Global Economy and Market Integration

 - Process of economic transformation within a region, bloc, or group of countries, aimed at pegging one price for the same product, thereby directly or indirectly merging previously separate markets or economic communities into one single market or economic community

Market Integration

Under globalization, the global economy’s operation is shaped and influenced by governments, global or multinational corporations (MNCs), and global institutions – the very same sectors that laid the foundations of _

contemporary market integration.

___ function as leading policymakers and implementers of globalization’s tenets.

Governments

___ are also partly managed and funded by governments and their representatives.

Global institutions

Meanwhile, ____ ensure a leading role in making the cogs of capitalist globalization operate as smoothly, efficiently, and profitably as possible.

global corporations

____ has its roots in the institutionalization of international monetary systems or the means of for international payments.

Contemporary economic globalization

To some extent, ___, ___, and other precious metals were already used as de facto currency in many parts of the world even before the modern times.

silver

gold

Other than barter or trade among precolonial Asians, products can be paid for by ____and ____.

gold

other metals

Minting coins with arbitrary face value started the process which later led to the formal adoption of _____, at least in the Western world.

international monetary systems

In the 1800s, the United Kingdom, the Unites States of America, and Europe adopted the ____.

GOLD STANDARD

According to ____:

“the gold standard was a commitment by participating countries to fix the prices of their domestic currencies in terms of a specified amount of gold. National money and other forms of money were freely converted into gold at the fixed price.”

Michael Bordo

This means that currencies were backed with gold: every piece of paper money has an equivalent amount of ____, hence when people use paper money, it’s as if they are using gold.

gold

“___was believed to guarantee non-inflationary, stable economic environment, a means for accelerating international trade.”

gold

Why Gold?

“gold was believed to guarantee non-inflationary, stable economic environment, a means for accelerating international trade.”

____ elaborates that:

“When a country’s government went ‘on gold,’ it promised to exchange its currency for gold at a pre-established rate,” thus the gold standard “provided an important degree of predictability for world trade, lending, investment, migration and payments.”

Dennis Mueller

In the same period, ___ powers intensified their use of their colonies in Asia, Africa, and Latin America as sources of raw materials and markets for finished goods.

International trade flourished with most of the benefits going to ___ powers.

Western

____ in production and transportation accelerated industrialization and facilitated swifter trade. International trade aided by global standard led to market integration.

Technological inventions

World War 1, the crisis years of 1930s (the Great Depression), and World War 2 devastation helped lay the rationale for the founding of the ____ which replaced the gold standard and aided capitalist countries toward achieving closer economic integration.

Bretton Woods system

This system is the precursor to the current global economic setup.

Bretton Woods system

In 1944, 44 capitalist countries led by the US met at ____, a town in New Hampshire, resulting in agreements that “created an international basis for exchanging one currency for another.

Bretton Woods

In ____, __capitalist countries led by the US met at Bretton Woods, a town in New Hampshire, resulting in agreements that “created an international basis for exchanging one currency for another.

1944

44

In 1944, 44 capitalist countries led by the US met at Bretton Woods, a town in New Hampshire, resulting in agreements that “created an international basis for exchanging one currency for another.

It also led to the creation of the ____ and the International Bank for Reconstruction and Development, now known as the ___.

International Monetary Fund (IMF)

World Bank (WB)

- designed to monitor exchange rates and lend reserve currencies to nations with trade deficits

International Monetary Fund (IMF)

- designed to provide underdeveloped nations with needed capital with the member-nations contributing “a membership fee, to fund these institutions; the amount of each contribution designated a country’s economic ability and dictated its number of votes.

World Bank (WB)

The Bretton Woods system further stimulated international trade and financed postwar reconstruction as:

“the member states agreed to fix their exchange rates by tying their currencies to the ____.

US Dollar

The Bretton Woods system further stimulated international trade and financed postwar reconstruction as:

“the member states agreed to fix their exchange rates by tying their currencies to the US Dollar. American politicians, meanwhile, assured the rest of the world that its currency was dependable by linking the US dollars to gold; $1 equaled __ oz. of bullion.

35 bullion

Nations also agreed to buy and sell dollars to keep their currencies at _% of the fixed rate. And thus the golden age of the US dollar began.”

1

From then on, the ___ became the world’s leading international currency

US dollar

From then on, the US dollar became the world’s leading international currency. With the IMF and the WB both under its control and influence, US dominance in the capitalist world remained undisputed until ___outperformed the former in terms of Gross Domestic Product (GDP).

China

This global economic system remains intact, though not immune to various crises such as the ___ and the ___.

Asian financial crisis in the 1990s

international crisis in 2008

Global interstate system

a system of unequally powerful and competing states in which no single state is capable of imposing control on all others

interstate system by Chase- Dunn (1981)