INTRODUCTION

The social institution that has one of

the biggest impacts on society is the
economy. The economy is composed of
people . It is the social institution that
organizes all production, consumption, and
trade of goods in the society. Economy
system vary from one society to another.
 THREE SECTORS

1. PRIMARY SECTORS – extracts

raw materials from natural
environments. Workers like farmers or
miners fit well in the primary sector.
2. SECONDARY SECTOR – gains the raw
material and transform them into
manufactured goods. This means, for
example, that someone from the primary
sectors extracts oil from the earth when
someone from the secondary sectors refines
the petroleum to gasoline.
3. TERTIARY SECTORS – involves
services rather than goods. It offers services
by doing things rather than making things.
Thus, economic system is more
complicated or at least, more sophisticated
than the way things used to be for much of
human history.
MARKET INTEGRATION
 Market Integration is a situation in which
separate markets for the same product
become one single market.

TYPES OF INTEGRATION
1. Backward vertical integration – this
involves a business operating earlier in
in the supply chain – e.g. a retailer buys a
wholesaler every, 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 – businesses in
the same industry and which operate at the
same stage of the production process are
combined.
 INTERNATIONAL FINANCIAL
INSTITUTION
International Financial Institutions
(IFIs) are all financial institutions operating
on an international level, by giving loans to
governments for large scale projects,
restructuring and balance of payments in
the hope of economic growth and
development.
 9 MAJOR INSTITUTION
1. Central Bank – is the financial
institution responsible for the oversight
and management of all other banks.
2. Retail and Commercial Banks –
offered products to individual consumers
while commercial banks worked directly
with businesses.
5. Savings and Loan Associations – financial
institutions that are mutually held and provide no
more than 20% of total lending to businesses fall
under the category of savings and loans association.
6. Investment Banks and Companies –
investments bank do not take deposits; instead, they
help individuals, businesses and governments raise
capital through the issuance of security. Investment
companies more commonly known as muttual fund
companies, pool funds from individual and
institutional investors to provide the access to the
broader security markets.
3. Internet Banks – a newer entrant to the
financial institution market, which works
similarly to a retail bank. Internet banks offered
the same product and services as conventional
banks, but they do so through online platforms
instead of brick and mortar locations.
4. Credit Unions – serve a specific demographic
per their field of membership, such as teachers or
members of the military. While products offered
resemble retail bank offerings, credit unions are
owned by their members and operate for their
benefit.
7. Brokerage Firms – assists individuals and
institutions in buying and selling securities
among available investors. Customers of
brokerage firms can place trades of stocks,
known as insurance companies bonds, mutual
funds, exchange traded funds and some
alternative investments.
8. Insurance Companies – Financial
institutions that help individuals transfer risk of
loss are Individuals and businesses use
insurance companies to protect against financial
loss due to death, disability, accidents, property
damage and misfortunes.
9. Mortgage Companies – Financial
institutions that originate or fund mortgage
loans are mortgage companies. While most
mortgage companies serve the individual
consumer market, some specialize in lending
options for commercial real estate only.
 THE GENERAL AGREEMENT OF
TARIFFS AND TRADE (GATT)
General Agreement on Tariffs and
Trade was a free trade agreement between
23 countries that eliminated tariffs and
increased international trade. It was the first
worldwide multilateral free trade
agreement.
 THREE PROVISIONS
GATT had three main provisions. The most
important requirement was that each member
must confer most favored nation status to
every other member. All members must be
treated equally when it comes to tariffs. It
excluded the special tariffs among members of
the British Commonwealth and customs
unions. It permitted tariffs if their removal
would cause serious injury to domestic
producers.
 Second, GATT prohibited restriction on the
number of imports and exports. The exceptions
were:
 When a government had a surplus of
agricultural products.
 If a country needed to protect its balance of
payments because its foreign exchange
reserves were low.
 Emerging market countries that needed to
protect fledging industries.
 The third provision was added in 1965. That
was because more developing countries joined
GATT, and it wished to promote them.
Developed countries agreed to eliminate tariffs
on imports of developing countries to boost
their economies. It was also in the stronger
countries’ best interests in the long run. It
would increase the number of middle class
consumer throughout the world.
 MEMBERS COUNTRIES
The original 23 GATT members were
Australia; Belgium; Brazil; Burma, (now
Myanmar); Canada; Ceylon (now Sri Lanka); Chile;
China; Cuba; Czecholoslovakia, (now Czech
Republic and Slovakia); France; India; Lebanon;
Luxembourg; Netherlands; New Zealand; Norway;
Pakistan; Southern Rhodesia; (now Zimbabwe);
Syria; South Africa; the United Kingdom; and the
United States.
 THE INTERNATIONAL MONETARY FUND AND THE
WORLD BANK
 IMF and The World Bank were founded after the World War
II. Their establishment was mainly because of peace advocacy
after the war.
 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 but of course, the richest countries were those who
 handled most of the financing and ultimately, those who had
the greatest influence.

 World Banks and IMF are established in December 27, 1945.

 In an effort to rebuild the international economic system in the
wake of World War II delegates from Allied Nations all over
established the international with the Bretton Woods Agreement on
this day in 1945. The lofty goal given to the World Bank was
reduction of poverty. Comprised of the international Bank for
Reconstruction and Development and the International
 Development Association along with the three other groups, the
World Bank provides loans to developing countries.

• In recent years the World Bank has come under criticism for its
free market reform policies, which critics say can be harmful to
economic development if implemented poorly, too quickly, or in
weak economies. They also charge the Bank with a modern of
imperialism.

OBJECTIVES OF IMF AND THE WORLD BANK

 To promote international economic cooperation, international

trade, employment, and exchange rate stability.
 ORGANIZATION FOR ECONOMIC COOPERATION
AND DEVELOPMENT

 Is a unique forum where the governments of 35

democracies with market economies work with each
other, as well as with more than 70 non member
economies to promote economic growth, prosperity,
and sustainable development.
 Most encompassing club of the richest countries in
the world.
DIRECTORATES AND MAIN COMMITTEES
 Development and Cooperation Directorate

The OECD Development Center is a research-oriented

body that promotes better understanding of developing
countries’ economic and social problems and shares the
knowledge, information and experience gained by OECD
members with the development process.
 Economics Department
The Economics Department examines economic and
financial developments in OECD countries and in selected
non-member economies. The department also produces the
twice-yearly OECD Economic Outlook and supports the work
of the Economic and Development Review Committee
(EDRC) and the Economic Policy Committee.
 Directorate for Education
The Education directorate helps member countries
achieve high-quality learning for all that contributes to
personal development, sustainable economic growth and social
cohesion. It focuses on how to evaluate and improve outcomes
of education – to promote quality teaching and to build social
cohesion through education.
 Directorate for Employment, Labor and Social Affairs
The Directorate for Employment, Labor and Social
Affairs oversees work on the inter-related policy areas that can
promote employment and prevent social exclusion.
 Center for Entrepreneurship, SMEs and Local Development
The OECD’s Center for Entrepreneurship, SMEs and
Local Development fosters an entrepreneurial society, capable
of innovating, creating jobs and seizing the opportunities
provided by globalization while helping to promote
sustainable growth, integrated development and social
cohesion.
 Environment Directorate
The Environment directorate helps member countries to
design and implement efficient, effective policies to address
environmental problems and to manage natural resources in a
sustainable way. The directorate produces regular peer reviews
of member countries environmental performance.
 Directorate for Financial and Enterprise Affairs

The Directorate for Financial and Enterprise Affairs

promotes policies and best practices designed to keep markets
open, competitive and sustainable while combating market
abuses and economic crime through international cooperation.
 Global Relations
The aim of the OECD’s Global Relations is to create a
community of economies which are committed to best policy
practices and to finding joint solutions for common challenges,
guided by the Organization’s evidence-based policy advice and
standards.
 Public Affairs and Communications Directorate
The OECD attaches great importance to cooperation and
communication with business, labor, parliamentarians, civil society,
media and the general public. The Public Affairs Divisions
Organization’s focal point for this cooperation in the OECD’s
efforts to build trust in public institutions and promote
understanding of economic and social change.
 Public Governance and Territorial Development Directorate
The Public Governance and Territorial Development
Directorate helps countries to adapt their government systems
and policies to the changing needs of society. This involves
improving government efficiency while protecting and
promoting society’s longer-term governance values.
 Directorate for Science, Technology and Innovation

The Directorate for Science, Technology and

Innovation develops evidence-based policy advice on the
contribution of science, technology and industry to societal
well-being and economic growth. It leads OECD work on the
translation of science, technology and knowledge into
innovation.
 Statistics Directorate
Statistics underpin the whole fabric of the OECD’s
work and the Organization has become one of the world’s
largest and most reliable sources of statistical, economic and
social data. This data is standardized to make them
internationally comparable and are published in both print and
electronic form.
 Center for Tax Policy and Administration
The Center for Tax Policy and Administration examines
all aspects of taxation, including international and domestic
tax issues, direct and indirect taxes and tax policy and
administration.
 Trade and Agriculture Directorate
The Trade and Agriculture Directorate’s work supports
a strong, rules-based multilateral trading system that will
maintain momentum for progressive trade liberalization and
rules-strengthening while contributing to rising standards of
living and sustainable development in OECD and non-OECD
countries.
 OTHER OECD BODIES
1. Center for Educational Research and Innovation
The Center for Educational Research and Innovation
(CERI) is a pioneer in educational research. Its primary aims are
to encourage better links between research, policy innovation and
practice, and enrich knowledge about education trends
internationally.
2. International Energy Agency (IEA)
The IEA acts as an energy advisor for member states in
their effort to ensure reliable, affordable and clean energy for
their citizens. Its role is to coordinate joint measures in times
of oil supply emergencies, and its policy-making focuses on
energy security, economic development and environmental
protection.
3. Nuclear Energy Agency (NEA)
The mission of the NEA is to assist its members in
maintaining and further developing, through international co-
operation, the scientific, technological and legal bases required
for the safe, environmentally friendly and economical use of
nuclear energy for peaceful purposes.
4. Sahel and West Africa Club (SWAC)
The Sahel and West Africa Club is the only
international platform entirely dedicated to regional issues. Its
mission is to help build more effective policies to improve
peoples’ living conditions in West Africa.
 ADVISORY BODIES
 Business Industry Advisory Committee (BIAC)
BIAC is an independent organization officially recognized
by the OECD as being representative of the business community
in Member countries. Its role is to provide the OECD and its
members with constructive comments and advice based on the
practical experience of its members.
 Trade Union Advisory Committee (TUAC)
TUAC is an international trade union organization that has
consultative status with the OECD and its various committees. It
acts as an interface for labor unions with the OECD.
 THE ORGANIZATION OF PETROLEUM EXPORTING
COUNTRIES
 The Organization of Petroleum Exporting Countries is an
organization of 14 oil-producing countries. It controls 61 percent
of the world's oil exports and holds 80 percent of the world's
proven oil reserves. OPEC's decisions have a significant impact
on future oil prices.
 It was originally comprised of Saudi Arabia, Iran, Iraq, Kuwait,
Iran, Venezuela. They are still part of the major exporters of oil
in the world today.
 It was formed because member countries wanted to increase the
price of oil, which in the past had a relatively low price and had
failed in keeping up with inflation.
 OPEC THREE GOALS
 OPEC's first goal is to keep prices stable. It wants to
make sure its members get a reasonable price for their
oil.
 OPEC's second goal is to reduce oil price volatility. For
maximum efficiency, oil extraction must run 24 hours a
day, seven days a week. Closing facilities could
physically damage oil installations and even the fields
themselves.
 OPEC's third goal is to adjust the world's oil supply in
response to shortages.
 OPEC MEMBERS

• Algeria, Angola, Ecuador,

Equatorial Guinea, Gabon, Iran,
Iraq, Kuwait, Libya, Nigeria,
Saudi Arabia, United Arab
Emirates, Venezuela.
 EUROPEAN UNION
- European Union is a political and economic union of
28 member states that are located primarily in
Europe.
- Is an international organization comprising 28
European countries and governing common
economic, social, and security policies.
 MEMBERS: Austria, Belgium, Bulgaria, Croatia, Cyprus, the
Czech Republic, Denmark, Estonia, Finland, France, Germany,
Greece, Hungary, Ireland, Italy, Luxembourg, Malta, the
Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia,
Spain, Sweden and United Kingdom.

 Purpose

Its purpose is to be more competitive in the global

marketplace. At the same time, it must balance the needs of its
independent fiscal and political members.
 Three Bodies run the EU
1. The EU Council sets the policies and proposes new
legislation. The political leadership, or presidency of the EU,
is held by different leader every 6 months.
2. The European Parliament debates and approves the laws
proposed by the council. Its members are elected every 5
years.
3. The European Commission staffs and executes the laws. Jean
Claude Juncker is the president until October 19.
 Currency

The euro is the common currency for the EU

area. It is the second most commonly held currency in
the world, after the US dollar.
 North American Free Trade Agreement
(NAFTA)
- Is a trade pact between the United States, Mexico and Canada
created on January 1, 1994 when Mexico joined the two other
nations.
- It was created in 1989 with only Canada and the United States
as trading partners.
- NAFTA helps in developing and expanding world trade by
broadening international cooperation.
 Purpose

- reduce trading costs;

- increase business investment; and
- help North America be more competitive in the global
marketplace.
 Article 102 of NAFTA Agreement

1. Grant the signatories most favored nation status

2. Eliminate barriers to trade and facilitate the cross border
movement of goods and services
3. Promote conditions of fair competition
4. Increase investment opportunities
5. Provide protection and enforcement of intellectual property
rights.
6. Create procedures for the resolution of trade disputes.
7. Establish a framework for further trilateral, regional and
multilateral cooperation to expand the trades agreement’s
benefits.