MARKET INTEGRATION

Market Integration is a situation in which separate markets for the same product become one single
market.
Economy is composed of people. It is a social institution that organizes all production, consumption, and
trade of goods in the society.
Economic system is an organized way in which a state or nation allocates its resources and apportions
goods and services.
Three sectors of Production

1. Primary sector- Extracts raw materials from natural environments

2. Secondary sector- Gains the raw materials and transforms them into manufactured goods.
3. Tertiary sector- Involves services rather than goods.

International Financial Institutions (IFIs)

An international financial institution is a financial institution that has been established by more than one
country, and hence are subjects of international law
In many parts of the world, international financial institutions (IFIs) play a major role in the social and
economic development programs of nations with developing or transitional economies. This role includes advising
on development projects, funding them and assisting in their implementation
The International Financial Institutions (IFIs) include the World Bank, the regional development banks,
and the International Monetary Fund (IMF). They are the largest source of development finance in the world,
typically lending between US$30-$40 billion to low and middle-income countries each year.
The following are the financial institutions and economic organizations that made countries even closer
together:
The Bretton Woods System
Major economies suffered because of the World War I & II and because of the fear of the recurrence of
lack of cooperation among nation-states, political instability, and economic turmoil, reduction of barriers to trade
and shift to free trading among nations became the focus of restructure of world economy which was the main
reason why the Bretton Wood System came to its existence.
5 Key Elements
1. The expression of currency in terms of gold or gold value to establish a par value.
2. The official monetary authority in each country (a central bank or its equivalent) would agree to
exchange its own currency for those of other countries)
3. The establishment of an overseer (IMF)
4. Elimination of restrictions on the currencies.
5. US dollar became the global currency.
General Agreement on Tariffs and Trade (GATT)
GATT was established in 1947. It was a forum for the meeting of representatives from 23 member
countries
World Trade Organization (WTO)
Unlike GATT, the WTO is an independent multilateral organization that became responsible for trade in
services, non-tariff related barriers to trade, and other broader areas of trade liberalization. The headquarters of
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WTO is located in Geneva, Switzerland and it has 164 members and 23 observer governments. Liberia became the
163rd member on 14 July 2016, and Afghanistan became the 164th member on 29 July 2016.

International Monetary Fund (IMF)

IMF was founded after the World War II and its establishment was mainly because of peace advocacy after
the war. This institution aimed to help the economic stability of the world. IMF’s main goal was to help countries
which were in trouble at that time and who could not obtain money by any means, thus, it served as a lender or a
last resort for countries which needed financial assistance.
World Bank
Just like IMF, World Bank was also founded after the second world war and it also aimed to secure the
economic stability of the different countries around the world. Basically, IMF and World Bank are banks but
instead of being started by individuals like regular banks, they were started by countries. In comparison, World
had a more long-term approach. Its main goals revolved around the eradication of poverty and it funded specific
projects that helped them reach their goals, especially in poor countries.
The Organization for Economic Co-operation and Development (OECD)
The most encompassing club of richest countries in the world is the OECD with 35 member states as of
2016, with Latvia as its latest member.
The Organization of the Petroleum Exporting Countries (OPEC)
OPEC was originally comprised of Saudi Arabia, Iraq, Kuwait, Iran, and Valenzuela. They are still part of
the major exporters of oil in the world today. OPEC 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.
European Union (EU)
The European Union is made up of 28 member states. Most members in the Eurozone adopted the euro as
basic currency but some Western European nations like the Great Britain, Sweden, and Denmark did not.
The North American Free Trade Agreement (NAFTA)
NAFTA is a trade pact between the United States, Mexico, and Canada created on January 1, 1994 when
Mexico joined two other nations. It was first created in 1989 with only Canada and United States as trading
partners. This institution helps in developing and expanding world trade by broadening international cooperation.
It also aims to increase cooperation for improving working conditions in North America by reducing barriers to
trade as it expands the markets of the three countries.

HISTORY OF GLOBAL MARKET INTEGRATION

Before the rise of modern economy, people only produced for their family. Nowadays, economy demands
the different sectors to work together in order to produce, distribute, and exchange products and services.
Agricultural Revolution
The first big economic change in the history of global market is agricultural revolution. It is when people
learned to domesticate plants and animals, they realized that it was much more productive than hunter-gatherer
societies. Farming helped societies build surpluses that led to major development like permanent settlements, trade
networks and population growth.

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Industrial Revolution
This is the rise of industry which came new economic tools (steam engines), manufacturing and mass
production. This is when factories and modern technologies started to replace how human work functioned.

However economic revolutions come with economic casualties:

✔ Workers in the factories-mainly poor women and children- worked in dangerous conditions.

✔ 19th century industrialists were known as robber barons- more productivity came greater wealth but also
greater economic inequality.
✔ Labor Unions sought to improve wages and working conditions through collective action, strikes and
negotiations. Inspired by Marxist principles, labor unions gave way for minimum wage laws, reasonable
working hours, and regulations to protect the safety of workers.
Agricultural jobs, which once were a massive part of the Philippines labor force, have fallen drastically
over the last century. In other countries such as the US, manufacturing jobs, which were the lifeblood of the
economy for much of the 20th century have declined in the last 30 years. The US economy began with their many
workers serving in either the primary or secondary economic sectors. But today, much of their economy is
centered on the tertiary sector or the service industry.
Two types of Job
1. PRIMARY LABOR MARKET – this includes job that benefits to workers (white-collar professions).
2. SECONDARY LABOR MARKET – a type of job which provides fewer benefits and include lower-skilled
jobs and lower-level service sector jobs

TYPES OF ECONOMIC MODELS

CAPITALISM
Capitalism is an economic system. In it the government plays a secondary role. People and companies
make most of the decisions, and own most of the property. The means of production are largely or entirely
privately owned (by individuals or companies) and operated for profit.
An economic and political system in which a country's trade and industry are controlled by private owners
for profit, rather than by the state.

SOCIALISM
Socialism a political and economic theory of social organization that advocates that the means of
production, distribution, and exchange should be owned or regulated by the community as a whole. Socialism is an
economic system where the ways of making money (factories, offices, etc.) are owned by a society as a whole,
meaning the value made belongs to everyone in that society, instead of a group of private owners. People who
agree with this type of system are called socialists.
Below, you will see some of the most socialistic nations in the world today

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MIXED ECONOMY
Mixed economy means is privately owned businesses and government both play important roles. For example,
to protect the public and to preserve private enterprise, to help control and regulate the means of production.
Besides that, mixed economy, the government decides on resource allocation of scarce commodities.
CAPITALISM AND SOCIALISM
Socialism Vs. Capitalism is one of the highly debated topics in group discussion. These are two economic
systems which are prevalent in or adopted by different countries of the world. Capitalism is the ancient political
system, whose origin dates back to 1400 AD in Europe. On the contrary, Socialism, which is evolved from 1800
AD and its place of origin is France.
A capitalist economy is featured with the free market and less government intervention in the economy,
wherein top most priority is given to capital. As opposed to a socialist economy, refers to the organization of
society, which is characterized by the abolition of class relations and thus give more importance to people.
So, here we have presented you all the differences between capitalism and socialism, which can help you to
decide which system is best.
Definition of Capitalism
Capitalism is defined as an economic system in which the means of production, trade, and industry are
owned and controlled by the private individuals or corporations for profit. It is also known as the free market
economy or laissez-faire economy.
Under this political system, there is minimal government interference, in the financial affairs. The key
elements of a capitalistic economy are private property, capital accumulation, profit motive and highly competitive
market. The salient features of capitalism are as under:
● The factors of production are under private ownership. They can use them in a manner they think fit
although government can put some restriction for public welfare.
● There is a freedom of enterprise, i.e. every individual is free to engage in the economic activity of his
choice.
● The gap between haves and have-nots are wider due to unequal distribution of income.
● Consumer sovereignty exists in the economy i.e. producers produce those goods only that are wanted by
the customers.
● Extreme competition exists in the market between firms which uses tools like advertisement and discounts
to call customer attention.
● The profit motive is the key component; that encourages people to work hard and earn wealth.

Definition of Socialism
Socialist Economy or Socialism is defined as an economy in which the resources are owned, managed and
regulated by the State. The central idea of this kind of economy is that all the people have similar rights and in this
way, each and every person can reap the fruits of planned production.

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 As the resources are allocated, in the direction of the centralized authority, that is why it is also termed as a
Command Economy or Centrally Planned Economy. Under this system, the role of market forces is negligible in
deciding the allocation of factors of production and the price of the product. Public Welfare is the fundamental
objective of production and distribution of product and service.
The salient features of Socialism are as under:
● In socialistic economy, collective ownership exists in the means of production that is why the resources are
aimed to utilize for attaining socioeconomic goals.
● Central Planning Authority exists for setting the socioeconomic objectives in the economy. Moreover, the
decisions belonging to the objectives are also taken by the authority only.
● There is an equal distribution of income to bridge the gap between rich and poor.
● People have the right to work, but they cannot go for the occupation of their choice as the occupation is
determined only by the authority.
● As there is planned production, consumer sovereignty has no place.
● The market forces do not determine the price of the commodities due to lack of competition and absence of
profit motive.

Key Differences between Capitalism and Socialism

The following are the major differences between capitalism and socialism
1. The economic system, in which the trade and industry are owned and controlled by private individuals, is
known as Capitalism. Socialism, on the other hand, is also an economic system, where the economic
activities are owned and regulated by the state itself.

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 2. The basis of capitalism is the principal of individual rights, whereas socialism is based on the principle of
equality.
3. Capitalism encourages innovation and individual goals while Socialism promotes equality and fairness
among society.
4. In the socialist economy, the resources are state-owned but in the case of the capitalist economy, the means
of production are privately owned.
5. In capitalism the prices are determined by the market forces and therefore, the firms can exercise monopoly
power, by charging higher prices. Conversely, in Socialism government decides the rates of any article
which leads to shortages or surfeit.
6. In Capitalism the competition between firms is very close whereas in Socialism there is no or marginal
competition because the government controls the market.
7. In Capitalism, there is a large gap between rich class and poor class because of unequal distribution of
wealth as opposed to socialism where there is no such gap because of equal distribution of income.
8. In Capitalism, every individual works for their own capital accumulation, but in Socialism, the wealth is
shared by all the people equally.
9. In Capitalism every person has the right to freedom of religion which also exists in Socialism, but
Socialism gives more emphasis on secularism.
10. In Capitalism, the efficiency is higher as compared to Socialism because of the profit incentive that
encourages the firm to produce such products that are highly demanded by the customers while in a
socialist economy there is a lack of motivation to earn money, which leads to inefficiency.
11. In Capitalism, there is no or marginal government interference which is just opposite in the case of
Socialism.
Source: Surbhi, S. 2018, The Differences of Capitalism and Socialism.

CORPORATIONS – these are organizations that exist as legal entities and have liabilities that are separate from
its members.
GLOBAL CORPORATIONS
These are companies that extend beyond the borders of one country are called multinational or
transnational corporations (MNCs OR TNCs). They are also referred to as global corporations.
There seem to be a lot of negative effects of globalization from transnational corporations. Trade does
promote the self- interested agendas of corporations and give them autonomy. The global corporation also
influence politics and allow workers to be exploited.
Positive Effects Opportunities

● Better allocation of resources ● high growth in the external environment

● Lower prices for products ● as GDP growth migrates from mature
● More employment worldwide economies becomes highly relevant to capture
● Higher product output growth in higher growth markets

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