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.
Economist Fritz Machlup traces the origin of the term 'economic integration' to a group of five economists writing in the 1940s, including Wilhelm Röpke, Ludwig von Mises and Friedrich von Hayek.[1] Economic integration was a foundational plank of US foreign policy after World War II.[2]
The degree of economic integration can be categorized into six stages:
- Preferential trading area
- Free trade area
- Customs union
- Common market
- Economic and monetary union
- Complete economic integration
Economic integration also tends to precede political integration. In fact, Balassa believed that supranational common markets, with their free movement of economic factors across national borders, naturally generate demand for further integration, not only economically (via monetary unions) but also politically--and, thus, that economic communities naturally evolve into political unions over time.
See also
Notes
- ^ Fritz Machlup, A History of Thought on Economic Integration (Columbia University Press, 1977)
- ^ Gabriel Kolko, The Politics of War: The World and United States Foreign Policy, 1943-1945 (Vintage, 1968; 1990 edition with new afterword)
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