CHAPTER 3 MARKET

INTEGRATION
P O R T
RE
TOPICS TO BE DISCUSSED
HISTORY OF GLOBAL MARKET
1 INTRODUCTION 6
INTEGRATION AND

INTERNATIONAL FINANCIAL THE AGRICULTURAL REVOLUTION AND

2 7
INSTITUTIONS THE INDUSTRIAL REVOLUTION

3 THE BRETTON WOODS SYSTEM 8 CAPITALISM AND SOCIALISM

4 GATT,WTO AND IMF 9 THE INFORMATION REVOLUTION

5 OECD,OPEC,EU AND NAFTA 10 GLOBAL CORPORATIONS

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 INTRODUCTION
ECONOMY

-A key social institution, impacts society significantly, beyond mere numerical metrics like
unemployment rates or GDP. It encompasses all aspects of production, consumption, and trade,
shaping people's lives.

ECONOMIC SYSTEMS LIKE CAPITALISM OR SOCIALISM VARY ACROSS

SOCIETIES AND ARE ORGANIZED INTO THREE SECTORS:

Primary (extracting raw materials)

Secondary (manufacturing goods)
Tertiary (providing services).

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INTERNATIONAL FINANCIAL INSTITUTIONS
Globalization has intertwined world economies, evident in the saying "When the American
economy sneezes, the rest of the world catches cold." However, it's not just the US
economy but others as well, like Russia and Asia, that significantly impact global
markets and finance.

Strong economies wield greater influence globally, while weaker ones have less impact.

Despite this interconnectedness, financial institutions and economic organizations play

a crucial role in bringing countries closer together, particularly in trade.

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 THE BRETTON WOODS SYSTEM
BRETTON WOODS SYSTEM

- Was established against the backdrop of global economic instability caused by World War
I, the Great Depression, and World War II, aiming to prevent future conflicts and promote
financial stability.

FIVE KEY ELEMENTS:

Expressing currency in terms of gold or gold value to establish a par value

Agreeing to exchange currencies at established rates with a one-percent margin
Establishing the International Monetary Fund (IMF) as an overseer of exchange rates
Eliminating restrictions on member states' currencies in international trade,
Designating the U.S. dollar as the global currency.

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 THE GENERAL AGREEMENT ON TARIFFS AND TRADE (GATT)
AND THE WORLD TRADE ORGANIZATION (WTO)
The Bretton Woods system greatly impacted global trade and finance, leading
to the establishment of the General Agreement on Tariffs and Trade (GATT) in
1947. GATT focused on multinational trade agreements, evolving into the World
Trade Organization (WTO) after the Uruguay Round (1986-1993). Unlike GATT, the
WTO addresses trade in services and non-tariff barriers, based on the principles
of neoliberalism. However, criticism arises due to the inability of the WTO to
counter trade barriers, especially in agriculture, leading to issues like food
riots. Decision-making processes favor larger trading powers, while smaller
nations and International Non-Governmental Organizations (INGOs) are excluded,
sparking protests against the WTO.

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 THE INTERNATIONAL MONETARY FUND (IMF)
AND THE WORLD BANK
The International Monetary Fund (IMF) and the World Bank were established post-World War II
with the aim of promoting global economic stability. They operate as banks but are owned by member
countries rather than individuals. While both institutions have a broad membership, wealthier
nations wield greater influence.

The IMF acts as a lender of last resort, providing financial assistance to countries facing
economic crises, such as currency instability or collapse. For example, Yemen received a loan from
the IMF in 2012 to address terrorism-related challenges. In contrast, the World Bank focuses on
long-term poverty alleviation through funding projects, particularly in developing countries like
Bangladesh, Chad, and Afghanistan, with a significant investment in education since 1962.

However, the IMF and World Bank have faced criticism for their practices, including lending to
corrupt governments or dictators and implementing ineffective austerity measures in exchange for
loans, leading to a decline in their reputation over time.

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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)

-A club of rich countries, currently with 35 members.

THE ORGANIZATION OF PETROLEUM EXPORTING COUNTRIES (OPEC)

-OPEC was formed in 1960 by five founding members: Saudi Arabia, Iraq, Kuwait, Iran, and Venezuela.
A group of major oil exporting countries, formed to increase oil prices.
Current members also include UAE, Algeria, Libya, Qatar, Nigeria, and Indonesia.

THE EUROPEAN UNION (EU)

-A union of 28 European countries. Eurozone members use euro as currency, but not all
members are in the Eurozone (e.g. Great Britain, Sweden, Denmark).

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 NORTH AMERICAN FREE TRADE AGREEMENT
(NAFTA)
The North American Free Trade Agreement (NAFTA) is a trade
agreement between the United States, Canada, and Mexico. It aimed
to increase trade between the three countries and improve working
conditions in North America.

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 HISTORY OF GLOBAL MARKET INTEGRATION

●TRANSITION FROM INDIVIDUAL FAMILY-BASED

PRODUCTION TO COLLABORATIVE ECONOMIC
SYSTEMS.
●
THE MODERN ECONOMY DEMANDS SECTORS TO
WORK TOGETHER FOR PRODUCTION, DISTRIBUTION, AND
EXCHANGE.
●THE SHIFT IN PRODUCTION METHODS OVER THE PAST
12,000 YEARS IS ESSENTIAL IN UNDERSTANDING THE
EVOLUTION OF GLOBAL MARKET INTEGRATION.

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 THE AGRICULTURAL REVOLUTION AND THE
INDUSTRIAL REVOLUTION
●AGRICULTURAL REVOLUTION: TRANSITION FROM
HUNTER-GATHERER TO AGRICULTURAL SOCIETIES,
FOSTERING SURPLUSES, SETTLEMENTS, TRADE, AND
POPULATION GROWTH.
● INDUSTRIAL REVOLUTION: EMERGENCE OF STEAM
ENGINES, MASS PRODUCTION, AND FACTORIES IN THE
1800S, ENHANCING PRODUCTIVITY, LIVING
STANDARDS, BUT ALSO CAUSING ECONOMIC
INEQUALITY.
● LABOR UNIONS: FORMED IN RESPONSE TO POOR
WORKING CONDITIONS, ADVOCATING FOR WORKERS'
RIGHTS AND INFLUENCING REGULATIONS FOR WAGES,
WORKING HOURS, AND SAFETY.

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 CAPITALISM AND SOCIALISM
There were two competing economic models that sprung up around the time
of the Industrial Revolution:
CAPITALISM
SOCIALISM

CAPITALISM
-a system in which all natural resources and means of production are privately
owned
-emphasizes profit maximization and competition as the main drivers of
efficiency.
-economist Adam Smith in the 1770s called the "invisible hand" of the market.

SOCIALISM
-property is owned by the government and allocated to all citizens, not only too
those people who has money to afford it
-Socialism emphasizes collective goals
-Karl Marx first wrote about socialism, he viewed it as a stepping stone toward
communism

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

-Agricultural jobs- which once were a massive part of the Philippine labor force, have fallen
drastically over the last century.

-The service industry includes every job such as:

·Administrative assistants
·Nurses
· Teachers
· Lawyers
- The primary labor market -includes jobs that provide many benefits to workers, like high
incomes, job security, health insurance, and retirement packages.
-These are white-collar professions, like doctors, accountants, and engineers.

- Secondary labor market jobs- provide fewer benefits and include lower-skilled jobs and lower-
level service sector jobs.
-They tend to pay less, have more unpredictable schedules, and typically do not offer
benefits like health insurance. They also tend to have less job security.

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 GLOBAL CORPORATIONS
International trade facilitated by organizations like the WTO and agreements like NAFTA have become
crucial for global prosperity. These groups regulate trade flow, reduce tariffs, and simplify
customs procedures, making international trade feasible.

Trade agreements reduce tariffs and simplify customs procedures, making cross-border trade easier.

Multinational Corporations (MNCs) or Transnational Corporations (TNCs): These corporations operate

across borders, taking advantage of opportunities in different countries to manufacture,
distribute, and sell products. They play a significant role in the global economy and often
influence politics and trade laws.

Economic Impact: MNCs often seek cheaper labor in developing nations, which can lead to
exploitation of workers and sweatshop conditions. While it brings jobs and industry to these
nations, it can also harm the working population and lead to unemployment in core countries.

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 GLOBAL CORPORATIONS
Outsourcing of labor to other countries is common, leading to job losses in core countries but
providing employment opportunities elsewhere.

Globalization through trade leads to cultural diffusion, as ideas and practices spread rapidly
through technology and communication channels. International trade and global corporations, along
with technological advancements, contribute to globalization by exchanging ideas, traditions, and
capital between nations, ultimately changing cultures and economies globally.

While globalization has economic benefits such as resource allocation and lower prices, it also has
negative effects such as exploitation of workers and cultural homogenization.

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