The Market Integration

Lesson 2

FATIMA MYNABELLE DILLERA BELDIA-DARIA, Ph.D.

Learning Outcomes:
At the end of the lesson, the learners are expected to demonstrate the following:

▪ Explain the role of international financial institutions in the

creation of a global economy;

▪ Narrate a short history of global market integration in the 20th

Century;

▪ Infer the attributes of global corporations.

Role of International Financial Institutions in the Creation of a Global Economy
Role of International Financial Institutions in the Creation of a Global Economy

After the Second World War, almost all countries around the world faced the
great challenge of bringing their feet back on the ground.

As a substitute for the unsuccessful League of Nations, the United Nations (UN)
was established on October 24, 1945.
Primarily, it was tasked to promote international cooperation and restore
international order.

Earlier in 1944 at the Monetary and Financial Conference in Bretton Woods, New
Hampshire (US), the first government-sponsored international financial institutions
were established World Bank (WB) and the International Monetary Fund (IMF).
There are two types of International Financial Institutions:

➔ Intergovernmental - The WB is an intergovernmental institution. It aims to end extreme poverty and

promote shared prosperity in a sustainable way (worldbank.org).
➔ Private
Five organizations belong to the WB Group:

● International Bank for Reconstruction and Development

● International Development Association
● International Financial Corporation
● Multilateral Investment Guarantee Agency
● International Center for Settlement and Investment Disputes.
The IMF, also an intergovernmental institution, works to foster global monetary cooperation, secure
financial stability, facilitate international trade, and more(imf.org/en.About). Like the WB, it also grants
financial assistance and loans to developing countries.
In the 1960s, regional development banks were established:

➔ Asian Development Bank (ADB) in 1960

➔ African Development Bank (AfDB) in 1964.

These two are intergovernmental financial institutions that were created to spur social progress and
economic growth to address and reduce poverty.
 There are also private international financial institutions

➔ Citigroup

➔ Merrill Lynch

Citigroup is an American multinational investment banking and financial corporation. It is the fourth largest bank in the
US (citigroup.com).

On the other hand, Merril Lynch is the wealth management division of the Bank of America. Both institutions provide
investments, stocks, or financial loans.
HISTORY OF GLOBAL MARKET INTEGRATION

Global market integration did not happen overnight:

1. Agricultural Revolution and Industrial Revolution

2. Capitalism and Socialism
3. The Information Revolution
The Agricultural Revolution

It was the first big economic change.

When people learned how to domesticate
plants and animals, they realized that it was
much more productive than hunter-gatherer
societies.
Farming helped societies build surpluses,
meaning, not everyone had to spend their
time producing food.
Thus, it led to major developments.
Industrial Revolution
Industrial Revolution

It was the second major economic revolution in 1800s.

With the rise of industry came new economic tools,

factories popped up and change how work functioned.

Instead of working at home, people began working as

wage laborers and then becoming more specialized in
their skills. Thus productivity went up, standards of
living rose, and people had access to wider variety of
goods due to mass production.
Economic Casualties:
The workers in factories worked in dangerous conditions for
low wages.
More productivity came greater wealth, but also greater
economic inequality.
Because of it, in the late 19th century, labor unions began to
form that sought to improve wages and working conditions.
Capitalism and Socialism

There were two competing economic models

that sprung around the time of Industrial
Revolution, as economic capital became more
and more important to the production of goods –
the capitalism and socialism.
Capitalism
A system in which all natural resources and means of production
are privately owned.

It emphasizes profit maximization and competition as the main

drivers of efficiency.

The idea that if one leaves a capitalist economy alone,

consumers will regulate things themselves by selecting goods
and services that provide the best value. This is what Adam
Smith called as the “invisible hands”.

In practice, an economy does not work well if it is left completely

on autopilot. It would lead to market failure such as monopoly.

Market failures are the reasons most countries are not purely
capitalist societies.
Socialism

Government plays an even larger role in

socialism.
The means of production are under collective
ownership – property is owned by the
government and allocated to all citizens, not
only those with the money to afford it.

To Karl Marx, socialism is a stepping stone to

communism
Information Revolution

Computers and other technologies are beginning to

replace many jobs because of automation or
outsourcing jobs offshore.
Development of technologies in the second half of
20th century.
Technologies has reduced the use of human labor
and shifted from a manufacturing- based economy to
one that is based on service work and the production
of ideas rather than goods
Multinational Corporations
The increase in international trade has both created and
been supported by international regulatory groups, like
WTO, and transnational trade agreements, like NAFTA.
The international trade agreements often benefit private
industries the most.

Companies can produce their goods and services across

many different countries. It is also referred as Global
corporations.
It is a company that operates in its home country, as well
as in other countries around the world.
It maintains a central office located in one country, which
coordinates the management of all other offices such as
administrative branches or factories.
SELF-ASSESSMENT QUESTIONS (SAQ/ Activity 2)

Instructions: Group Work

Choose one Filipino Global corporation, In an essay, discuss its history,

worldwide reach, and attributes as a global corporation.
 Reference:

Brazalote T., and Leomardo R. (2019). The Contemporary World. C & E Publishing, Inc. Quezon City p.17-21

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