Global Economy & Market Integration

Global Economy & Market Integration

What is the global economy?

It is the worldwide system of trade, finance, and production where countries are interconnected and interdependent. For example, a financial crisis in one country, like the 2008 U.S. mortgage crisis, can trigger global recessions.

Define market integration.

It is the process of connecting separate markets through free trade, customs unions, or economic unions so they act as one economy. The EU is the most advanced example.

What are the four levels of market integration?

Free trade area,

customs union,

common market,

economic union.

What is the role of international financial institutions in globalization?

The IMF ensures stability and lends in crises, the World Bank funds development, and the WTO regulates trade rules. While they promote global cooperation, critics say they favor rich countries and impose harsh policies on weaker ones.

Why did multinational corporations emerge?

hey emerged to cut costs, access resources, and expand markets. Advances in transport and technology made it possible. Today, they dominate global supply chains but also raise issues like labor exploitation and local industry decline.

Narrate briefly the history of global market integration in the 20th century.

It started with the gold standard and colonial trade, collapsed during the Great Depression, revived after WWII with Bretton Woods institutions, grew with regional blocs in the 1950s–70s, accelerated in the 1980s–90s with WTO and neoliberal reforms, and today is defined by global supply chains and emerging economies like China.

What are the competing views on globalization?

Hyperglobalists say nation-states are weakening, skeptics say globalization is overstated, and transformationalists believe it reshapes states in uncertain ways.

How did the Bretton Woods system shape today’s global economy?

Bretton Woods (1944) created the IMF and World Bank and pegged currencies to the U.S. dollar. This made the U.S. central in the world economy. Even when the gold standard ended in 1971, the U.S. dollar stayed dominant. It shows how power politics and economics intertwine.

Why did the Bretton Woods system collapse?

Because the U.S. could no longer back the dollar with gold after spending heavily on the Vietnam War and social programs in the 1970s. This led to floating exchange rates, making the global economy more volatile but also more flexible.

What does the IMF do?

It lends to countries in crisis to stabilize economies.

Why is the IMF controversial?

Because its loans come with strict conditions like austerity, cutting subsidies, and privatization. While meant to stabilize economies, these often worsen poverty and inequality, especially in developing countries.

Can you give an example of IMF intervention?

Yes, during the 1997 Asian Financial Crisis, the IMF bailed out countries like South Korea and Thailand, but required them to cut spending and liberalize markets, which led to protests and political backlash.

Why do MNCs dominate globalization?

They control global supply chains, technology, and capital.

How do MNCs influence politics?

Through lobbying and foreign direct investment. For example, oil companies lobby governments for favorable energy policies, and tech giants like Meta or Google influence internet regulations.

Do MNCs help developing countries?

They bring jobs and technology, but wages are often low, and profits go back to headquarters in richer countries, so dependency remains.

What’s the difference between hyperglobalists, skeptics, and transformationalists?

Hyperglobalists see states weakening, skeptics say states remain central, and transformationalists say globalization is real but unpredictable.

Which perspective do you agree with and why?

I lean toward transformationalist because globalization is clearly reshaping economies, but states still matter. For example, China shows strong state control even while participating in globalization.

What are the levels of integration?

FTA, customs union, common market, economic union.

Why is the EU considered the most advanced example of integration?

Because it not only has a common market but also a common currency (the euro) and shared policies. This level of sovereignty pooling is rare in world history.

Why don’t all regions integrate like the EU?

Integration requires political trust, shared history, and similar economic levels. Regions like ASEAN are diverse in politics and development, making deeper integration harder.

What are the attributes of global corporations?

They operate in multiple countries, have global supply chains, and huge capital.

Are global corporations more powerful than states?

In some ways, yes. For example, Apple’s revenue is bigger than many countries’ GDPs. But corporations still rely on states for regulation, infrastructure, and protection. So power is shared, not absolute.

What is the role of the WTO?

To manage trade rules and settle disputes.

Can you give an example of a WTO trade dispute?

Yes, the U.S. and EU fought over subsidies for Boeing and Airbus. The WTO ruled that both sides violated rules, showing how even powerful economies must submit to WTO rulings.