Economic Integration

Topics: European Union, International trade, Economic integration Pages: 11 (3711 words) Published: January 12, 2011
An economic integration, established on global, continental or regional level, is not a newborn phenomenon. Ever since the voyages of Marco Polo in 1260, (Latham, 1958) the collaboration and integration of world economies- through trade, movements of factors of production and transmission of economically effective knowledge and technology- has been continuously increasing. (Masson, 2000) The overall process of globalisation and economic integration has been in most cases globally beneficial, but alongside winners it had also created losers, and the progression of economic integration has neither always advanced smoothly nor has it been advantageous to all whom it had affected. The ideas and their implementation leading towards greater economic integration have not always been digested with effortlessness and immediate comprehension, but as it is very common in the world of business, new and brave ideas generally have a long and complicated ‘gestation period’. (Wyplosz, 2006) This assignment will place an emphasis on depiction of advantages and disadvantages of various levels of economic integration occurring within the European community and also in the global context, and highlighting and evaluating the economic interaction between the European Union and the rest of the world. The rationale of creating cooperative and integrated markets would range from the common desire for social, cultural or political cohesion to the necessity to obtain the most basic economic resources. (Meade et al, 1962) The latter was once portrayed rather intriguingly by Cuban writer and avid advocate of a free-market economy, Jose Marti: “The country that wants to die sells only to one country, and the country that wants to survive sells to more than one.” (Thinkexist, 2009) A departure from survival could be found in Balassa’s Theory of Economic Integration, where he compares two extreme views of the means and objectives of the economic and political integration- ‘liberalist’ and ‘dirigist’ ideals. Defenders of economic liberalism (Maurice Allais and Wilhelm Röpke) deem European integration as a restoration and return to the free-trade ideals of the pre-WW1 Europe, while the dirigist standpoint discards the use of market processes and relies purely on non-market economic means without the lifting of trade barriers. (Balassa, 1965) A less extreme historic approach, taken by Cook and Piggot, would focus on the achievements of economic integration in the 19th century, particularly the Austro-Hungarian customs union and the ‘zollverein’ in Prussia, which led to nations’ political development, economic prosperity, and most importantly, the unification of Germany. (Cook & Piggot, 1999) There is a clear evidence that integration never happens purely on economic level. (Dearden & McDonald, 2005) The main by-product, or the actual cause of this process, is a political gain. (Downs, 1957) According to Molle, the political goal of economic integration, such as enhancing economic welfare of voters or equitable income distribution, can be reached by implementing governmental or international policies which would go ‘hand in hand’ with such processes. (Molle, 2001) Clifton argues that it is the belief in the superiority of private ownership which commands political decisions and the role of the states involved. (Clifton et al, 2003) Simon diverts the attention from governments to the large and privately-owned corporations by asking: “.. whether the economic futures of nations or states were actually being determined more within the boardrooms of the world’s largest corporations than in the corridors of government economic ministries.” (Simon, 1995) Whether the motives behind economic integration are of a political, private or social nature, the execution of this process, at its various stages, normally follows a certain pattern and the aim of integration is always the same: to benefit all parties involved. (Molle, 2001) Johnson and Turner define the...

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