MARKET INTEGRATION

International Financial Institutions

- Globalization has brought together world economies

- It is important to remember that it is not only the economy of one country but
also other economies in the world that have a significant impact on the global
market and finance

- The strength of a more powerful economy brings a greater effect on other

countries

We’ll be talking about financial institutions and economic organizations that made
countries even closer in terms of trade.

1. The Bretton Woods System

- After the two world wars, world leaders sought to create a global economic
system that would ensure a longer-lasting global peace.

- One of their ways is to set up a network of global financial institutions that

would promote economic interdependence and prosperity.

- Inaugurated in 1944. It is a set of unified rules and policies that provided the
framework necessary to create fixed international currency exchange rates.

- Influenced by John Maynard Keynes- believed that economic crises occur not
when a country does not have enough money, but when money is not being
spent and, thereby, not moving.

- When the economies slow down, the government should reinvigorate markets
with infusions of capital

2. The International Monetary Fund (IMF)

- Stemmed from the Bretton Woods System, with the role to oversee the
exchange rates
 3. The General Agreement on Tariffs and Trade (GATT)

- 1947- Shortly after Bretton Woods, other countries made their own economic
integration through GENERAL AGREEMENT ON TARIFFS AND TRADE in
1947

- The main purpose was to reduce tariffs and other hindrances to free trade

4. World Trade Organization (WTO)

- an intergovernmental organization that regulates and facilitates international

trade.

5. The World Bank

- an international financial institution that provides loans and grants to the

governments of low- and middle-income countries for the purpose of pursuing
capital projects

History of Global Market Integration

1. The Agricultural Revolution

- The time when people learned to domesticate plants and animals, and
realized that it was much more productive than the hunter-gatherer society

Effects:
- Farming led to permanent settlements
- trade network and population growth

2. The Industrial Revolution

- The 1800s-the rise of new economic tools like the steam engine,
manufacturing, and mass production

Effects:
- People began to work as wage laborers
- began to be more specialized in their skills
 - Productivity went up
- Standards of living rose up

Two economic models that sprung around the time of the industrial revolution:

Capitalism VS Socialism

Capitalism
- system in which all natural resources and means of production are privately
owned

- Emphasis on profit maximization

- Competition as the main driver of efficiency

Socialism

- Government plays a larger role in socialism

- Socialist systems follow production under collective ownership
- Emphasis on collective goals, expecting everyone to work for the common
good
- Property is mostly owned by the government and allocated to all citizens
- Putting a higher value on meeting everyone’s basic needs

3. The Information Revolution

- The age where scientific and technological advances have reduced the
role of human labor

- Labor has shifted from manufacturing goods to the production of ideas

Effects
- digitalization and computers have replaced people because of automation
- Outsourcing jobs offshore
- Decline in union membership
-

Global Corporations

- Companies that extend beyond the border of one country are called
multinational or transnational corporations (MNCs or TNCs)
- Also called global corporations