MARKET INTEGRATION

Market integration allows for the transfer of price signals from one market to another. When markets are well
integrated, prices become more stable and food security for households is likely to increase as poor households
can get food at more affordable rates. Well developed markets can help prevent the shortages of regional foods.
This section examines how global market becomes coherent through local corporations and international
financial institutions.
At the end of this module, instructors will enable their students to:
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
Identify the attributes of global corporations

INTERNATIONAL FINANCIAL INSTITUTIONS

The need for an organisation like the IMF became evident during the great depression that ravaged the
world economy in the 1930s. A widespread lack of confidence in paper money led to a spurt in the
demand for gold and severe devaluation in the national currencies. The relation between money and
the value of goods became confused as did the relation between the value of one national currency and
another.In the 1940s, Harry Dexter (US) and John Maynard Keynes (UK) put forward proposals for a
system that would encourage the unrestricted conversion of one currency into another, establish a clear
and unequivocal value for each currency and eliminate restrictions and practices such as competitive
devaluations. The system required cooperation on a previously unattempted scale by all nations in
establishing an. innovative monetary system and an international institution to monitor it. After much
negotiations in the difficult war time conditions, the international community accepted the system and
an organisation was formed to supervise it.

International financial institutions ( IFIs) play a significant role in the social and economic development
programmes of emerging or emerging economies in many parts of the world. This role includes
advising on development projects, funding and assisting in their implementation with the following
goals and objectives: (1) To reduce global poverty and improve people’s living conditions and standards,
(2) To support sustainable economic social, and institutional development and (3) to promote regional
cooperation and integration. Its goals are accomplish through national government loans, credits and
grants. Such funding is typically related to particular programs focused on sustainable economic and
social growth. It also provides technical and advisory assistance to their borrowers and conduct
extensive research and development issues.

HISTORY OF GLOBAL MARKET INTEGRATION

In 1944, it became clear that the war was coming to an end, and the western Allied powers decide to
again to attempt building a new world order. Meeting at the Mount Washington Hotel in Bretton
Woods, New Hampshire, the US and English representatives, H.D. White and J.M. Keynes set our
create institutions so to prevent the recurrences of the conditions which led to World War II. They
proposed the creation of the 3 organizations, with each organization playing a role in the smooth
functioning of global economy. These were:
Guide Questions for discussion:
1. What is the most familiar International Financial Organization (IFO)? Compare and contrast the two legally and
financially distinct entities under the World Bank in terms of their objectives, member countries, lending terms, lending
qualifications as well as other details.
2. What role does the International Monetary Fund play in determining the value of exchange rates?
The international Bank for reconstruction and Development (IBRD of the World Bank) whose
original mandate was to rebuild the war torn economics of Europe and Asia. It has evolved into the
world’s most influential lender of foreign aid to developing nations. The international Monetary Fund
(IMF) whose primary purpose was to maintain a fixed exchange rate system known as the Bretton
Woods System. Recently it plays a highly visible and controversial role in the aftermath of the East
Asian Crisis. The International Trade Organization (ITO), which was not ratified by the US Congress
and consequently did not become a reality. However, its primary function of liberalizing world trade
was given to the General Agreement on Tariffs and Trade (GATT).

The post World War II era marked by two geopolitical events, the Cold War and the period of
decolonization. The latter saw the birth of many new nations as the European powers decolonized.
This means that many developing countries are relatively young, especially those in Africa, the Middle
East and South Asia. These newly liberated countries have to choose which economic structure to
adopt to achieve their developmental goals.

These new nations adopted government controlled economies that relied on import substitution
industrialization strategies to achieve industrialization. Import substitution means that these countries
fostered the growth of industries that produced goods and were being imported, usually from former
colonialist.

The oil price shocks of 1970s forced many Americans for the first time to realize that the US economy
was not independent from the rest of the world. The recessions following the oil crises od 1973 and in
1979 led both recession and inflation simultaneously. The oil price shocks set into motion events that
are still present in today’s global economy.

On the other hand, most developing countries saw the benefits of becoming linked to the global
economy. Industrial nations were no longer viewed as neo-colonial exploiters, but as markets for
developing countries goods. Further integration of capital markets led to emerging market
phenomena. The global movement towards more market friendly economic markets, both internally
and externally, have created a world of growing interdependence. The events across the globe are
transmitted everywhere though the global economy.

ATTRIBUTES OF GLOBAL CORPORATIONS

The rise of global corporation is a reflection of globalized market integration. The Transnational
Corporations (TNCs) and Multinational Corporation (MNCs) are no longer limited to their home
countries. They are able to expand their influence to other continents and countries. These global
corporations have common attributes. Neubauer (2014) identifies three of them; an agent of desired
economic development, an economic prominence, and a very powerful entity that can create a crisis.
These corporations hit their target of economic development by making their consumer products
available in many parts of the world.

Finally, international financial institutions play an important role in the social and economic
development programs of developing and transitional countries. They are instrumental in the
functionality of the global economy which is reliant on global corporations.

Suggested Readings :
(1) The Contemporary World (2018) by Lisandro Claudio & Patricio N. Abinales
(2) Piazolo, D. (2000). Market integration, regionalism and the global economy. European Journal of Political
Economy, 16(3), 583–586. https://doi.org/10.1016/s0176-2680(00)00016-1
 Test Your Knowledge!
Encircle the letter of the correct answer
1. This was founded at the end of World War II as an international peacekeeping organization and a forum for
resolving conflicts between nations.
a. League of nations
b. United nations
c. Bretton Woods System
d. UNICEF
1.
2. One of its main tasks is to coordinate global efforts to achieve the Millennium Development Goals which includes
halving world poverty, promoting equality between men and women, fighting diseases like HIV/AIDS, and protecting
the environment.
a. UN Development Program
b. UNICEF
c. WHO
d. SECURITY COUNCIL 1.
3. One of the declines of the nation-state is linked to these two changes which accelerated the integration of national economies into
one single global market economy.
a. global and transnational
b. local and global market
c. technological and financial
d. political and social
4. An increasing interdependence of world economies as a result of the growing scale of cross-border trade of commodities and services, flow
of international capital and wide and raid spread of technologies.
a. global market integration
b. economic globalization
c. world systems theory
d. global economy
5. The following are the interconnected dimensions of economic globalization, except:
a. the globalization of trade of goods and services
b. the globalization of financial and capital markets
c. the globalization of technology and transportation
d. the globalization of production.
6. Which of the following are examples of multinational corporations
a. Ford Motor Company, Toyota, Hyundai
b. McDonalds, Starbucks, Burger King
c.Nike, Head, Adidas
d. Banana Republic, Penshoppe, Aeropostale
7. Which of the following are the goals and objectives of International Financial Institutions
1. To reduce global poverty and improve people’s living conditions and standards.
2. To support sustainable economic social, and institutional development; and
3. To promote regional cooperation and integration.
a. 1, 2 and 3
b. 1 and 2 only
c. 2 and 3 only
d. 1 and 3 only
8. They set out create institutions so to prevent the recurrence of the conditions which led to World War II.
a. W. Wilson and G. Mazzini
b. H.D. White and J.M. Keynes
c. D. Trump and B. Obama
d. B. Gates and J. Ma
9. The original mandate of this institution was to rebuild the war torn economics of Europe and Asia. However, it has evolved into the world’s most
influential lender of foreign aid to developing nations.
a.World Bank
b. International Monetary Fund
c. International Trade Organization
d. Transnational Corporation

10. This institution play an important role in the social and economic development programs of developing and transitional countries and is
instrumental in the functionality of the global economy which is reliant on global corporations.
a. World Bank
b. International Monetary Fund
c. International Trade Organization
d. International Financial Institution

Essay Questions Write a 2-3 paragraphs essay for each question below.
1. Why is it important to emphasize that globalization is uneven?
2. How does the International Financial Institution help in poverty alleviation?