MARKET INTEGRATION

Introduction:

ECONOMY

 Number of unemployed
 Gross Domestic Product (GDP)
 Stock Market

 Composed of people
 It is the social institution that organizes all the product, consumption and trade of goods in
society
 Economic systems vary from one society to another

PRODUCTION

PRIMARY SECTOR- extract raw materials from natural environment

SECONDARY SECTOR- gains the materials and transforms them into manufactured goods

TERTIARY SECTOR- involves service rather than goods

-it offers service by doing things rather than making things

INTERNATIONAL FINANCIAL INSTITUTIONS

 World economies have been brought closer together by globalization

-“when the American economy sneezes, the rest of the world catches a cold”
 It is important to remember that it is not only the economy of the United States but also other
economies in the world that have significant impact on the global market and finance.

Financial Crises- experienced by Russia and Asia affected the world economy.

Crises on weaker economies- have less effect on the other countries

 Although countries are heavily affected by the gains and crises in the world economy, the
organizations that they consist also contribute to these events.

COMMON GOAL:

 To reduce global poverty and improve people’s living conditions and standards
 To support sustainable economic, social and institutional development
 To promote regional cooperation and integration

THE BRETTON WOODS SYSTEM

 July 1 1944- delegates from 44 countries met to create a new international monetary system.
The conference was held at Bretton woods, New Hampshire
  Currencies became convertible
 Countries settled their international balance in dollars while US were fully convertible to gold
 Exchange Rate: $35 per ounce of gold.
 The agreement dissolved between 1968 and 1973
 1971- The US president Richard Nixon announced the suspension of the agreement
 1973- the system officially ended

THE GENERAL AGREEMENT ON TARIFFS AND TRADE (GATT)

 Legal agreement between many countries whose overall purpose was to promote international
trade by reducing or eliminating trade barriers such as tariffs or quotas
 1947
 Uruguay rounds (1986-1993)

WORLD TRADE ORGANIZATION (WTO)

 Global International Organization dealing with the rules of trade between nation
 Geneva, Switzerland
 1995
 Based on Neoliberalism

THE INTERNATIONAL MONETARY FUND (IMF) AND THE WORLD BANK

INTERNATIONAL MONETARY FUND (IMF)

-Its main goal is to help countries which were in trouble at time and who could not obtain money by
many means

-Served as a lender or a last resort for countries which needed financial assistance

WORLD BANK

- Had a more long-term approach

- Its main goals revolved around the eradication of poverty and it founded specific product that
helped them reached their goals especially in poor countries

THE ORGANIZATION FOR ECONOMIC COOPERATION AND DEVELOPMENT (OECD), ORGANIZATION OF

PETROLEUM EXPORTING COUNTRIES (OPEC), and the EUROPEAN UNION (EU)

OECD

-The most encompassing club of the richest countries in the world

OPEC

-Founded in 1960, was originally comprised of Saudi Arabia, Iraq, Kuwait, Iran and Venezuela.
They are still part of the major exporters of oil in the world today.

-The United Arab Emirates, Algeria, Libya, Qatar, Nigeria and Indonesia- are also included as
members in OPEC.

EU

-is made up of 28 member states. Most members in the Eurozone adopted the Euro as basic
currency.

-critics argue that the euro increased the price in eurozones and resulted in depressed economic
growth rates like in Greece, Spain and Portugal

 POLICIES OF THE EUROPEAN CENTRAL BANK- are considered to be significant

contributor in these situations

NORTH AMERICAN FREE TRADE AGREEMENT (NAFTA)

-Trade Pact between the United States, Mexico and Canada created on January 1, 1994

-First created on 1898 with only the United States and Canada

NAFTA HELPS:

-Develop and expand world trade and increase cooperation for improving working conditions

PROS AND CONS OF NAFTA

PROS:

1. NAFTA lowered the price of many goods

2. NAFTA was good for GDP

3. NADTA was good for diplomatic relations

CONS:

1. It led to the loss of many US manufacturing jobs

2. It hurt the economic prospects of Mexican small farmers and small business owners

3. Suffered wages for non-college educated workers in the US

GLOBAL MARKET INTEGRATION

- The process by which a company combines different activities around the world so that they
operate using the same methods

THE INDUSTRIAL REVLUTION AND THE INDUSTRIAL REVOLUTION

AGRICULTURAL REVOLUTION

-When people learned how to domesticate plants and animals, they realized that it was more productive
than hunter gather societies. This becomes the new Agricultural economy.

INDUSTRIAL REVOLUTION

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

-As a result, nineteenth century industrialist were known.

-“with more productivity came greater wealth, but also greater economic inequality” (Robert Barons)

- Labor Unions (Marxist Principles)- gave way for minimum wage laws, reasonable working hours and
regulations to the protection and safety of workers

CAPITALISM AD SOCIALISM

CAPITALISM

- Is a system in which all natural resources and means of production are privately owned
- The “invisible hand of the market” is a term used by Adam Smith (1770) to describe the
unintended social benefits of an individual's self-interested actions. The phrase was employed
by Smith with respect to income distribution and production.

SOCIALISM

-in a socialist system, the means of production are under collective ownership.

SOCIALISM, PROPERTY is owned by the government and allocated to all citizens, not only those with the
money to afford it.

 A study of european capitalist countries and socialist countries in the 1970s found that the income
ratio between the top 5% an the bottom 5% in capitalist countries was about 10- 1; whereas, in
socialist countries, it was 5- 1.

Those TWO MODELS are not the end of the story because we are living in the middle of the economic
revolution that followed the INDUSTRIAL REVOLUTION

THE INFORMATION REVOLUTION

SERVICE INDUSTRY -includes every job such as administrative assistants, nurses, teachers and lawyers

PRIMARY LABOR MARKET- include job that provide many benefits to workers like high incomes, job
security, health insurance and retirement packages.

SECONDARY LABOR MARKET- provide fewer benefits and include lower skilled jobs and lower service
sector jobs.

CORPORATIONS- defined as organizations that exist as legal entities and have liabilities that are
separate from its members.

GLOBAL CORPORATION

It is a business that operates in two or more countries

NEGATIVE AND POSITIVE EFFECTS OF GLOBAL CORPORATION

NEGATIVE

1. Workers are employed

POSITIVE

1. Better allocation of resources

2. Lower prices of products

3. More employment worldwide

4. Higher product output