MARKET INTEGRATION liberalization.

The headquarters of WTO is located in Geneva,

- Market Integration is a situation in which separate markets for Switzerland and it has 164 members and 23 observer
the same product become one single market. governments. Liberia became the 163rd member on 14 July 2016,
- Economy is composed of people. It is a social institution that and Afghanistan became the 164th member on 29 July 2016.
organizes all production, consumption, and trade of goods in the
society. International Monetary Fund (IMF)
- Economic system is an organized way in which a state or nation IMF was founded after the World War II and its establishment was
allocates its resources and apportions goods and services. mainly because of peace advocacy after the war. This institution
aimed to help the economic stability of the world. IMF’s main
Three sectors of Production goal was to help countries which were in trouble at that time and
1.Primary sector- Extracts raw materials from natural who could not obtain money by any means, thus, it served as a
environments lender or a last resort for countries which needed financial
2.Secondary sector- Gains the raw materials and transforms them assistance.
into manufactured goods.
3.Tertiary sector- Involves services rather than goods. World Bank
Just like IMF, World Bank was also founded after the
International Financial Institutions (IFIs) second world war and it also aimed to secure the economic
An international financial institution is a financial institution that stability of the different countries around the world. Basically,
has been established by more than one country, and hence are IMF and World Bank are banks but instead of being started by
subjects of international law individuals like regular banks, they were started by countries. In
comparison, World had a more long-term approach. Its main goals
In many parts of the world, international financial institutions revolved around the eradication of poverty and it funded specific
(IFIs) play a major role in the social and economic development projects that helped them reach their goals, especially in poor
programs of nations with developing or transitional economies. countries.
This role includes advising on development projects, funding them
and assisting in their implementation The Organization for Economic Co-operation and
Development (OECD)
The International Financial Institutions (IFIs) include the World The most encompassing club of richest countries in the
Bank, the regional development banks, and the International world is the OECD with 35 member states as of 2016, with Latvia
Monetary Fund (IMF). They are the largest source of development as its latest member.
finance in the world, typically lending between US$30-$40 billion
to low and middle-income countries each year. The Organization of the Petroleum Exporting Countries
The following are the financial institutions and economic (OPEC)
organizations that made countries even closer together: OPEC was originally comprised of Saudi Arabia, Iraq,
Kuwait, Iran, and Valenzuela. They are still part of the major
The Bretton Woods System exporters of oil in the world today. OPEC was formed because
Major economies suffered because of the World War I member countries wanted to increase the price of oil, which in the
& II and because of the fear of the recurrence of lack of past had a relatively low price and had failed in keeping up with
cooperation among nation-states, political instability, and inflation.
economic turmoil, reduction of barriers to trade and shift to free
trading among nations became the focus of restructure of world European Union (EU)
economy which was the main reason why the Bretton Wood The European Union is made up of 28 member states.
System came to its existence. Most members in the Eurozone adopted the euro as basic currency
but some Western European nations like the Great Britain,
5 Key Elements Sweden, and Denmark did not.
1.The expression of currency in terms of gold or gold value to
establish a par value. The North American Free Trade Agreement (NAFTA)
2.The official monetary authority in each country (a central bank NAFTA is a trade pact between the United States,
or its equivalent) would agree to exchange its own currency for Mexico, and Canada created on January 1, 1994 when Mexico
those of other countries joined two other nations. It was first created in 1989 with only
3.The establishment of an overseer (IMF) Canada and United States as trading partners. This institution
4.Elimination of restrictions on the currencies. helps in developing and expanding world trade by broadening
5.US dollar became the global currency. international cooperation. It also aims to increase cooperation for
improving working conditions in North America by reducing
General Agreement on Tariffs and Trade (GATT) barriers to trade as it expands the markets of the three countries.
GATT was established in 1947. It was a forum for the meeting of
representatives from 23 member countries HISTORY OF GLOBAL MARKET INTEGRATION
Before the rise of modern economy, people only produced for
World Trade Organization (WTO) their family. Nowadays, economy demands the different sectors to
Unlike GATT, the WTO is an independent multilateral work together in order to produce, distribute, and exchange
organization that became responsible for trade in services, non- products and services.
tariff related barriers to trade, and other broader areas of trade
Agricultural Revolution
The first big economic change in the history of global market is MIXED ECONOMY
agricultural revolution. It is when people learned to domesticate Mixed economy means is privately owned businesses and
plants and animals, they realized that it was much more productive government both play important roles. For example, to protect the
than hunter-gatherer societies. Farming helped societies build public and to preserve private enterprise, to help control and
surpluses that led to major development like permanent regulate the means of production. Besides that, mixed economy,
settlements, trade networks and population growth. the government decides on resource allocation of scarce
commodities.
Industrial Revolution
This is the rise of industry which came new economic tools (steam CAPITALISM AND SOCIALISM
engines), manufacturing and mass production. This is when Socialism Vs. Capitalism is one of the highly debated topics in
factories and modern technologies started to replace how human group discussion. These are two economic systems which are
work functioned. prevalent in or adopted by different countries of the world.
Capitalism is the ancient political system, whose origin dates back
However economic revolutions come with economic casualties: to 1400 AD in Europe. On the contrary, Socialism, which is
 Workers in the factories-mainly poor women and evolved from 1800 AD and its place of origin is France.
children- worked in dangerous conditions.
 19th century industrialists were known as robber A capitalist economy is featured with the free market and less
barons- more productivity came greater wealth but also government intervention in the economy, wherein top most
greater economic inequality. priority is given to capital. As opposed to a socialist economy,
 Labor Unions sought to improve wages and working refers to the organization of society, which is characterized by the
conditions through collective action, strikes and abolition of class relations and thus give more importance to
negotiations. Inspired by Marxist principles, labor unions people.
gave way for minimum wage laws, reasonable working
hours, and regulations to protect the safety of workers. Definition of Capitalism
Capitalism is defined as an economic system in which the means
Agricultural jobs, which once were a massive part of the of production, trade, and industry are owned and controlled by the
Philippines labor force, have fallen drastically over the last private individuals or corporations for profit. It is also known as
century. In other countries such as the US, manufacturing jobs, the free market economy or laissez-faire economy.
which were the lifeblood of the economy for much of the 20th
century have declined in the last 30 years. The US economy began Under this political system, there is minimal government
with their many workers serving in either the primary or interference, in the financial affairs. The key elements of a
secondary economic sectors. But today, much of their economy is capitalistic economy are private property, capital accumulation,
centered on the tertiary sector or the service industry. profit motive and highly competitive market. The salient features
of capitalism are as under:
Two types of Job
1.PRIMARY LABOR MARKET – this includes job that  The factors of production are under private ownership.
benefits to workers (white-collar professions). They can use them in a manner they think fit although
2.SECONDARY LABOR MARKET – a type of job which government can put some restriction for public welfare.
provides fewer benefits and include lower-skilled jobs and lower-  There is a freedom of enterprise, i.e. every individual is
level service sector jobs free to engage in the economic activity of his choice.
 The gap between haves and have-nots are wider due to
TYPES OF ECONOMIC MODELS unequal distribution of income.
CAPITALISM  Consumer sovereignty exists in the economy i.e. producers
is an economic system. In it the government plays a secondary produce those goods only that are wanted by the customers.
role. People and companies make most of the decisions, and own  Extreme competition exists in the market between firms
most of the property. The means of production are largely or which uses tools like advertisement and discounts to call
entirely privately owned (by individuals or companies) and customer attention.
operated for profit.  The profit motive is the key component; that encourages
An economic and political system in which a country's trade and people to work hard and earn wealth.
industry are controlled by private owners for profit, rather than by
the state. Definition of Socialism
Socialist Economy or Socialism is defined as an economy in
SOCIALISM which the resources are owned, managed and regulated by the
a political and economic theory of social organization that State. The central idea of this kind of economy is that all the
advocates that the means of production, distribution, and exchange people have similar rights and in this way, each and every person
should be owned or regulated by the community as a whole. can reap the fruits of planned production.
Socialism is an economic system where the ways of making
money (factories, offices, etc.) are owned by a society as a whole, As the resources are allocated, in the direction of the centralized
meaning the value made belongs to everyone in that society, authority, that is why it is also termed as a Command Economy or
instead of a group of private owners. People who agree with this Centrally Planned Economy. Under this system, the role of market
type of system are called socialists. forces is negligible in deciding the allocation of factors of
production and the price of the product. Public Welfare is the Capitalism:
fundamental objective of production and distribution of product  Capitalism is an economic system where the means of
and service. production are owned by private individuals.
 Companies live by the profit motive. They exist to make
The salient features of Socialism are as under: money. All companies have owners and managers.
 In socialistic economy, collective ownership exists in the  It is the government’s job by enforcing laws and regulations
means of production that is why the resources are aimed to to make sure there is a level playing field for privately-run
utilize for attaining socioeconomic goals. companies.
 Central Planning Authority exists for setting the
socioeconomic objectives in the economy. Moreover, the Socialism:
decisions belonging to the objectives are also taken by the  The means of production, such as money and other forms of
authority only. capital, are owned by the state or public.
 There is an equal distribution of income to bridge the gap  Under a socialist system, everyone works for wealth that is
between rich and poor. in turn distributed to everyone.
 People have the right to work, but they cannot go for the  The government decides how wealth is distributed among
occupation of their choice as the occupation is determined the people. They provide for the people.
only by the authority.
 As there is planned production, consumer sovereignty has CORPORATIONS – these are organizations that exist as legal
no place. entities and have liabilities that are separate from its members.
 The market forces do not determine the price of the
commodities due to lack of competition and absence of GLOBAL CORPORATIONS
profit motive. These are companies that extend beyond the borders of one
country are called multinational or transnational corporations
Key Differences between Capitalism and Socialism (MNCs OR TNCs). They are also referred to as global
1.The economic system, in which the trade and industry are owned corporations.
and controlled by private individuals, is known as Capitalism.
Socialism, on the other hand, is also an economic system, where There seem to be a lot of negative effects of globalization from
the economic activities are owned and regulated by the state itself. transnational corporations. Trade does promote the self- interested
2.The basis of capitalism is the principal of individual rights, agendas of corporations and give them autonomy. The global
whereas socialism is based on the principle of equality. corporation also influence politics and allow workers to be
3.Capitalism encourages innovation and individual goals while exploited.
Socialism promotes equality and fairness among society.
4.In the socialist economy, the resources are state-owned but in Positive Effects
the case of the capitalist economy, the means of production are  Better allocation of resources
privately owned.  Lower prices for products
5.In capitalism the prices are determined by the market forces and  More employment worldwide
therefore, the firms can exercise monopoly power, by charging  Higher product output
higher prices. Conversely, in Socialism government decides the
rates of any article which leads to shortages or surfeit. Opportunities
6.In Capitalism the competition between firms is very close  high growth in the external environment
whereas in Socialism there is no or marginal competition because  as GDP growth migrates from mature economies becomes
the government controls the market. highly relevant to capture growth in higher growth mark
7.In Capitalism, there is a large gap between rich class and poor
class because of unequal distribution of wealth as opposed to
socialism where there is no such gap because of equal distribution
of income.
8.In Capitalism, every individual works for their own capital
accumulation, but in Socialism, the wealth is shared by all the
people equally.
9.In Capitalism every person has the right to freedom of religion
which also exists in Socialism, but Socialism gives more emphasis
on secularism.
10.In Capitalism, the efficiency is higher as compared to
Socialism because of the profit incentive that encourages the firm
to produce such products that are highly demanded by the
customers while in a socialist economy there is a lack of
motivation to earn money, which leads to inefficiency.
11.In Capitalism, there is no or marginal government interference
which is just opposite in the case of Socialism.
Source: Surbhi, S. 2018, The Differences of Capitalism and
Socialism.