The Evolution of the Global
Economic System: From Bretton
Woods to Regional Trade
Agreements
Market Integration
Introduction
The economy is the social institution that has the biggest impact on society.
While we often talk about it in numerical terms, the economy is composed of
people. The people are the social institution that organizes everything
happening in the society; production, consumption, and trade of goods.
There are many ways in which a product can be made, exchanged and used,
such as capitalism or socialism. These economic systems – and the economic
revolutions that created them – shape the way people live their lives.
Market integration is the fusing of many markets into one. Global market
integration means that price differences between countries are eliminated
as all markets become one. For example, in a single market, the price of a
commodity like rice would be the same across different regions, as sellers
would move their stocks to equalize prices. However, high transport costs
and other expenses might mean that it would be uneconomical for sellers to
move their stocks to other places even if prices were higher there.
The strength of a more powerful economy, like the United States, brings
greater effect on other countries. Similarly, crises in weaker economies have
less effect than in other countries. Although countries are heavily affected
by the gains and crises in the world economy, the organizations that they
consist of also contribute to these events.
The Bretton Woods System
The Bretton Woods Agreement was negotiated in July 1944 to establish a
new international monetary system, the Bretton Woods System.
Approximately 730 delegates representing 44 countries met in Bretton
Woods, New Hampshire, with the principal goals of creating an efficient
foreign exchange system, preventing competitive devaluations of currencies,
and promoting international economic growth.
The Bretton Woods Agreement and System were central to these goals. The
Bretton Woods Agreement also created two important organizations—the
International Monetary Fund (IMF) and the World Bank. While the Bretton
Woods System was dissolved in the 1970s, both the IMF and World Bank
have remained strong pillars for the exchange of international currencies.
