What are the Benefits and Disbenefits of Economic Integration?
Answer:
The greater the economic integration among countries and regions, the greater are the economic benefits to all people in these regions/countries. Efficiency increases, technology spreads, people falling outside the mainstream gets integrated, peace and prosperity expands.
The costs of economic integration are temporary and generally hurts vested interests of businessmen, industrialists, organized/unionised labor and politicians who are better of in protected economies not inetgrated to other countries/ regions economically.
Economic integration is a term used to describe how different aspects between economies are integrated. The basics of this theory were written by the Hungarian Economist Béla Balassa in the 1960s. As economic integration increases, the barriers of trade between markets diminishes. The most integrated economy today, between independent nations, is the European Union and its euro zone. The degree of economic integration can be categorized into six stages:
Preferential trading area
Free trade area
Customs union
Complete economic integration is the final stage of economic integration. After complete economic integration, the integrated units have no or negligible control of economic policy, including full monetary union and complete or near-complete fiscal policy harmonisation.
Complete economic integration is most common within countries, rather than within supranational institutions.
Common market
Economic and monetary union
Complete economic integration
Read this:Global economic integration is not a new phenomenon. Some communication and
trade took place between distant civilizations even in ancient times. Since the travels of
Marco Polo seven centuries ago, global economic integration—through trade, factor
movements, and communication of economically useful knowledge and technology—has
been on a generally rising trend. This process of globalization in the economic domain has
not always proceeded smoothly. Nor has it always benefited all whom it has affected. But,
despite occasional interruptions, such as following the collapse of the Roman Empire or
during the interwar period in this century, the degree of economic integration among different
societies around the world has generally been rising. Indeed, during the past half century, the
pace of economic globalization (including the reversal of the interwar decline) has been
particularly rapid. And, with the exception of human migration, global economic integration
today is greater than it ever has been and is likely to deepen going forward. 1
Three fundamental factors have affected the process of economic globalization and
are likely to continue driving it in the future. First, improvements in the technology of
transportation and communication have reduced the costs of transporting goods, services, and
factors of production and of communicating economically useful knowledge and technology.
Second, the tastes of individuals and societies have generally, but not universally, favored
taking advantage of the opportunities provided by declining costs of transportation and
communication through increasing economic integration. Third, public policies have
significantly influenced the character and pace of economic integration, although not always
in the direction of increasing economic integration.
These three fundamental factors have influenced the pattern and pace of economic
integration in all of its important dimensions. In particular, this paper discusses three
important dimensions of economic integration: (1) through human migration; (2) through
trade in goods and services; and (3) through movements of capital and integration of financial
markets. After examining how fundamental forces have influenced economic integration in
these dimensions, the paper concludes with reflections on three issues of general importance
to the future course of global economic integration: the importance of communication as an
influence on integration; the possibility that we may see a sharp reversal in the general trend
of increasing integration, as occurred in the interwar period; and the apparent end of
imperialism as a mechanism of integration. Before turning to this agenda, however, it is
important to emphasize a key theme that will recur in subsequent discussion: the main factors
that drive the process of economic integration exert not only independent influences but also
interact in important and complex ways.
Interactions Among the Fundamental Factors Driving Economic Integration
Although technology, tastes, and public policy each have important independent
influences on the pattern and pace of economic integration in its various dimensions, they
clearly interact in important ways. Improvements in the technology of transportation and
communication do not occur spontaneously in an economic vacuum. The desire of people to
take advantage of what they see as the benefits of closer economic integration—that is, the
taste for the benefits of integration—is a key reason why it is profitable to make the
innovations and investments that bring improvements in the technology of transportation and
communication. And, public policy has often played a significant role in fostering innovation
and investment in transportation and communication both to pursue the benefits of closereconomic integration (within as well as across political boundaries) and for other reasons,
such as national defense.
The tastes that people have and develop for the potential benefits of closer economic
integration are themselves partly dependent on experience that is made possible by cheaper
means of transportation and communication. 2 For example, centuries ago, wealthy people in
Europe first learned about the tea and spices of the East as the consequence of limited and
very expensive trade. The broadening desire for these products resulting from limited
experience hastened the search for easier and cheaper means of securing them. As a byproduct
of these efforts, America was discovered, and new frontiers of integration were
opened up in the economic and other domains. More recently, if less dramatically, it is clear
that tastes for products and services produced in far away locations (including tastes
exercised through travel and tourism), as well as for investment in foreign assets, depend to
an important degree on experience. As this experience grows, partly because it becomes
cheaper, the tastes for the benefits of economic integration typically tend to rise. For example,
it appears that as global investors have gained more experience with equities issued by firms
in emerging market countries, they have become more interested in diversifying their
portfolios to include some of these assets.
Public policy toward economic integration is also, to an important extent, responsive
to the tastes that people have regarding various aspects of such integration, as well as to the
technologies that make integration possible. On the latter score, it is relevant to note the
current issues concerning public policy with respect to commerce conducted over theinternet. Before recent advances in computing and communications technology, there was no
internet over which commerce could be conducted; and, accordingly, these issues of public
policy simply did not arise. Regarding the influence of tastes on public policy, the situation is
complicated. Reflecting the general desire to secure the perceived benefits of integration,
public policies usually, if not invariably, tend to support closer economic integration within
political jurisdictions. The disposition of public policy toward economic integration between
different jurisdictions is typically more ambivalent. It should be emphasized that the interactions between public policy and both tastes
and technology in their effects on economic integration can be quite complex and sometimes
surprising. "Globalization refers to the growing integration since World War II of the national economies of most of the advanced-industrialized countries of the world, and an increasing number of developing nations, to the degree that we may be witnessing the emergence and operation of a single worldwide economy.� This enhanced integration of world economic activity consists of increased cross-national flows of a greater variety of goods and services, more extensive cross-border flows of short-term and long-term capital, and an increasingly dense and complex network of transnational production networks involving multinational enterprises as well as independent supplier companies.��
Globalization brings into sharp relief many of the key issues at the heart of the modern study of international political economy: it raises directly the question of whether and to what extent individuals and countries are living in a new political-economic environment, and if so, what has brought about that new environment into being.� In addition, globalization requires that national communities address the question of what sort of balance they wish to strike between their interest in enjoying the benefits of economic integration and their concern that international economic integration requires that they learn to live with new risks�for example, an increased risk of externally induced economic shocks, a loss of political-economic autonomy, and a need to learn to live with differences in cross-national cultures.
What do you mean by economic integration? The European Union is one example of economic integration. Initially, the member countries agreed to eliminate all tariffs on goods and services imported from each other. This is called a "customs union." If in addition, the countries agree to allow free movement of both capital and labor between the countries, this is called a "common market." The final stage is when they all agree to use the same currency, for example, the Euro.
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