffs and Trade
(GATT) and the World Trade Organization (WTO
Headquater: Geneva, Switzerland
Member States: 164 (as as of 2021_
Unlike GATT, WTO is an independent
multilateral organization that became
responsible for trade in services, non-tariff-
related barriers trade, and other broader
areas of trade liberalization.
c. The General Agreement on Tariffs and Trade (GATT) and the World Trade Organization (WTO
c. The International Monetary Fund (IMF)
and the World Bank
c. The International Monetary Fund (IMF)
and the World Bank
IMF and the World Bank were founded after the WWII.
Their establishment was mainly because of peace
advocacy after the war.
These institutions aimed to help the economic stability of
the world.
c. The International Monetary Fund (IMF)
and the World Bank
Both of them are basically banks, but instead
of being started by individuals like regular
banks, they were started by countries.
Most of the world’s countries were members of
the two institutions
c. The International Monetary Fund (IMF)
and the World Bank
IMF and the World Bank were designed to
complement each other.
The IMF’s main goal was to help countries
which were in trouble at the time and who
could not obtain money by any means.
c. The International Monetary Fund (IMF) and the World Bank (WB)
Situation: A country’s economy collapsed or their currency was threatened.
The World Bank, in comparison, had
IMF, in this case, served as a a more long term approach. Its main
lender or as last resort for goals revolved around eradication of
countries which needed financial poverty and it funded specific projects
assistance. that helped them reached their goals,
especially in poor countries.
For instance, Yemen loaned
93 million dollars from IMF on An example of such is their investment
April 5, 2012 to address its in education since 1962 in developing
struggle with terrorism. nations like Bangladesh, Chad and
Afghanistan.
c. The International Monetary Fund (IMF)
and the World Bank
Unfortunately, the reputation of these
institutions have been dwindling mainly
due to practice such as lending the corrupt
governments and even dictators and
imposing ineffective austerity measures to
get their money back.
d. The Organization for
Economic
Cooperation and
Development (OECD),
the Organization of
Petroleum Exporting
Countries (OPEC),
and the European
Union (EU)
The Organization for Economic Cooperation
and Development (OECD),
• most encompassing club of the richest
countries in the world
• Member states: 38
• Headquarters: Paris, France
The Organization for Economic Cooperation
and Development (OECD),
• The goal of the organization is “to
shape policies that foster prosperity,
equality, opportunity and well-being
for all.”
The Organization for Economic Cooperation
and Development (OECD),
• The organization, which is often thought
of as a think-tank or monitoring group,
provides assistance in a number of
fields, including economic performance,
job creation, education, the
environment, tax policies, and social
policies.
The Organization for Economic Cooperation
and Development (OECD),
• Member Countries: USA, Sweden,
Japan, UK, Turkey, New Zealand, Norway,
Poland, Netherland, Greece, Ireland, Israel,
Italy, Australia, Canada, Belgium, Finland,
France, Germany
Organization of Petroleum Exporting
Countries (OPEC)
• permanent, intergovernmental
Organization
• created at the Baghdad
Conference on September 10–14,
1960, by Iran, Iraq, Kuwait, Saudi
Arabia and Venezuela.
Organization of Petroleum Exporting
Countries (OPEC)
• The five Founding Members were later joined by:
✓ Qatar (1961) – terminated its membership in January 2019;
✓ Indonesia (1962) – suspended its membership in January 2009, reactivated it in January 2016, but
decided to suspend it again in November 2016;
✓ Libya (1962);
✓ United Arab Emirates (1967);
✓ Algeria (1969);
✓ Nigeria (1971);
✓ Ecuador (1973) – suspended its membership in December 1992, reactivated it in October 2007, but
decided to withdraw its membership effective 1 January 2020;
✓ Angola (2007); Gabon (1975) - terminated its membership in January 1995 but rejoined in July 2016;
✓ Equatorial Guinea (2017); and
✓ Congo (2018).
Organization of Petroleum Exporting
Countries (OPEC)
• There are now 15 countries that are members of
the Organization of the Petroleum Exporting
Countries (OPEC).
• In South America, there are two, while six are in
the Middle East and seven are on the continent of
Africa.
Organization of Petroleum Exporting
Countries (OPEC)
OPEC's objective is to co-ordinate and unify petroleum
policies among Member Countries, in order to secure fair
and stable prices for petroleum producers; an efficient,
economic and regular supply of petroleum to consuming
nations; and a fair return on capital to those investing in
the industry.
European Union (EU)
The European Union (EU) is a group of 27 nations in Europe,
formed in the aftermath of World War II.
✓ The first batch of countries joined in 1957, including Germany, France, Italy, Belgium, Luxembourg,
and The Netherlands.
✓ In 1973, Denmark, Ireland, and the United Kingdom joined.
✓ Greece joined in 1981, followed by Spain and Portugal in 1986 and Austria, Finland and Sweden in
1995.
✓ In 2004, nine countries were added, two more in 2007, and finally Croatia in 2013 to bring the total to
28.
✓ On June 23, 2016, the United Kingdom voted to leave the EU, a process it completed in 2020.
European Union (EU)
• Membership in the EU is expected to grow in
2022.
✓ The Ukraine submitted an application
for membership in February 2022,
though Russia's February invasion of
the Ukraine may complicate or derail
the membership process.
✓ Georgia and Moldova also submitted
applications for membership in March
2022.
European Union (EU)
• The European Union was created to
bind the nations of Europe closer
together for the economic, social,
and security welfare of all.
• It is one of several efforts after World
War II to bind together the nations of
Europe into a single entity.
European Union (EU)
• Nineteen of the EU countries
are also part of the
Eurozone, a union of
countries that have adopted
the Euro as their official
currency.
e. North American Free Trade
Agreement (NAFTA)
e. North American Free Trade Agreement (NAFTA)
•The North American Free Trade Agreement (NAFTA)
was implemented in 1994 to encourage trade
between the U.S., Mexico, and Canada.
•NAFTA reduced or eliminated tariffs on imports and
exports between the three participating countries,
creating a huge free-trade zone.
e. North American Free Trade Agreement (NAFTA)
The United States-Mexico-Canada
Agreement (USMCA), which was
signed on Nov. 30, 2018, and went
into full force on July 1, 2020,
replaced NAFTA.
e. North American Free Trade Agreement (NAFTA)
REFERENCE
Aldama, P. (2018).The Contemporary World. First Edition. RBS Publishing, Inc.
Claudio, L., Abinales, P. (2018), The Contemporary World. C & E Publishing, Inc. Goldstein, J.L., Rivers
https://corporatefinanceinstitute.com/resources/knowledge/finance/bretton-woods-agreement/
https://worldpopulace.com/opec-countries/
https://www.oecd.org/about/document/ratification-oecd-convention.htm
https://www.thebalancemoney.com/bretton-woods-system-and-1944-agreement-3306133
https://www.worldatlas.com/geography/oecd-countries.html
https://www.worldbank.org/en/about/leadership/members
https://www.youtube.com/watch?v=spt8oLc7f5c
• Image Credit:
https://www.pinterest.ph/pin/575194183633558557/
https://pixar.fandom.com/wiki/Pixar_Wiki?file=CAPITALISM.gif
https://www.facebook.com/EntertainmentWriter/
https://www.visualistan.com/2019/03/business-data-analytics-the-information-revolution-infographic.html
