The main types of integration are:

1. Backward vertical integration

This involves acquiring a business operating earlier in the supply chain – e.g. a retailer buys a wholesaler,
a brewer buys a hop farm

2. Conglomerate integration

This involves the combination of firms that are involved in unrelated business activities

3. Forward vertical integration

This involves acquiring a business further up in the supply chain – e.g. a vehicle manufacturer buys a car
parts distributor

4. Horizontal integration

Here, businesses in the same industry and which operate at the same stage of the production process
are combined.
Horizontal integration

is the acquisition of a business operating at the same level of the value chain in a similar or different
industry.

This is in contrast to vertical integration, where firms expand into upstream or downstream activities,
which are at different stages of production.

Economy

The social institution that has the biggest impact on society

What comes to mind when you think of economy?

1. Unemployment
2. Gross Domestic Product, or
3. Stock Market

Economy is composed of people. It is the social institution that organizes

1. Production
2. Consumption
3. Trade of goods

Unemployment for the unemployed can mean

1. Hardship,
2. failed opportunities, and
3. lack of self-respect

According to some psychological research, being fired from a job creates more stress, than the death of
a close friend.

Unemployment has remained high in the Philippines, at almost twice the level of neighboring
countries, despite relatively fast employment growth in the past decade.

1. Employment growth was not sufficient to reduce unemployment because of

2. Rapid population growth and
3. Increased labor force participation.

Job loser -an individual in the labor force who was employed and whose employment was involuntarily
terminated or who was laid off.

Job leaver -an individual in the labor force who voluntarily quits.

Frictional Unemployment: - This is unemployment caused by people moving in between jobs, e.g.
graduates or people changing jobs.

"voluntary unemployment” - high benefits may encourage people to stay on benefits rather than get
work this is sometimes known as
Structural Unemployment - This occurs due to a mismatch of skills in the labor market it can be caused
by:
a. Occupational immobility's. This refers to the difficulties in learning new skills applicable to a new
industry, and Technological change.

b. Technological Change. If there is the developments of labor saving technology in some industries
there will be a fall in demand for labor.

Cyclical Unemployment - Occurs when the economy is below full capacity. Ex. recession

Seasonal Unemployment -Unemployment tends to be higher during certain times of the year, either in
summer or rainy season depending on the country.

Capitalism - an economic and political system in which a country's trade and industry are controlled by
private owners for profit, rather than by the state.

Socialism - a political and economic theory of social organization which advocates that the Means of
production, distribution, and exchange should be owned or regulated by the community as a whole.

Left-wing politics supports social equality and egalitarianism often in opposition to social hierarchy. ...
The term left-wing can also refer to "the radical, reforming, or socialist section of a political party or
system".

What is the difference between left and right in politics?

Generally, the left-wing is characterized by an emphasis on "ideas such as Liberty, Equality, Fraternity,

Rights, Progress, Reform and Internationalism",

Right-wing is characterized by an emphasis on "notions such as Authority, Hierarchy, Order, Duty,

Tradition, Reaction and Nationalism“

Liberalism is a political and moral philosophy based on Liberty, Consent of the governed, and Equality
before the law

What are conservative beliefs?

American  conservatism  is a broad system of political  beliefs in the United States that is characterized
by respect for American traditions, Support for Judeo-Christian values, Economic liberalism, Anti-
communism and a Defense of Western culture

What do the Republicans believe?

The 21st century Republican Party ideology is American conservatism.

The GOP supports lower taxes, free market capitalism, a strong national defense, Gun rights, Pro-life,
Deregulation and Restrictions on labor unions
Sector Definition

This involves the extraction of resources

directly from the Earth, this includes farming,
Primary mining and logging. They do not process the
products at all.
They send it off to factories to make a profit.

This group is involved in the processing

products from primary industries.
Secondary This includes all factories—those that refine
metals, produce furniture, or pack farm
products such as meat.

This group is involved in the provision of

services.
Tertiary
They include teachers, managers and other
service providers.

This group is involved in the research of

Quaternary
science and technology. They include scientists.

Some consider there to be a branch of the

quaternary sector called the quinary sector,
which
includes the highest levels of decision making
Quinary Sector in a society or economy.
This sector would include the top executives or
officials in such fields as government, science,
universities, nonprofit, healthcare, culture,
and the media.

INTERNATIONAL FINANCIAL INSTITUTIONS - are financial institutions that have been established by
more than one country and hence are subjects of international laws

Common goal of INTERNATIONAL FINANCIAL INSTITUTIONS:

1. Reduce global poverty and improve people’s living conditions and standards;
2. Support sustainable Economic, Social and Institutional development; and to promote regional
cooperation and integration
The Bretton Woods Agreement is the landmark system for monetary and exchange rate management
established in 1944.

It was developed at the United Nations Monetary and Financial Conference held in Bretton Woods,
New Hampshire, from July 1 to July 22, 1944.

Under the agreement, currencies were pegged to the price of gold, and the U.S. dollar was seen as a
reserve currency linked to the price of gold.

The Bretton Woods agreements, negotiated largely between Britain and the United States and signed
by forty-four nations in 1944.

Developed by Harry Dexter White and John Maynard Keynes.

PLANS OF WHITE AND KEYNES

Harry Dexter White

A Bank for Reconstruction (today the World Bank) and An International Stabilization Fund should be
established.

BOP - Saw an imbalance as a problem only of the deficit country.

John Maynard Keynes

Wanted to vest the IMF with possibilities to:

1. Create money (a fact that can easily be understood in the background of Great Britain’s
suffering from the deflation policies in the Inter-War period) and
2. Have authority to take actions on a much larger scale.

BOP - recommended that both sides, debtors and creditors, should change their policies.

The US dollar was established as an international reserve currency

The US dollar was backed by gold at a price of $35 per ounce and any country could exchange dollars for
gold

The International Monetary Fund (IMF) was formed to:

1. monitor and regulate financial operations in the world and

2. Provide loans, often in the form of bailout funds, to balance out fiscal deficits of nations

The World Bank was formed to finance the capital needed by developing countries for national
development programs (ranging from infrastructure projects such as roads and highways to social
projects such as disease prevention and education)
The Bretton woods institutions

1. International Monetary Fund (IMF) - would monitor exchange rates and lend reserve currencies
to nations with balance-of-payments deficits.
2. World Bank - The International Bank for Reconstruction and Development, now known as the
World Bank Group, was responsible for providing financial assistance for the Reconstruction
after World War II and Economic development of less developed countries.

The Bretton Woods System didn’t survive because the United States kept running deficit to fund
various projects, and therefore the amount of dollars in existence kept increasing while the gold
reserves of the US kept shrinking as more countries demanded gold in exchange for their dollars

On the 15 of August 1971 Nixon officially announced that dollar would no longer convertible to gold

The Bretton Woods System lasted from 1944 to 1971, when Nixon ended it and thereby put final nail in
the coffin of not just the Bretton Woods monetary system but also to gold’s monetary role

GATT (General Agreement on Tariffs and Trade)

Is a multilateral agreement regulating international trade?

According to its preamble, its purpose was the

1. “Substantial reduction of tariffs and other trade barriers and

2. Elimination of preferences, on a reciprocal and mutually advantageous basis."

EXISTENCE OF GATT

It was negotiated during the United Nations Conference on Trade and Employment and was the
outcome of the failure of negotiating governments to create the International Trade Organization (ITO).

GATT was signed by 23 nations in Geneva on October 30, 1947 and took effect on January 1, 1948.

It lasted until the signature by 123 nations in Marrakesh on April 14, 1994 of the Uruguay Round
Agreements, which established the World Trade Organization (WTO) on January 1, 1995.

The average tariff levels for the major GATT participants were about 22 percent in 1947. 

As a result of the first negotiating rounds, tariffs were reduced in the GATT core of the United States,
United Kingdom, Canada, and Australia, relative to other contracting parties and non-GATT participants. 

By the Kennedy round (1962–67), the average tariff levels of GATT participants were about 15%. 

After the Uruguay Round, tariffs were under 5%.

The early GATT's contribution to trade liberalization

1. "include binding the negotiated tariff reductions for an extended period (made more
permanent in 1955)
2. Establishing the generality of non-discrimination through most favored nation (MFN)
treatment and national treatment
3. Ensuring increased transparency of trade policy measures, and
4. Providing a forum for future negotiations and for the
5. Peaceful resolution of bilateral disputes.

All of these elements contributed to the rationalization of trade policy and the reduction of trade
barriers and policy uncertainty."

The World Trade Organisation (WTO)- is a global organization which deals with regulations of trade
between several nations, ratified by their parliaments.

WTO was established on January 1, 1995 under the Marrakesh Agreement.

The WTO is a complex international organization with many moving parts.

Its main purpose is to

1. Help trade flow smoothly for all member nations so that they may increase the Well-being of
their countries and
2. Standards of living for their citizens.
3. It works to educate and inform companies and governments on acceptable rules that govern
trade (i.e., imports and exports).

There are several groups within WTO, with the highest decision-making authority going to a group
known as the Ministerial Conference, which can make decisions on all matters and trade disputes
among members.

The WTO was officially created in January of 1995 and essentially replaced the General Agreement on
Tariffs and Trade (GATT), which had been in force since 1948, a few years after the Second World War.

Before the WTO was created, an initiative to start something similar knows as the International Trade
Organization (ITO) took place.

ITO treaty was not approved by the U.S. and a few other countries and ultimately never went into
effect.
In the 1980s, as the world economies became more global in trade and business, it became evident
that GATT was not built or structured to address many of the new global trading challenges arising.

As a result, the biggest trade negotiating event on record began in 1986. It was known as the Uruguay
Round, seeing as it took place in Punta del Este, Uruguay.

One of the final accomplishments of this round was the creation of the WTO.

The WTO is currently working on new negotiations and agreements, known as the Doha Development
Agenda, and this started in 2001.

Causes and Effects of Globalization

I. Principles of the Global Trade Regime

Principles of GATT:

GATT was initially largely limited to a tariff agreement

Trade without discrimination (Non-discrimination)

WTO introduced multilateral disciplines on a variety of subjects, ranging from the

1. Environment
2. Labor standards
3. Competition and
4. Investment policies to animal right

Principles of WTO:

a. Non-discrimination
b. Reciprocity
c. Enforceable commitments
d. Transparency
e. Safety valves

Nondiscrimination – is a fundamental part of WTO. It has two components: This principle ensures non-
discrimination between trading partners

The Most-favoured Nation (MFN) Principle: treating other WTO members equally

1. The National Treatment Principle: treating foreigners and locals equally

2. If a WTO member grants to a country an advantage, it has to give advantage to all WTO
member.
Reciprocity - Includes the lowering of import duties and other trade barriers in return for similar
concessions from another country.

It is a traditional principle of the GATT and WTO, but it is only practicable by developed nations due to
their roughly matching economy.

Transparency - WTO members are required to

1. Publish their trade regulations,

2. Maintain institutions charged with review of administrative decisions affecting trade,
3. Respond to requests for information by other members, and
4. Notify changes in trade policies to the WTO.

Enforceable Commitments

The tariff commitments made by WTO members in a multilateral trade negotiation and on accession are
enumerated in a list of concessions.

A country can change its commitments but only after negotiating with its trading partners, which could
mean compensating them for loss of trade.

If satisfaction is not obtained, the complaining country may invoke the WTO dispute settlement
procedures.

Safety Valves

A final principle embodied in the WTO is that, in specific circumstances, governments should be able to
restrict trade.

There are three types of provisions in this connection:

1. Articles allowing for the use of trade measures to attain noneconomic objectives;
2. Articles aimed at ensuring “fair competition”; and
3. Provisions permitting intervention in trade for economic reasons.

II. Trade Liberalization

With the removal of restrictions or barriers among nations, free exchange of goods thrived.

This includes the removal or reduction of

a. Tariffs,
b. Duties,
c. Surcharges,
d. Quotas and more.

Economic Integration and Free Trade conditions were introduced and produced an unstoppable
movement towards economic globalization.
While there were positive outcomes from free trade, there were also costs and implications from it.

Globalization is followed by a lot of advantages, but also disadvantages.

There is the “Unemployment Effect” – growing trade generally created more jobs, but the parallel
growth in competition has forced many companies to cut costs, therefore, firing their workers.

International Monetary System

It refers to the Rules, Customs, Instruments, Facilities, and Organizations for effecting international
payments

And IMF was intended to stabilize exchange rates between currencies and Serve as a country’s “lender
of last resort.”

To have a good system it must

1. Maximize the flow international trade and investments and

2. Leads to a balanced distribution of the gains from trade among the nations.

An international monetary system can be evaluated in terms of

1. Adjustment,
2. Liquidity, and
3. Confidence

Adjustment - refers to the process of by which balance-of-payment disequilibria are corrected.

Liquidity - refers to the amount of international reserve assets available to settle temporary balance-of-
payments disequilibria.

Confidence - refers to the knowledge that the adjustment mechanism is working adequately.

Functions of the IMF In practice, the IMF’s mandate of promoting international monetary stability
translates into three main functions:

1. Surveillance of financial and monetary conditions in its member countries and in the world
economy;
2. Financial assistance to help countries overcome major balance-of-payments problems
3. Technical assistance and advisory services to member countries.

The balance of payments (BOP) is a statement of all transactions made between entities in one country
and the rest of the world over a defined period of time, such as a quarter or a year.
IMF is a component of the World Bank Group, which is part of the United Nations System it was
established, alongside with IMF, under the Bretton Woods Institutions

Two institutions under WB:

1. International Bank for Reconstruction and Development (IBRD) – 1944

2. International Development Association (IDA) -1960

Founded in 1944 after the World War II aimed to help the economic stability of the world’s countries

The Organization for Economic Cooperation and Development (OECD),

for several years now, countries have been coming together, joining forces and forming international
organizations that can benefit the members.

There are several reasons for this joining of forces: defense and security, peace, environmental
conservation, and so on.

One of the most common reasons why countries come together is to foster economic development.

There are several international financial organizations all over the world, formed by countries looking to
bolster their economic power.

One such organization is the OECD.

What does OECD stands for?

OECD stands for the Organization for Economic Co-operation and Development.

It is an intergovernmental association formed by a number of countries in the world, whose aim is to

improve their economic welfare.

Compiled information about the OECD, from its foundation, history, current member countries, and the
purpose of the association

The OECD was founded in 1961.

It grew from a former international association the Organization for European Economic Association.

The OEEC had been founded in 1948, to distribute the American and Canadian aid as part of the Marshal
plan (for aiding Western Europe in rebuilding economies after the end of World War II).
Is the USA part of OECD?

Yes, the United States is a member of the OECD.

While it was not part of the original OEEC organization, it became a full member of the reborn OECD
during its foundation, joining the 19 other founders to establish the new association in 1960.

What is the purpose of OECD?

When the OECD was founded, it was designed to be an economic forum that would help member
countries share resources and experiences that would lead to solutions for common

1. Economic and
2. Social problems.

However, the organization is not all about member countries, as it also seeks to foster the economic and
social development of non-member countries, especially the developing nations.

OECD founded with three main aims, which are:

1. To promote economic development that would lead to high sustainable levels of Economic growth,
Employment, Standards of living, and Financial stability in member countries
2. To encourage the development of the global economy by
3. Contributing to the economic growth and development of both the member and non-member
countries
4. To promote the expansion of the global trade in a multi-lateral and non-biased manner with regards
to international obligations

Organization of Petroleum Exporting Countries (OPEC)

Founded September 14, 1960 Founding Members: Saudi Arabia, Iraq, Kuwait, Iran, and Venezuela

Member Countries

The Organization of the Petroleum Exporting Countries (OPEC) was founded in Baghdad, Iraq, with the
signing of an agreement in September 1960 by five countries namely Islamic

1. Republic of Iran
2. Iraq
3. Kuwait
4. Saudi Arabia and
5. Venezuela.

They were to become the Founder Members of the Organization.

These countries were later joined by

Qatar (1961)
Indonesia (1962)
Libya (1962)
United Arab Emirates (1967)
Algeria (1969)
Nigeria (1971
Ecuador (1973)
Gabon (1975)
Angola (2007)
Equatorial Guinea (2017) and
Congo (2018).

Ecuador suspended its membership in December 1992, but rejoined OPEC in October 2007.

Indonesia suspended its membership in January 2009, reactivated it again in January 2016, but decided
to suspend its membership once more at the 171st Meeting of the OPEC Conference on 30 November
2016.

Gabon terminated its membership in January 1995. However, it rejoined the Organization in July 2016.

Qatar terminated its membership on 1 January 2019.

This means that, currently, the Organization has a total of 14 Member Countries.

The OPEC Statute distinguishes between the

1. Founding Members and

2. Full Members - those countries whose applications for membership have been accepted by the
Conference.

The Statute stipulates that “any country with a substantial net export of crude petroleum, which has
fundamentally similar interests to those of Member Countries, may become a Full Member of the
Organization, if accepted by a majority of three-fourths of Full Members, including the concurring votes
of all Founder Members.”

The Statute further provides for Associate Members which are those countries that do not qualify for
full membership, but are nevertheless admitted under such special conditions as may be prescribed by
the Conference

List of Countries in the European Union 2019

The European Union (EU) is a group of 28 nations in Europe, formed in the aftermath of World War II.

The first batch of countries joined in 1957, which included 

1. Germany, 
2. France, 
3. Italy, 
4. Belgium, 
5. Luxembourg and
6. Netherlands.

In 1973, Denmark,  Ireland and the UK joined.

Greece joined in 1981, followed by Spain and Portugal in 1986 and Austria, Finland and Sweden in

1995.

In 2004, 9 countries were added, 2 more in 2007, and finally  Croatia  in 2013 to bring the total to 28.
 It helps in developing and expanding world trade by broadening international coo

It aims to increase cooperation for improving working conditions in north Americ

barriers to trade as it expands the market of the three countries.
Created manufacturing jobs from developed nations to less developed nations.

NAFTA has positive and negative consequences .

History of Global Market Integration

Before the rise of today’s modern’s economy, people only produced for the needs of their family.

Economy demands different sectors to work together in order to produce, distribute and exchange
products and services.
AGRICULTURAL REVOLUTION - was a period of technological improvement and increased crop
productivity that occurred during the 18th and early 19th centuries in Europe.

INDUSTRIAL REVOLUTION - With the rise of industry came new economic tools, like steam engines,
manufacturing, and mass production.

Companies that extend beyond the borders of one country are called multinational or transnational
corporations (MNCs or TNCs).

They internationally surpass national borders and take advantage of opportunities in different countries
to manufacture, distribute, market and sell their products.

Transnational corporations have a significant role in the global economy.

1. They influence the

a. Economy and
b. Politics by donating money to specific political campaigns or lobbyists.

2. Global Corporations often locate their factories in countries which can provide the cheapest labor in
order to save up for expenses in the making of a product. As a result developing nations will provide
incentives, like tax-free trade zones or cheap labor.

NEGATIVE POSITIVE

Trade does promotes the self- These include better allocation of resources
interested agendas of corporations
and give them autonomy.
The global corporations also influence Lower prices for products
politics and allow workers to be
exploited.
More employment worldwide and higher products output

The Information Revolution

Technology has reduced the role of human labor and shifted it from a manufacturing-based economy to
the one that is based on service work and the production of ideas rather than goods.