CONTEMPORARY Chapter 3

Chapter 3

Market Integration
• Contributions of the different financial &
economic institutions that facilitated the
growth of the global economy
• History of the global market
• The growth & dynamics of multinational
corporations that are emerging in today’s
world economy
International Financial Institutions
• World Economies have been brought closer together by
globalization
• Reflected in the phrase: when the American economy
sneezes, the rest of the world catches a sold
• It is not only the economy of the US but also other
economies in the world that have a significant impact on
the global market & finance
The Bretton Woods System
• Fear of the recurrence of lack of cooperation
among nation-states, political instability and
economic turmoil, reduction of barriers to
trade & free flow of money among nations
became the focus to restructure the world
economy & ensure global financial stability
The General Agreement on Tariffs &
Trade & the World Trade Organization
GATT
• Was established in 1947
• Was a forum for the meeting of
representatives from 23 member countries
• Focused on trade goods through
multinational trade agreements conducted in
many rounds of negotiation
WTO
• Headquarter is located in GenevA Switzerland w/ 152 member
states
• An independent multilateral organization that became
responsible for trade in services , non-tariff related barriers to
trade and other broader areas of trade liberalization
Neoliberalism- general idea where WTO is based
- this means that by reducing or eliminating barriers,
all nations will benefit
Criticisms to WTO
1. Trade barriers created by developed countries cannot be
countered enough by WTO, especially in agriculture
a. the emerging markets in the Global South made the majority
in WTO, but they suffered under the industrial nations w/c
supported the agriculture w/ subsidies
b. grain prices increased & food riots occurred in many
members of WTO
2. The decision-making process were heavily influenced by larger
trading powers while excluding smaller powers in meetings
3. International Non-Government Organizations are not involved
The International Monetary Fund(IMF) &
The World Bank
• Were founded after the World War II
• Established because of peace advocacy after the war
• Aimed to help the economic stability of the world
• Basically banks but they are started by countries
instead of individuals
• Richest countries handled most of the financing & had
the greatest influence
• Were designed to complement each other
• Unfortunately the reputation of these
institutions have been dwindling, mainly due
to practices such as lending the corrupt
governments or even dictators and imposing
ineffective austerity measures to get their
money back
The Organization for Economic Cooperation and Development,
The Organization of Petroleum Exporting Countries and the
European Union

OECD- the most encompassing club of the

richest countries in the world
- has 35 member states as of 2016
- highly influential, despite the group
having little formal power
OPEC
• in 1960 was originally comprised of SA, Iraq, Kuwait,
Iran & Venezuela
• Was formed because member countries wanted to
increase the price of oil , w/c in the past had a relatively
low price & had failed in keeping up w/ inflation
United Arab Emirates, Algeria, Libya, Qatar, Nigeria, &
Indonesia- new members
EU
• is made up of 28 member states
• most members of the adopted the Euro as
basic currency
• Critics argue that the euro increased the
prices in Eurozones & resulted in depressed
economic growth rates like Greece, Spain &
Portugal
North American Free Trade Agreement
(NAFTA)
• is a trade pact between the US, Mexico & Canada created on January
1, 1994
• Was 1st created in 1989 with only Canada & US as trading partners
• Helps in developing & expanding world trade by broadening
international cooperation
• Aims to increase cooperation for improving working conditions in North
America by reducing barriers to trade as it expands the market of the 3
countries
• Its creation has caused manufacturing jobs from developed nations
(Canada, US) to transfer to less developed nations (Mexico) in order to
reduce the cost of their products
Positive & Negative Consequences of
NAFTA
Positive:
1. it lowered prices by removing tariffs
2. opened up new opportunities for small and
medium sized business to establish a name for
itself
3. Quadrupled trade between the 3 countries
4. Created 5M jobs
Positive & Negative Consequences of
NAFTA
Negative:
1. Excessive pollution
2. Loss of more than 682,000 manufacturing jobs
3. Exploitation of workers in Mexico
4. Moving Mexican farmers out of business
History of Global Market Integration
• Before the rise of today’s modern economy ,
people only produced for their family
• Nowadays, economy demands the different
sectors to work together in order to produce,
distribute & exchange products & services
The Agricultural Revolution & The
Industrial Revolution
• The Agricultural Revolution
- the 1st big economic change
- people learned how to domesticate plants & animals
- they realized that it was much more productive than
hunter-gathered societies
- this became the new agricultural economy
The Agricultural Revolution & The
Industrial Revolution
• Industrial Revolution
- 2nd major economic revolution
- with the rise of industry came new economic tools, like steam
engines, manufacturing & mass production
- factories popped up & changed how work functioned
- instead of working at home where people worked for their family
by making things from start to finish, they began working as wage
laborers & then becoming more specialized in their skills
OVERALL - productivity went up, standards of living rose & people
had access to a wider variety of goods due to mass production
Economic Revolution Comes with
Economic Casualties
1. The workers in the factories were mainly poor women &
children- they worked in dangerous conditions for low wages
2. 19th century industrialists became known as robber barons-
with more productivity came greater wealth but also greater
economic inequality
3. Labor unions began to form. These labor unions sought to
improve wages & working conditions through collective action,
strikes & negotiations
- LU gave way for minimum wage laws, reasonable working
hours and regulations to protect the safety of workers
Capitalism and Socialism
• Capitalism- is a system in w/c all natural resources & means of
production are privately owned
- it emphasizes profit maximization and competition as the
main drivers of efficiency
- this means that when one owns a business, he needs to
outperform his competitors if he is going to succeed
INVISIBLE HAND OF THE MARKET- he is incentivized to more
efficient by improving the quality of one’s own product & reducing
it’s prices
Socialism
• In a socialist system, the means of production are under
collective ownership
• It rejects capitalism’s private property and hands-off approaches
• Property is owned by the government and allocated to all
citizens , not only those w/ the money to afford it
• Emphasizes collective goals expecting everyone to work for the
common good & placing a higher value meeting everyone’s basic
needs than on individual profit
• Stepping stone toward communism – political & economic system
in w/c all members of a society are equal
The Information Revolution
• Ours is the time of the information revolution
• Technology has reduced the role of human labor & shifted it
from a manufacturing based economy to one that is based on
service work & the production of ideas rather than goods
• Computers & other technologies are beginning to replace many
jobs because of automation or outsourcing job offshore
• We also see the decline in union membership. Nowadays, most
unions are for public sector jobs like teachers
THANK YOU!!!!

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OECD- the most encompassing club of the

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