Economic Globalization – countries in order to be strong have decided to be one that is to

integrate their markets for their interests.

Market Integration
Market
Market Integration – it is the fusing of markets into one.

European Union – it is the best example of market integration.

Integrated  28 countries operate as a cohesive economic and political
Market Market
Market block. Of these countries, 19 are using the Euro as their
official currency.
 It acts as one economic unit in the world economy.
 This was established because of the desire to form a single
Market European political entity, end centuries of warfare among
European countries that culminated in World War 2.
 Its early focus was a common agricultural policy and
elimination of custom barriers. 
 At first it was known as European Coal and Steel Company,
then it became European Economic Community, then it
became European Community and then under the
Maastricht Treaty, it became European Union. 

Global Market Integration – the price differences between countries are eliminated as all
markets become one.

Market 1 (price
would be the
Problems in Global Market Integration
same with market
2 if they are in a  Institutional Differences between countries
single market )  Incompatibility with democracy &
sovereignty
 Removal of institutional variations between
countries
Single  It suffocates countries’ economic
Market development

Advantages of Global Market Integration

 Harmonization of institutions across
countries
Market 2  Brings prosperity
History of Global Market Integration

1. First Millenium BC
 long distance trade existed for centuries
 Driven buy growing population and income
 Created a demand for new products
2. 1820s
 Globalization took off
 Price differences started to close –up because of:
1. Transport revolution
 Steamship
 Railroads
 invention of refrigeration
2. Opening of Suez Canal
 slashed the journey time between Europe and Asia.
3. Eve of World War I
 Global economy was highly integrated
 Unprecedented flows of capital, goods and labor across borders
th
4. 9 century Onwards
 Technological change helped integrate markets because of steam powered
transport invention
5. Great Depression of the 1930s
 Governments imposed tariffs which were intended to switch the demand for
domestically produced goods
6. Smoot-Hawley Tariff
 Enacted in the United States which raised tariffs on imported goods
 Tariffs reduced demand for foreign goods
 Foreign countries retaliated that worsened the effects of Depression of 1930s
 It took decades to rebuild the world economy
7. End of the 20th Century
 Markets are more integrated as transportation cost have continued to fall
 Most tariffs have been scrapped altogether.
8. 1970s
 Trend was toward a freer flow of capital across borders
 Liberalization of capital markets, where funds for investment can be borrowed.