CONTEMPORARY WORLD
Lesson 14: MARKET INTEGRATION
Market integration – refers to the process of creating a unified marketplace where goods, services and
capital can flow freely between countries or regions.
One of the main benefits of market integration is that it allows firms to access a larger pool of customers
and suppliers which can increase their profits and lead to higher levels of economic growth.
But at the same time, market integration can create winners or losers, with some industries benefiting more
than others. Firms that can compete internationally may thrive in a more integrated market, while firms in
industries that are not globally competitive may suffer.
Overall, market integration is an important aspect of economic globalization as it helps increase economic
efficiency and promote growth. However, it is important to ensure that the benefit of integration is shared
fairly and that measures are taken to address the negative impacts that can arise for certain regions.
The social institution that has one of the biggest impacts on society is the economy.
It is the social institution that organizes all production, consumption, and trade of goods in society. It is the
process or system by which goods and services are produced, sold, and bought in a country or region.
Economic systems vary from one society to another. But in any given economy, production
typically splits into three sectors. The four economic sectors are the primary, secondary, tertiary, and the
quaternary sector.
1.) The primary sector extracts raw materials from the natural environment. (example; farms or agriculture,
fishing, mining) Workers like farmers or miners fit well in the primary sector.
2.) The secondary sector gains the raw materials and transforms them into manufactured goods. Raw
materials are turned into finished products. This means, for example, that someone from the primary sector
extracts oil from the earth then someone from the secondary sector refined the petroleum to gasoline.
Example; manufacturing, industry, chemistry)
3.) The tertiary sector is composed of companies that sell products or services to the consumer. It offers
services by doing things rather than making things.
Example; Commercial companies- sell goods to the consumer.
Service companies- sell services to the consumers such as banks, security, communication, construction.
As a nation develops, it will typically move from the primary sector towards the quaternary sector
over time, though all four are crucial to thew economic welfare of a country and the world as a whole.
INTERNATIONAL FINANCIAL INSTITUTIONS
That IFIs refers to financial institutions that have been established by more than one country.
World economies have been brought close together by globalization. It is reflected in the phrase
“When the American economy sneezes, the rest of the world catches a cold.”
But it is important to remember that it is not only in the economy of the United States but also in
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. In the same manner, crises in
weaker economies have less effect on other countries.
THE BRETTON WOODS SYSTEM
The Bretton Wood system was inaugurated in 1944 during the United Nations Monetary and
Financial Conference to prevent the catastrophes of early decades of the century from reoccurring and
affection international ties. After the two world wars, the world leaders sought to create economic system
that would ensure long lasting peace. In order to prevent another war, they had the Bretton Wood system.
This system was largely influenced by the ideas of British economist Jhon Maynard Keynes who believed
that economic crisis occurs not when a country does not have enough money, but when money is not being
spent, and thereby not moving.
When economies slow down according to Keynes, governments have to reinvigorate (to encourage)
markets with infusions of capital.
Setting up a system of rules, institutions, and procedures to regulate the international monetary
system, these accords established the IMF and the World Bank.
THE INTERNATIONAL MONETARY FUND (IMF) and the WORLD BANK
IMF and the World Bank were founded after World War II. Their establishment was mainly because
of peace advocacy after the war. These institutions aimed to help the economic stability of the world. 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 rich
countries were those who handled most of the financing and ultimately, those who had the greatest
influence.
IMF and World Bank were designed to complement each other. The IMF’s main goal was to help
countries that were in trouble at that time and who could not obtain money by any means. Perhaps, their
economy collapsed or their currency was threatened. The IMF, in this case, served as a lender or a last
resort for countries that need financial assistance. For instance, Yemen loaned 93 million dollars from the
IMF on April 5, 2012 to address its struggle with terrorism.
The World Bank, (International Bank of Reconstruction and Development) in comparison, had a
more long-term approach. Its main goals revolved around the eradication of poverty and it funded specific
projects that help them reach their goals, especially in poor countries. An example of such is their
investment in education since 1962 in developing countries like Bangladesh, and Afghanistan.
In the early 1970’s, the process of oil rose sharply as a result of the OAPEC’s imposition of an
embargo in response of the decision of the US and other countries to resupply the Israeli military with the
needed arms during the Yom Kippur War. Arab countries also used the embargo to stabilize their
economies and growth. The oil embargo affected the Western economies that were reliant on oil. To make
the matters worse, the stock markets crashed in 1973-1974 after the US stopped linking the dollar to gold
effectively ending the Bretton Wood system.
