Year XXXIV, 1992, Number 1 - Page 11
The World Economy and International Economic Integration at the Beginning of the Nineties
FRANCO PRAUSSELLO
1. Introductory considerations.
Innovation, the opening-up of markets, and international economic integration are linked by strong ties of interdependence and are mutually supportive. The collapse of the routine economy, and the appearance of Schumpeterian innovation, which continually provides new fuel for the process of development, are facilitated and stimulated by the presence of the international market, in which the economies of scale produced by investment in modern productive processes can be fully exploited, hence making development possible. Furthermore, the incentives and benefits of innovation are made more powerful in the presence of international economic integration, in that the number and the yield of innovations generated by an integrated world economy are proportionally greater than is the case for individual countries.[1]
For some time now, the context of technological change has not been provided by the national market and by its related processes, but by the world economic system as a whole, or rather by what it is convenient to call the world economy. In this context the domestic markets of individual countries continue to fulfil an important function for innovation, but they have lost the role as the basic driving force behind modern production processes, and these processes are now increasingly conceived of, and carried out, with reference to the world market.
It is within this broader framework, moreover, that both the processes of technological catch-up between innovating and follower countries, and the processes of the decentralisation of production among various groups of countries can be seen. Such developments are the rationale behind the technological changes that are affecting the apparatus of production and society, and feed the growth of modern economies.
The make-up of the world economy changes both with increased interdependence, and with the emergence of forms of integration, at global and regional levels, between countries.
This study aims to deal with the principal characteristics of the internationalisation of productive processes in the course of the last decade, with particular reference to the global context and the experience of integration within the EC and within Europe as a whole. The analysis covers on the one hand the characteristics of the world economy and the actions of its key players (countries and multinational corporations); and on the other, the prospects for integration in Europe in the run-up to 1993 and in the wake of the events of 1989 in Eastern Europe.
2. The process: the formation of the world economy and international economic integration.
Throughout the 1980’s the tendency of modern productive processes to extend beyond the framework of the national market was both reinforced and significantly advanced. By the end of the decade the underlying rationale encouraging the economies of individual countries to integrate organically into the system of world economy (a trend which in certain areas gave rise to more advanced forms of interdependence within the context of experiments in regional economic integration) produced two results of great significance. First, the possibility that the economic and political unification of the European Community will be rapidly completed; second, the opening-up of Eastern European economies, and their integration within the context of European and world markets.
The main structural factor determining economic internationalisation is the evolution of modes of production, or rather in the fact that in modern scientific mode of production, the production processes tend to involve the entire world economy. Indeed, the world economy is now considered the most suitable framework within which to plan and carry out modern production, by decentralising parts of the production cycle, or even products, towards the periphery of the system, and exploiting the differentials in cost and sales opportunities between its constituent areas.[2] This powerful factor operates in a virtually cumulative manner, and enjoys a large degree of freedom with respect to the commercial policies of different countries. Its particular impact, however, turns out to be a function (among other things) of the liberalisation of trade in products and in factors of production, between countries and areas.
This means that while economic interdependence between countries tends, broadly speaking, to increase as the new mode of production becomes diffuse and its global characteristics are intensified with respect to the world market, it is also possible to see that within the world economy there exist regional experiments in the integration of markets, which are based on the gradual elimination of trade obstacles and on the creation of a number of common policies in sectors of varying size.[3]
Hence the world economy, by developing in this way, presents new asymmetrical characteristics – over and above the traditional asymmetries that exist between central and peripheral, or semi-peripheral, countries. The situation has been highlighted in studies by Wallerstein and followers of his school,[4] who argue that as regards the areas involved in the process of integration, interdependence tends to be organised in relatively stable and effective forms, unlike the situation for global interdependence. The latter, in the absence of a world government of economy, is the object of partial forms of organisation that are based on the supremacy of the most advanced countries.
Following the decline in the strength of the US economy (as a result of European and Japanese poles emerging in the Western economy), the most advanced countries try to regulate global interdependence between countries to their advantage: policy co-ordination between the leading countries of the G7 area is the method used. Moreover, it is not impossible that sooner or later, once it has been accepted into multilateral economic world institutions, even the Russian Republic (heir to the Soviet Union) will become part of this group, or of a similar body.
Against this background, in comparison to the preceding decade, the 1980’s saw not only the confirmation of trends but also important changes regarding the main characteristics of the world economic system, as it continued to spread gradually to all countries and areas of the globe.
Despite the resumption of protectionism caused by the recessions of the mid-and late 1970’s,[5] interdependence between countries increased in overall terms. Indeed, with the new cycle of international expansion which began in 1982 and was still continuing at the beginning of 1990, world trade started to develop once again at a sustained pace, on the basis of higher average rates than those of the preceding decade. Using, as a measure of interdependence, the connection between trade flows and domestically produced wealth, it can be observed that the relation between growth rates of imports and of world GDP rose in the two periods from 1.12 to 1.34, with an increase of about 20 percent.[6]
At the same time, experiments in regional economic integration (which in the 1970’s had marked time and even lost some ground, not least because of the negative impact of world recession) gained fresh impetus and were re-launched, at least in the Western economy.[7] Apart from the twin aims of Community integration and increased economic co-operation between EC and EFTA countries (as a preliminary to those countries joining the Community[8]), there are several other examples which should be noted in this context. For example, the establishment of a free trade area between the United States and Canada (and in future Mexico), as well as the resumption or consolidation of many integration experiments that have been started in areas on the periphery of the world economy. Most notable among the latter category are the Andean Pact, experiments in the Caribbean, the Central American Common Market, and Africa, where after the re-launching of the initiatives of the Maghreb and the Economic Community of West African States, there exist growing demands within the Organisation for African Unity for setting up a continent-wide common market.[9]
Only the countries of Eastern Europe seemed to be unsuccessful in this field, a result of the unavoidable negative effect of the crisis in centrally planned systems on the functioning of the CMEA (the international organisation which governed the promotion of regional economic integration between most Eastern countries, under the leadership of the Soviet Union). On closer consideration, however, the collapse of the old model of centralised planning in Central and Eastern European countries will result in some form of integration with the countries of Western Europe, an evolution which will culminate in their joining the European Community, following a transition period of uncertain length. Yet all the above does not even consider the Chinese economy’s gradual opening up to trade, a trend which seems destined to become stronger, despite the interruption caused by the repression of domestic movements in favour of democracy.
The above-mentioned developments were, in their turn, the result of the effect that the globalisation of the mode of production has had on the production of goods and services, and on the circulation of financial capital within the framework of the system of world economy.
A distinctive characteristic, which has indeed become more accentuated in the last few years, concerns the diverse articulation and organisation of real and financial flows in the world system. Real flows, despite the decentralisation of production on a world scale, tend to remain tied to models where the regional component of production and trade remains important. Financial flows, on the contrary, at least in the form of portfolio investments and speculative capital movements, have proved less tied to choices of a regional nature, and tend to be directed in a more homogeneous way towards world markets as a whole.
Hence, between 1974-80 and 1981-87, indices of commercial integration within the main world areas registered slight but significant increments: rising from 30 to 31 percent for North America; from 62 to 64 percent for Western Europe; and from 32 to 34 percent for the Far East.[10] In the same period the current account deficit of the United States was covered by capital inflows from the rest of the world, or rather from other regional areas (notably Japan), whose banks had by then come to dominate the world financial market, with larger operations than their American counterparts.[11]
In addition, within the context of different types of flows, important innovations emerged compared to the previous decade. The product cycle continued to operate at a world level by means of the successive delocalisation of production, even to the extent of including a new circle of countries above and beyond the first NIC’s (newly industrialising countries). However, on top of this trend was grafted a type of counter-cycle, more idiosyncratic than that of the 1970’s. The exploitation of process and product innovations, and above all the pervasive use of microelectronics, allowed the countries of the centre to maintain or recover segments of production in sectors which were once considered globally mature.[12] This explains the existence of competitive advantages for countries that were technologically advanced in sectors such as special steels, textiles and clothing, furniture,[13] and the automobile industry. Nevertheless, these developments cannot be dogmatically interpreted as a general justification for maintaining obsolete specialisation.
Furthermore, in the face of the de-localisation processes, which affect relations between countries, at the microeconomic level there was often a tendency to dismantle the structures of vertical integration, and to decentralise activities with low added value, and functions not vital to the success of a company’s strategies, outside the company itself.
As regards financial flows, decisive progress was made during the 1980’s towards the globalisation of markets, or rather towards the elimination of obstacles to the free transfer of capital and to the computerised control of movements of savings at a world level.[14]
By the end of the decade the total world financial market, in action twenty-four hours a day, was still at an early stage,[15] but it had crossed the threshold to become an operating reality. Compared to the situation in the 1970’s this represented a qualitative leap, one destined to have a decisive influence on the economic policies of countries both at the centre and on the periphery of the world economy. Since the opening-up and deregulation of financial markets (the London Stock Exchange’s “big bang” was in 1986), capital transfer movements from one country to another have been larger than the real flows of goods and services: the Eurocurrency market alone increased by $2,217 to $4,073 billion (bn) between 1981 and 19861;[16] while at the end of 1989 the global value of international banking activity came to $3,530 bn.[17]
Nevertheless, in contrast to gradual extension in the sphere of production, circulation of goods, and financial activities, the labour force remained divided in national markets. Only under more advanced forms of regional economic integration, such as in the European Community, is the free circulation of labour guaranteed at an international level. Within the context of the world economy, by contrast, the virtual unity of goods and capital markets has no counterpart as regards the labour market. Hence the existence of numerous obstacles to migration from peripheral to central countries.
3. The agents of change: multinational companies and states.
Within basic parameters, which are determined by the functioning of scientific mode of production, the evolution of the world economy is influenced by the behaviour and strategies of its key players: national states and multinational corporations.
The former try to stimulate and control growth (subordinating its results to collective preferences), which in the event means they mainly favour increasing the bargaining power of national policy institutions in comparison to other international bodies. Multinational corporations, for their part, represent the rationality of scientific mode of production applied to modern productive processes. They have recently given rise to the global company, which operates a strategy, based on the entire world system, that takes into account the behaviour of other companies and countries using analytical schemes which apply the theory of games to the study of oligopolistic situations.[18]
In the transition from the 1970’s to the 1980’s (at least in the Western area of the world economic system), states to a greater or lesser extent gave up the ambition of globally directing the process of growth towards socially-determined objectives, and abandoned the establishment of planner-directed public activity. On the contrary, the neo-liberal wave which spread through the system, following the experiments of Thatcherism in Great Britain and the Reagan administration in the United States, set out to dismantle government intervention, the effectiveness of which the new classical macroeconomics (the most sophisticated version of laissez-faire economic theory) went so far as to call into question. Later on, after the mid-1980’s, even Eastern European countries tried to overcome the deficiencies of centralised planning by re-launching reforms and trying to make room for the market economy.
However, not even the most rigorous neo-liberal governments neglected the possibilities that public industries and initiatives provided for the purposes of strengthening the national production system. Particularly in relation to third countries, national policy-makers took care to guarantee themselves advantageous positions within the context of increased international competition, which was one of the by-products of increased interdependence at a global level.
This serves to explain the extension of neo-mercantilist policies in the course of the 1980’s, and the proliferation in this period of non-tariff obstacles to trade (particularly in the form of anti-dumping measures) in the wake of the protectionist strains caused by the recessions of the preceding decade. But it also explains why most countries involved in the process of increasing interdependence at a world level, and in experiments in regional economic integration, changed their attitude to policy co-ordination and the enaction of common policies at an international level.
During the 1970’s many countries had tried to oppose the growth of interdependence, winning varying degrees of autonomy by means of beggar-my-neighbour policies (the achievement of high levels of industrial activity at the expense of commercial partners) or by policies of isolation from the rest of the world. Although flexible exchange rates did not allow national economies to isolate themselves completely from external shocks,[19] the adoption of this exchange rate system from 1973 onwards can be interpreted as an attempt to maintain a certain degree of monetary independence in an increasingly interdependent world.[20]
In the 1980’s, by contrast, faced with the risk of instability due to the existence of diverging policies, the objective of autonomy was pursued by means of co-ordination or the launching of common policies. Having realised that the power to achieve economic policy objectives through unilateral action was in irreversible decline, countries set out to regain a satisfactory level of control over the principal economic variables by coordinating action or by sharing intervention instruments. Note that this was true as much for minor countries as for the dominant countries of the various sub-systems which make up the world economy: the former were concerned with overcoming an almost total absence of autonomy; the latter with reinforcing an inadequate capacity for intervention by voluntary co-operation with other countries.[21]
On a more general level, it is worth noting that, apart from limited exceptions, co-operation is a superior solution to non-cooperation (where economic policies are decided autonomously at the level of individual countries), in that in the latter case the improvement of conditions for one country implies, at the least, worse conditions for another.[22]
As examples of the growth in co-operation in the course of the decade, one might mention the G7’s activity regarding the co-ordination of monetary and economic policies, in a broad sense, by the largest industrial powers of the West; as well as the strengthening and re-launching of the European Community as regards the common economic policies carried out on the territory of the twelve member countries.
The freedom of action of a country’s economic policy is a function not only of interdependent relations with other countries, but also of the bargaining power and strategies of the multinationals. Often, in fact, the actions of multinational corporations reduce the effectiveness, or increase the cost, of national economic policy intervention.
Attempts to limit the activity of multinational corporations have taken two complementary forms: the introduction of constraints at a national level, particularly with the identification of sectors which to varying degrees are closed to this type of company (closed sectors); and the approval of international codes of conduct to which the activities of global companies have to conform. However, both types of measure have produced few results, leading the authorities of host-countries to adopt a more flexible approach with regard to the way multinationals operate.[23]
In fact, the last few years have seen governments’ attitude to direct investments by global companies change in two ways. First, in the sense that even countries which were once hostile to direct investment and imposed onerous conditions, now solicit it, particularly with a view to the effect on the host economy in terms of increased employment, as well as the faster transfer of innovations. Second, in the sense that subsequent to direct investment, the regulations imposed on multinational corporations’ activities proved to be less exacting than those which had characterised the previous decade. It can be said that in this respect, while the 1970’s still saw many host-country governments maintain a cautious and critical attitude towards direct investment, in the 1980’s foreign inflows of capital were highly prized, particularly for the extra employment and increased technological standards of local producers that they engendered. At the same time, the general image of the multinational corporation was positive.
It is not clear whether this new situation corresponded to a new stage in which the influence of multinational capital on the host-country was increased to the extent that the latter became heavily or fully subject to the strategies of multinational corporations; or whether it simply reflected a new awareness on the part of policy-makers in the host-countries of the crucial advantages offered by the presence of direct investments. What is clear, however, is the fact that policies aimed at controlling multinationals, even where they were still pursued, continued to show little effect.
This serves to confirm the difficulties that beset host-countries which tried to resist the strategies of multinational corporations, and direct internal growth towards objectives determined autonomously at a national level. Factors operating against the successful achievement of autonomous aims on the part of individual countries were, in fact, not only increased interdependence between countries, but also the activities of global companies that were decided and carried out with reference to global conditions, well beyond the scale of the traditional nation-state.
In this way, a new area has been opened up to experiments in increasingly advanced international economic integration, which could even lead to forms of world government of the economy. In this framework, integration once again represents the instrument by which policy-makers can recover some of their lost sovereignty: not necessarily in conflict with multinational’s strategies, but certainly independent of any conditions they might choose to set.
In general then (even ignoring questions linked to the expansion of multinational capital), where there exists no government of world economy (or co-ordination, which is a second best), increased interdependence between countries risks giving rise to unstable and not self-regulating structures. As an example, the synchronisation of national economic cycles often reduces the possibility of using foreign markets to compensate for drops in domestic demand during recessions, while the opening-up of financial markets facilitates, and perhaps even amplifies (compared to the previous situation) the transmission of external shocks, as was the case for the Wall Street crash of October 1987.
However, if the need for joint regulation of the world economic system is becoming more acute, government responses remain clearly inadequate. In the absence of intervention co-ordinated at a global level, for example in the context of joint action by the institutions of a strengthened United Nations, the forms of policy co-ordination established so far either fail to go beyond the regional level, or imply serious limits when they have global ambitions. The co-ordinated management of interdependence in the framework of the G7, seen from this angle, excludes the majority of the world’s people from participating in common decisions, while at the same time making them pay for all the deficiencies caused by the lack of unified instruments for formulating and carrying out policy at a global level.
In contrast, the strategy of multinationals reveals a homogeneity that is based on the evolution of the world economic framework. Apart from differences dictated by certain national or regional peculiarities, the multinationals’ response to basic shocks, such as medium term changes affecting the entire world economy, can be seen to be converging. Thus, even during the 1980’s, variations both in the flow of direct investments and in the implementation of company policies proceeded in ways that were common to all multinational corporations.
As regards the former point, it should be stressed that the 1980’s saw the consolidation of trends which had already become evident during the previous decade, although with a number of new elements regarding quantitative aspects. In gross terms, it remained the case that the bulk of direct investments (both inward and outward) continued to affect the OECD area, and that within the categories of developed and developing countries, the relative weight of the leading countries, or groups of countries, changed. Simultaneously, the expansion of multinational corporations into developing countries was confirmed, notably in the newly industrialising economies (NIE’s) of Hong Kong, Taiwan, South Korea, and Singapore, as well as Brazil and Mexico,[24] which had many multinationals of its own by this time.
Hence, between the beginning of the 1970’s and the period 1980-84, the share of direct investments originating from industrialised countries was slightly reduced from 99.8 to 97.3 percent, while the developing countries’ share rose from 0.2 to 2.7 percent.[25] Within OECD countries, where the triad of the US, Europe and Japan provided more than 80 percent of total flows, there was a dramatic change in the size of US investments, which fell from 45 percent in the early 1970’s to 18 percent in the period 1985-89.
The gap created by the US was mainly filled by Great Britain and Japan, whose respective shares rose from 17 to 20, and 6 to 19 percent, while France doubled its share from 4 to 8 percent and Germany’s investments stagnated at around 8 percent of the OECD total.[26] As regards inflows of direct investment, until the mid-1980’s, OECD and developing country shares remained stable at around 77-78 and 22-23 percent respectively. In the second half of the decade, investments became concentrated in industrialised market economies, and the share of underdeveloped countries dropped to 18 percent, with the added caveat that for direct financial inflows into the Third World, three-quarters were concentrated in ten countries: five in Asia (China, Hong Kong, Malaysia, Singapore and Thailand); four in Latin America (Argentina, Colombia, Brazil and Mexico); and one in Africa (Egypt).[27] Among developed countries, the United States’ share was doubled (from 24 to 48 percent between the periods 1970-79 and 1985-89), while the share of the four major Western European countries dropped from 40 to 26 percent. Among developing countries, Latin America’s share showed a similar drop, while that of the Asiatic countries increased.[28]
The main new element in this context, during the 1980’s, was undoubtedly the emergence of the US as a net importer of capital, absorbing direct investments from the rest of the world, notably from Europe and Japan.[29]
In relations between Europe and the US, acquisitions by European multinationals came to dominate; the ratio for direct investment flows across the Atlantic in the period 1984-1989 was two to one.[30]
However, the creation of the internal market in 1993, and moves towards Economic and Monetary Union, should be considered as being bound to accelerate the resumption of US and Japanese direct investment in the EC; indeed this trend has already begun.[31]
There are further elements which need to be emphasised: in brief, the increasingly multinational expansion of industrial companies, as well as the large increase in the amount of foreign trade carried on by multinational corporations.
Despite the fall in direct investments in the early 1980’s as a result of recession,[32] the proportion of overseas production to total production for leading industrial conglomerates (their degree of multinationalisation), grew by several percent in the course of the decade.[33] Furthermore, the increase in direct investments was at a higher rate than trade growth. Between 1983 and 1989 global direct investment increased by about 30 percent p.a., three times faster than trade between countries.[34]
Moreover, towards the mid-1980’s more than 90 percent of international trade was carried on by the largest 800 global conglomerates; and in intra-firm trade these industrial groups accounted for over a third of goods exchanged globally.[35]
It is well-known that companies decide to make direct investments for one or more of the following reasons: a) to obtain a secure supply of raw materials; b) to overcome obstacles created by protectionist measures, by setting up production units in the export market; c) to increase the scale of production, so as to reduce costs; d) to use multinational expansion as a means of maintaining intangible advantages (managerial or technological). The strategies that correspond to the four above-outlined objectives are concerned with: a) supply; b) the market; c) rationalisation; and d) technological and financial policy.[36]
Whereas during the recessions of the 1970’s and early 1980’s, a market strategy was very successful in fulfilling these objectives (since it enabled companies to deal with the protectionism produced by economic difficulties),[37] it seems that from the mid-1980’s onwards technological and financial strategies were increasingly adopted, even if strategies that aimed at market penetration retained considerable importance. These trends translate into a greater number of forms of internationalisation that do not involve the direct control of associated companies, or that are based on co-operation agreements with external partners, or even on non-equity forms that involve no venture capital at all.
This characteristic was already apparent in the 1970’s; other trends visible during that decade were: the increased importance of direct investments in service industries; a reduction in the creation of new production capacity in favour of the acquisition of already-existing production units; and a shift from commercial production facilities that served local markets, to more complex structures that were directed at regional or global markets.[38]
4. The framework: the asymmetries of the world economic system.
The world economic system, as previously mentioned, is not internally homogeneous, but reveals a whole array of asymmetries and hierarchical relationships among its constituent countries, and groups of countries. Furthermore, as has been demonstrated, the world market can also be considered asymmetrical in terms of resources traded, given the lack of unrestricted labour transfers at an international level, due to the barriers that face workers who want to migrate towards the markets of industrialised countries.
In general terms, the asymmetries most worthy of consideration are the vast discrepancies that exist between the contribution of different regional groupings to increases in output and world trade. The major change during the 1980’s in this respect was the shift of the world economy’s centre from the Atlantic region to the Pacific area. Since 1983, the amount of trade in manufactured goods between Japan and South-East Asia on the one hand, and within the Americas on the other, has been greater than that between the two sides of the Atlantic.[39]
Two main factors contributed to this change. First, the rise of Japan as a global economic power, and the dynamism of the newly industrialising countries (NIC’s or NIE’s) located in the area under direct Japanese influence. Second, the relative decline in the United States’ share of output and world exports, coupled with the fact that EC participation in international trade essentially stagnated.
Some argue, however, that the importance of the Pacific area will recede in future, mainly because there are many obstacles that hinder the maintenance of growth levels similar to those of the last twenty years.[40] Furthermore, expansion associated with Eastern Europe’s entry into the world market, combined with the completion of the Single Market and EMU, could shift the world economy’s centre of gravity back towards Europe, simultaneous with an extended European Union (including the countries of Eastern Europe) gaining leadership of the world economy.
As regards the traditional dichotomy between centre and periphery, the 1980’s saw the gap between advanced and underdeveloped countries in the world economy widen. Only the developing economies of East Asia showed satisfactory economic results; sub-Saharan Africa and Latin America, on the other hand, saw their per capita income fall by 2.5 and 0.6 percent p.a. respectively, between 1980 and 1988.[41] Taken as a whole, the difference in average per capita incomes between developed and developing countries, increased from $5,450 in 1975, to $13,860 in 1987.[42]
One of the main causes why the Third World fell even farther behind is the debt crisis, in which developing countries have been trapped since the early 1980’s.
The excessive amounts of finance transferred by banks to developing countries during the 1970’s has proved, since the beginning of the following decade, to be a formidable obstacle to their growth. Among the direct causes of the debt crisis are increased interest rates, as a result of the restrictive monetary stance adopted by the US in 1979, and a fall in debtor country exports in the wake of the recession which hit industrialised countries at about that time. Real interest rates on the loans of non-oil-producing debtor countries reached almost 20 percent, while the terms of trade for the 15 most indebted countries decreased in 1981 and 1982, by 3 and 4 percent respectively.[43] In structural terms, however, when debtor countries began to repay their loans, a possible worsening of their terms of trade had to be taken into account (in line with the theory of transfers), because of the pressure on world prices caused by the sale of produce in an effort to make debt repayments.[44]
The crisis manifested itself when Mexico stopped servicing its debt in 1982, which elicited much intervention on the part of creditor countries and multilateral credit institutions (such as the IMF and World Bank), in an effort to prevent the collapse of the international financial system.
For many countries, the difficulties of servicing the debt were due not so much to illiquidity, as to actual insolvency, since often interest rates on the debt exceeded domestic product growth rates; and exportable resources did not seem sufficient to repay loans without the danger of forcing domestic consumption below subsistence levels. Despite this, the policy of creditors (both banks and countries) continued, for a long time, to aim at full loan recovery. Hence there followed, in succession: drastic deflation of debtor economies; an initial, fruitless attempt to promote new financing in order to stimulate growth again in debtor countries (the Baker Plan); debt reduction by means of bilateral conversion operations; and finally the launch of the Brady Plan to reduce, within a multilateral framework, the debts of countries most at risk, beginning with Mexico.[45]
By the end of the decade the crisis was far from resolved. The collapse of the international financial system had been avoided, but despite this not all dangers had been overcome. The Third World still had debt of about $1.3 bn, with a loan service that amounted to 20 percent of the value of their exports (40 percent for the most severely indebted countries).
The effects of the debt crisis proved onerous, both in terms of reducing living conditions (often subjecting people to disease and malnutrition), and in terms of slowing down the process of industrialisation[46] and reducing growth rates. This was due to a sharp reduction in imports and net resource transfers, which, by this period, operated in favour of creditor countries from Third World countries ($169 bn in total, from 1984 to 1989).[47]
Taken as a whole, the 1980’s were a lost decade for Third World development, while for sub-Saharan Africa there were two decades lost.
However, the newly industrialising countries of the Asian region were an exception to the usual fate of the Third World: in contrast, they brought about a new development pole in the world economy.
South Korea, Hong Kong, Singapore and Taiwan joined the ranks of newly industrialising countries in the 1970’s, and continued to grow at a more than impressive rate, lifting the expansion rate for the whole of the Asiatic region (7.1 percent in the period 1980-88, or more than double Third World growth rates as a whole during the same period).[48] The performance of these countries was often measured by double digit increases in annual product (an average of between 7 and 9 percent during 1980-1988), as a result of an aggressive commercial policy aimed at world markets. Their success illustrates the advantages of an export-led development model which adopts realistic exchange rate policies, and uses well-timed structural adjustment policies to cope with external shocks.[49]
This also explains the limited impact that the debt crisis had on them. Only South Korea had contracted substantial debts, and these have been partly repaid.[50]
The industrialisation of these countries was based on the logic of decentralised production, which was inspired by the search for cheap labour.[51] The 1980’s saw a second wave of production transfers to Thailand, Malaysia, the Philippines and Indonesia, countries which enjoyed comparative advantages in highly labour-intensive sectors involving medium to low technologies. A third wave can be envisaged for the future, which might reach as far as China. In the meantime, trade within the Asian area was augmented by the increased return flow to Japan of goods produced in the Asiatic NIC’s by Japanese multinationals; it was from Japan that some production had originally been decentralised.[52]
As regards industrialised countries, the 1980’s saw the crisis of central planning in the countries of the East, and the reinforcement of multipolarism in the Western economy. The various reform projects launched in countries with centrally-planned economies did not succeed in making their economic management more efficient. Moreover, they were overtaken by the launch of perestroika, which had much more ambitious objectives, namely the undermining of the very foundations of public ownership of the means of production.
Among Western countries, in contrast, the tendency to base reciprocal relations on an oligopolistic basis continued to increase.[53] When the hegemonistic stage of the international economic system ended in the early 1970’s, with the collapse of the Bretton Woods system, the European Community and Japan took their place alongside the United States as new poles of the Western economy.
In the following decade, the economic importance of the United States continued to abate, to the advantage of Japan in particular, while Europe marked time, awaiting fresh impetus (that the planned completion of the Single Market may provide).[54] Between 1978 and 1986, the United States’ share of world exports decreased from 11 to10 percent (in 1973 it was 16 percent), while Japan’s world export share rose from 7 to 10 percent, and the EC’s share remained around 37 percent.[55] Moreover, between 1965 and 1987, the US share of Western product declined from 40 to 30 percent, compared with an increase from 5 to 16 percent for Japan, and 6.6 to 7.4 percent for Federal Germany.[56] At the same time, the GDP of the EC (of the Twelve), plus the five German Länder once in the GDR, rose to over $6 bn by the end of 1990, overtaking the amount of wealth produced by the United States ($5.3 bn), and leaving Japan ($2.9 bn) a good way behind.[57]
Compared to the previous period, in which it had exported capital to other countries, the US position was clearly weakened by its becoming a net importer of capital and repeatedly running a deficit on the current account. As a result, the US accumulated so much foreign debt as to make it the world’s most indebted country, with over $360 bn of debt by the end of 1990.[58] Moreover, in international finance and for many high-technology products, the leadership of the United States was replaced by that of Japan.
Within the context of the multipolar system, the oligopolistic countries were subject to the conflicting aims of pursuing their own ends (often by means of mercantilist policies), and of submitting to common rules in order to manage the world economy in a co-ordinated manner and thereby gain the public benefit of an “international economic system” (a system of economic relations between countries that is endowed with the necessary stability).
The absence of hegemony, and the difficulty of operating for a system with an oligopolistic structure, explain both the recurrence of trade tensions between the three poles, and attempts at policy co-ordination within the G7.
With regard to the former trend, it is sufficient to recall the wrangles between the US and the EC over trade policies involving agriculture, and iron and steel products, as well as the pressure exerted on Japan by Europe and the United States in order to further open up Japan’s domestic market. As for policy co-ordination, the specific object of their combined efforts was to maintain a stable foreign exchange market in the face of the erratic behaviour of the dollar’s exchange rate; the dollar remained the principal currency of the international economic system. The co-ordination of monetary and exchange policies culminated in the Plaza agreements of 1985, and the Louvre agreements of 1987. However, as has been previously mentioned, there became established within the G7 a tendency not simply to take decisions dealing with relations between industrialised countries, but also ones that related to the behaviour of these countries as a single group with regard to the rest of the world.
5. Change in Europe: the completion of European integration and the crisis of centralised planning in Eastern European countries.
The 1980’s marked the re-launching of European integration, and yet also the collapse of the Communist regimes in the minor countries of Eastern Europe, as well as the start of structural reform in the Soviet Union. The two series of events are interdependent in more ways than one: since they are both expressions of the fundamental trend governing the globalisation of production processes; and because Community integration, and difficulties in Eastern Europe, have affected each other in the past, and are destined to do so in the future as regards the evolution of the two parts of Europe. At the beginning of the 1990’s, the crucial issue in this context is whether the Community has the capacity to support and facilitate the opening-up and democratisation of ex-Communist Europe, without losing its momentum towards unity. On the contrary, there exists the possibility that the extension of the Community’s sphere of action to include Eastern European countries, as well as, and in particular, German unification, will end up blocking the EC’s evolution towards federal institutions, such that the attempt to crown the long process of integration (begun after the Second World War) with economic, monetary and political union, will be doomed to failure.
After the long intermediate period that was marked by setbacks throughout the 1970’s and early 1980’s,[59] economic integration in the EC started up again, as a result of both political and economic factors. Among the latter, worthy of mention are the reaction to Europe’s decline in the global competition with the United States and Japan for the conquest of world leadership in high-technology sectors, and the continuing convergence of the Community’s economies due to the effect of the EMS. Particularly from 1983 onwards, in the wake of France and Italy’s agreement to bring their monetary policies gradually into line with the greater rigour of the Bundesbank, exchange rate fluctuation and differentials between the inflation rates of countries belonging to the European exchange rate agreements were reduced. Between 1980 and 1988, for example, the differential between price changes in Italy and Germany, was reduced from 15 to about 4 percent.[60] During the same period, output growth rates tended to converge, although average economic growth for countries belonging to the EMS proved to be less than for other Western countries, leaving open the question of the possible deflationary effect of Community exchange rate agreements.[61]
The convergence of EC member country performances, as regards price movements and changes in real output, thus created the conditions for launching a programme to complete the Single Market, an enterprise which would have made little sense if member country economies were diverging.
The political factors underpinning the re-launching of this Community project can be encapsulated in the election by direct suffrage of the European Parliament, and by the latter’s action (based on strength derived from its newly-gained democratic legitimacy) to increase its powers and reform the Community’s decision-making mechanisms. In 1984, at the end of its first legislature, the elected Parliament presented a proposal for European Union (the Spinelli Plan), which involved comprehensive democratic innovations with regard to the functioning of the Community.
Member state governments did not accept the changes in the Treaty requested by the European Parliament (although some of them did in fact give their agreement). They were nevertheless forced to respond in some way to the proposal of European Union, and this they did by approving the Single Act in 1986. As well as introducing some minor innovations, including those in regional and environmental policy, the Single Act added to the EC Treaty the aim of creating the Single Market by 1992.[62]
The Commission’s White Paper on the completion of the Single Market lists the 280 or so directives that are needed to eliminate the remaining obstacles to the free transfer of produce, and production factors, within the Community market. They deal with: physical barriers (internal border controls on goods and people); fiscal barriers (different rates of VAT and domestic excise duty); and technical barriers (differing national technical regulations – often a Trojan Horse for non-tariff forms of protectionism).[63]
The Cecchini Report evaluates the overall benefits of eliminating such obstacles as equal to 250 bn Ecus, and an increase of between 2 and 5 million jobs. Moreover, this does not assess the dynamic advantages of the Single Market (increased output, associated with greater investment due to the opening-up of markets; nor the degree of reorganisation which the most protected sections of the European economy will undergo).[64]
An in-depth study of the effects of full market integration reveals two crucial elements for the success of the initiative. First, the Single Market must engender not only efficiency, by reducing costs and prices, but also stability throughout the European economy, as well as equity (preventing the benefits of integration from being enjoyed only by certain countries, or social groups). Second, the need for member countries’ economic policies to be restricted in favour of Community institutions, given that it is impossible for there to exist simultaneously, the free exchange of produce and production factors, exchange rates stability, and full policy autonomy for each individual member country.[65]
An awareness of the first element’s importance led to an increase (insufficient, but significant none the less) in the resources distributed by the EC’s structural funds, which aim at smoothing out the possible negative effects of the Single Market, in the context of increased differences between the central and peripheral areas of the Community.
In turn, the need for economic policy integration, aside from market integration, resulted in the re-proposition of the projects of Economic and Monetary Union, which had not come to fruition in the 1970’s. The Delors Report, which set out a stage-by-stage approach to the single currency and economic union, was approved by member countries, despite the opposition of Great Britain,[66] and on 1st July 1990, the first stage of the transition to the Union came into force (accompanied by the full liberalisation of capital movements within the Community, and between the Community and the rest of the world).
At the same time, an intergovernmental conference was set for the end of 1990, in order to discuss Treaty changes with a view to completing Economic and Monetary Union. It was subsequently decided to hold an intergovernmental conference on Political Union as well, given that the completion of Economic and Monetary Union makes dramatically clear the need for a European government with limited, but real, powers.
In this way, the foundations were laid for the approval of the Maastricht Treaty, in which the Twelve were to commit themselves to establish a European currency by 1999 at the latest, and to start joint initiatives in the fields of foreign policy, security and defence.
By the end of the decade, and on the eve of the enactment of the Delors Plan, progress towards the Single Market was on balance positive, even though the Community programme had suffered some setbacks over the elimination of border controls, and the harmonisation of indirect taxation. Above all, the goal of completing the Single Market was seen to be achievable – it served as a reference point for companies, who began to take it into consideration when planning investments, and medium and long term business strategies.[67]
While the Community was preparing its re-launch and enacting the first stages towards completely open markets and the goal of the European Union, Eastern European countries were suffering a number of problems, and were unable to fulfil the objectives set by their national plans or by the joint programmes of the CMEA.
Because of a series of adverse circumstances, both external and internal, several countries were obliged to restrict internal absorption heavily, to the extent that growth in Eastern European countries during this period fell to its lowest levels since the Second World War, while income per capita remained static at levels reached at the end of the 1970’s. Concurrent with these trends, even ambitious plans to re-launch socialist economic integration within the CMEA (with a programme of scientific and technological development in the mid-1980’s) seemed to have little hope of success. This can be explained, above all, because of difficulties in co-ordinating the national five-year plans, and reconciling a system based on central planning with decentralised decision-making processes at the level of individual companies.[68]
With reference to the Soviet Union in particular, the first half of the 1980’s saw a sharp decline in product growth rate, which according to authoritative sources reached zero in 1985,[69] and subsequently rose to an average of 2.9 percent in the period 1980-1989. At the beginning of the 1990’s, the difficulties of changing to a market economy were translated into an absolute reduction in real terms of wealth produced, and South American-style inflation rates.[70]
Gorbachev launched perestroika in the spring of 1985, and in the wake of this initiative, reform movements (which during the 1970’s and early 1980’s had for the most part languished) gained new strength in many countries of the area.[71]
To these developments were added the events of 1989: notably the fall of Communist regimes in the minor countries of Eastern Europe; the gradual change to a multi-party system in the Soviet Union; and the growing possibility of a rapid Wiedervereinigung between the two German states.
The prospects regarding economic development for Eastern European countries at the beginning of the 1990’s were fairly clearly outlined. In structural terms, there existed a trend to replace the old mechanisms of centralised planning with the automatic functioning of a market economy, the latter to be corrected (to an extent that is difficult to define ex ante) by state intervention, in a similar way to today’s mixed economies in the West.
The objective of changing to a market economy is evident, in any case, even in the countries of the defunct Soviet Union, where a programme of transition towards this type of economic system seems bound to succeed (despite thousands of difficulties), particularly in the wake of the failed coup of August 1991.[72] Moreover, it is worth noting that on an external level, these countries (following the disintegration of the Soviet Union, the dissolution of the CMEA, and the collapse of trading links that depended on the latter) showed their intention of participating actively in the management of the world economy, primarily by joining the multilateral institutions that regulate its development, such as the IMF, the World Bank and GATT.
In the medium term, there is a danger that problems (inherent in every transition) will multiply; while uncertainties over the way to implement a market economy, and the results of such a transition, have given rise to disorganisation and growing shortages.
Moreover, on a general political level, the efforts made to create common institutions for the countries belonging to the Commonwealth of Independent States have a high risk of failure; this is also the case for Eastern European countries as they grapple with inter-ethnic tensions of various kinds, unless the disintegrative forces of local nationalisms are curbed with authentically federal institutions. Following Yanaev’s failed coup d’état in August 1991, the secession of the Baltic countries and the dissolution of the USSR marked an important stage in a process whose outcome could prove profoundly destabilising, even to the extent of resulting in armed conflicts which might involve atomic weapons, and endanger world peace.
From this point of view, as regards the reorganisation of the general structure of Central and Eastern Europe, and their constituent countries, there exists a choice between fragmentation on the one hand (through the explosion of nationalisms, or even tribalisms), and the birth of federal type structures on the other. Hence, European Community interests lie primarily in preventing the disappearance of all forms of joint state organisation between the Republics of the old Soviet Union, and in supporting their democratisation and transition to a market economy, while refusing to assist in any way the nationalistic policies of countries in the area. It should clearly be pointed out that this is also the case for the minor countries of Eastern Europe, in particular Yugoslavia, whose unity on a democratic foundation should have been required by Europe, as indeed EC Foreign Ministers tried, at least initially, to emphasise.
In light of this situation, the Community is faced with new opportunities, and also new risks. On a political level, the Community’s priority is to increase its influence in these countries, and consolidate their fragile democracies, completing, at the same time, the democratisation of Community institutions as a preparation for a wave of expansion to the East, which will increase the EC’s responsibilities and its international weight.
From an economic point of view, the opening-up of markets to the East may provide the driving force for a period of sustained growth for EC economies, which are probably best-equipped to provide the industrial plant and technological know-how that are needed in order to modernise those countries.[73] From this point of view, the financing made available to Eastern Europe by the European Bank for Reconstruction and Development (EBRD) constitutes an investment, which should bear fruit within a reasonable period of time. Yet it is clear that such financing is dramatically insufficient in the face of the vast amount of reorganisation which needs to be done to the industrial infrastructure of these countries. An immense effort is therefore necessary, similar to the United States’ Marshall Plan for Europe after the Second World War. Meanwhile, as an initial step, the transition to a market economy, and the opening-up to international trade, could be eased by establishing a regional payment agreement, similar to the European Union of Payments of the 1950’s which was tied to the Ecu.[74] On the other hand, a collapse of Eastern European economies would be extremely costly for the Community, not least in the form of massive numbers of immigrants, whose absorption would test to the full the resistance of the economic and political structures of European society. It should be pointed out that such costs could possibly exceed the $300 bn (in 1991 prices) which crossed the Atlantic in the form of the Marshall Plan after the Second World War.[75]
Among the immediate risks is the possibility that the crisis which began with the fall of the old regimes may have ruinous effects on democracy, stability and even peace, in the region, with an obvious negative impact at an economic level, as well. Other effects which should be taken into account, are the high costs connected with German unification: in terms both of the higher interest rates required to counteract the inflationary potential of the subsidies needed to sustain the economies of the new eastern Länder;[76] and in terms of a possible weakening of the German mark’s pivotal role in the EMS, for some time to come at least (although in the long run the mark is bound to be strengthened by the eastward expansion of the unified Germany’s sphere of influence, and especially its currency’s influence).[77]
At a later stage, there exists the risk that by joining the Community, Eastern European countries may slow down the momentum towards the Community’s complete integration, and make operating the EC more complex. Nor should we ignore the danger that if the Community enters a stalemate situation, then the difficulties of German unification may persuade German politicians not to pursue the objective of European integration. The latter scenario is a real possibility, even if it may occur only much later on, at the end of the present political cycle which is continuing to involve German leaders in the struggle for European democracy, but only if (as may unfortunately happen) the present window of opportunity, which currently allows us to hope for the early completion of European integration, is not exploited. However, the prospect of the new German state’s foreign policy taking a nationalistic turn can be made more remote, by giving the Community solid federal institutions to which the unified Germany’s future may be anchored in perpetuity. As for difficulties connected to relations with Eastern European countries, it should be noted that the Community welcomed the entry of the area corresponding to the ex-German Democratic Republic. Indeed, under the protocol appended to the Treaty of Rome concerning the free circulation within the Common Market of goods involved in inter-German trade, the GDR had represented a sort of silent partner from the very beginning. For the majority of Eastern European countries, however, the attitude of the Commission and member governments remains cautious, given that according to official declarations the deepening of integration continues to have precedence over the broadening of the Community. With regard to this question as a whole, European governments and political movements have presented proposals which share two main characteristics: the need to strengthen Community integration; and the usefulness of providing for a series of organisations with overlapping, but concentric, circles to oversee co-operation between the Community and the rest of the world. However, opinions differ as to how these objectives should be carried out. First, there is a vital conflict between those who maintain that greater integration can be achieved by simply extending intergovernmental cooperation, and those who strive for a constitutional option which would imbue the Community framework with democratic legitimacy (above all, by attributing full legislative powers to the Strasbourg Parliament). Taking into consideration only the policies of member governments, the principal members of the first group are Mitterrand’s France and Great Britain, while the countries most committed to the constitutional solution are Kohl’s Germany and Italy. Second, much uncertainty exists as to the role of external countries. At first, it seemed a political consensus was forming with regard to the existence of a second circle, made up of candidate countries associated to the Community, but not yet ready for membership. Countries which wanted to remain on the system’s margins would have to form part of a third circle, co-operating with the countries in the two inner circles by means of an organisational framework similar to that suggested by Gorbachev when he spoke of the “European Common Home”. Proposals of this type were supported by President Mitterrand, who argued that the Community, and its associate countries in Central and Eastern Europe, should form a European confederation; and by Duverger,[78] who considered that the broadest circle could include all the member countries of the Council of Europe. For his part, Jacques Delors, the President of the Commission, seemed inclined to include the EFfA countries in the second circle (in the context of the “European economic space”), with associate countries from Eastern Europe in the third circle, and to keep non-associate countries completely outside.[79] However, it became apparent that such proposals were entirely inadequate as, in the course of the first few months of 1991, the economic and political difficulties that beset the new democratic regimes of Eastern Europe spurred the countries of Central Europe to repeatedly ask the Community for membership within a reasonable period of time. Hence the political defeat and rejection, by the countries involved, of the concept of Confederation that had been favoured by Mitterrand in the Prague conference of June 1991, and been openly presented as an alternative to full membership. However, one element of the French President’s plan did seem to win a consensus: the delineation of the broadest circle of pan-European co-operation as being within the context of the CSCE.[80]
Faced with this situation, and considering the risks of a likely deterioration of economic, social and political conditions in the region’s countries – and in some cases the dangers of coups d’état, and inter-ethnic and even inter-state wars – the EC cannot afford to hesitate. The Community has a decisive instrument at its disposal with which to consolidate the democratisation of Central and Eastern Europe, its transition to a market economy, and its opening-up to international trade: the immediate start of EC membership negotiations, with the caveat that their economies can adjust to Community rules within the course of appropriate transitional periods, which will be arranged with regard to the initial condition of the candidate country’s economy.[81] For the Republics born out of the disintegration of the Soviet Union, which presumably will not apply to join the EC in the near future, an instrument of association could be used, with a statute sui generis. Without solutions of these kinds, economic transition can hardly be expected to take place in a short space of time, since there would be no guarantee for new investments, and old production forms would stagnate, as is demonstrated by the example of agricultural exports from the East, which the Community is still discriminating against.[82]
When the Western European countries that have already applied to join the Community, or which are about to apply (Austria, Turkey, Cyprus, Malta, Sweden, Norway, Finland, and probably also Switzerland), are also taken into consideration, it becomes clear that an expansion of such vast dimensions cannot occur without fundamental reforms to the Community’s structure: that will allow it to operate without any individual member country being able to exercise a veto. From this point of view, the Maastricht Treaty reforms are inadequate, since they keep decision-making powers in the hands of the member governments, and do not bestow any real legislative competence on the European Parliament. The liberation of Eastern Europe has confronted the Community with a basic choice: to leave the countries of Eastern Europe to collapse into chaos and become ungovernable; or to transform itself into a federation.
6. Concluding remarks.
In describing the framework of technological change in modern economies, I have highlighted the crucial role played by the evolution of the mode of production, by increased interdependence between countries, and by the creation of the world economic system as a result of the scientific and technological revolution, which for a long time now has had an enormous impact on our societies, and on the industrial infrastructure on whose development they are founded. In various experiments in international economic integration it has been possible to identify both the effect of growth of interdependence and attempts to regain a certain amount of autonomy and control over economic processes (which individual countries are unable to achieve alone), by enacting common policies and setting up joint bodies. Moreover, economic integration between countries at a regional level can be observed not solely in Europe, but also in many other areas of the world. Meanwhile, on a global level, there exists a need for forms of partial government of world economy: attempts at policy co-ordination by theG7 represent a response to this requirement.
In this framework (in which some of the structural factors determining it emerge), the experiment of European integration appears destined to reach its most advanced outcome, precisely because the forces underlying the process seem unlikely to be removed.
With regard to this context, the immediate external forces which influence the completion of the Community’s integration serve to reinforce the basic trends, both by making a positive contribution to them, and, on the whole, by also acting in opposition to potential obstacles. Hence, the increase in membership applications from countries of the two Europes helps to overcome the institutional deficiencies of the Community, while the distrust, and even hostility, aroused in the United States by the prospect of integration being completed, could be easily overcome (if Community countries only had the will to do so) by demonstrating real determination to make progress towards political unity.[83] German unification, more than any other element, could have caused serious problems for the goal of transforming the Community into a Federal European state. Instead, it has encouraged a broad group of forces to display a new willingness to speed up the process of integration, and extend it to the political sphere. Most prominent among these forces are certain Community governments, President Delors, a large majority of German politicians (led by Chancellor Kohl), as well as the European Parliament, which has again taken the line of seeking greater powers, following the signing of the Maastricht Treaty.
In conclusion, events in Eastern Europe and particularly the reunification of Germany, have not put at risk the commitments that had already been undertaken by the Community with regard to the completion of the Single Market, and the launch of the final stages of EMU. Indeed, events in Eastern Europe have had the reverse effect: bringing about initially an acceleration of the European integration process, and extending the relevance of that process to aspects of the political unification of member countries, as well as increasing the possibility of reaching the ultimate goal: European Federation.
[1] Broadly speaking, this is true for countries with similar levels of development. G. Grossman and E. Helpman (“Product Development and International Trade”, in Journal of Political Economy, no. 6, 1989) show that trade between countries which enjoy different levels of technological progress will produce shifts between the industrial sector and research and development, which may increase or reduce world growth. See also P. Krugman, Rethinking International Trade, Cambridge, Mass., The MIT Press, 1990; L. A. Rivera-Batiz and P. M. Romer, “Economic Integration and Endogenous Growth,” in The Quarterly Journal of Economics, May 1991.
[2] On the scientific mode of production and the formation of the world market see G. Montani (L’economia post-industriale e il mercato mondiale, Turin, Giappichelli, 1989, particularly Part I). Some elements of the globalising of the economy are described thus in a recent attempt to define its characteristics: “the totality of processes which allow production, distribution and consumption of goods and services starting from structures of valorisation of tangible and intangible factors of production organised on a worldwide basis ..., for worldwide markets regulated by world rules and standards ..., by organisations created and operating on a worldwide basis, with an organisational culture that is deliberately open to a world context and obedient to a world strategy” (R. Petrella, “La mondialisation de la technologie et de l’économie”, in Futuribles, September 1989). This quotation demonstrates the truth of G. De Bernis’ observation (“Economie mondiale”, in Recherches Internationales, aut. inv. 1988) about the imprecision of the concept of the world economy adopted by many authors. As a definition we prefer that of I. Wallerstein (The Capitalist World Economy, Cambridge, CUP, 1979) who claims that the world economy can be based on its systemic characteristics as well as on the strategies and fields of action of its operators: multinational or global companies, and states or economic policy bodies. See also F. Praussello and M. Marenco, Interdipendenza, integrazione, conflitto nell’economia mondo, Genoa, ECIG, 1991 and F. Praussello, Le interdipendenze economiche fra il Nord e il Sud del mondo, Genoa, ECIG, 1986.
[3] As in R. Cooper, “Economic Interdependence and Co-ordination of Economic Policies” (in R. Jones and P. Kenen, Handbook of International Economics, Amsterdam, North Holland, 1985). By economic interdependence we mean the degree of reciprocal influence at the margin of one economy on the other, with the caveat that dependence is to be understood as vulnerability in the sense used by R. Keohane and J. Nye (Power and Interdependence: World Politics in Transition, Boston, Little Brown, 1977); in other words, as all the costs connected with any drop in those economic transactions between countries which constitute interdependence itself. Integration of markets, on the other hand, implies the formation of transnational markets, where product prices (and also the price of factors if economic integration is complete) are brought to the same level. In any case it seems to us that even the least advanced forms of integration require the existence of common policies, at least as regards the organisation of the market and the free circulation of products.
[4] On the general model of the world economy see I. Wallerstein, op. cit. Recent applications of the world system analysis, in which the lack of homogeneity in the world economic system is underlined, can be found in A. MacEwan and W.K. Tabb (eds.), Instability and Change in the World Economy, New York, Monthly Rev. Press, 1989, as well as in S. Amin, G. Arrighi, A. Gunder Frank and I. Wallerstein, Le grand tumulte? Les mouvements sociaux dans l’économie-monde, Paris, La Découverte, 1991.
[5] According to data from the World Bank for 1981 to 1986, the proportion of industrialised countries’ imports that were subject to non-tariff protection rose from 13 to 16 percent of total imports. However, manufactured goods, against which the majority of discriminatory measures are concentrated, have been showing an annual increase of 5.3 percent in world exports since 1973, in contrast to a 3.5 percent increase in production (M. Wolf, “The Challenge to Liberalism Grows”, in The First 100 Years, The Financial Times, 15 February 1988).
[6] The statistics refer to the periods 1965-80 and 1980-87 respectively (A. Maddison, L’économie mondiale au 20e siècle, Paris, OCDE, 1989). Between the decade 1971-80 and the period 1981-88, the relevant ratios for the measures in volume of the changes in world trade and production rose from 1.46 to 1.50, an increase of almost 3 percent. In the last few years, however, this ratio has tended to be higher than 2:1, with foreign trade developing at about twice the rate of world output (IMF, Annual Report, Washington D.C., 1989). Although the ratios for flows of foreign trade and domestic product are not homogeneous, they are currently used to measure the degree of interdependence between countries. See J. Dunning, “The Organisation of International Economic Interdependence: an Historical Excursion”, in J. Dunning and M. Usui (eds.), Structural Change, Economic Interdependence and World Development, London, MacMillan Press, 1987.
[7] On the experiments of integration in Latin America and Africa respectively, see G. Rosenthal, “Some Lessons of Economic Integration in Latin America: the Case of Central America”, in J. Dunning and M. Usui (eds.), Structural Change, Economic Development and World Development, cit. and V. Diejomaoh, “The Economic Integration Process in Africa”, in J. Dunning and M. Usui, Structural Change, cit. See also R. Tamames, Estructura economica internacional, Madrid, Alianza Universidad, 1990.
[8] The constitution of the European economic space between these two groups of countries can in fact be interpreted as a kind of transitory stage, in anticipation of the EFTA countries joining the EC. On the basis of the agreements decided in October 1991, these countries will adjust their own legislation to the directives of the single market, and will participate in financing Community regional policy, by January 1993. See P. Lemaitre, “La CEE et l’AELE vont mettre en place un espace économique commun”, in Le Monde, 23 October 1991.
[9] Algeria, Morocco, Tunisia, Libya and Mauritania expressed their wish to relaunch regional integration in the Treaty of 27 February 1989, which defined both the objectives and stages of economic integration of the member countries, as well as the institutions of the Union of the Arab Maghreb (UMA) (S. Bessis, L’union du Maghreb arabe, une nouvelle donne. L’Etat du monde 1989-90, Paris, La Découverte, 1989). As regards Latin America, among the most significant examples of the resumption of the regional integration process should be cited the objective of setting up, by 1995, a single market between the countries of the Andean Pact (Bolivia, Colombia, Ecuador, Peru and Venezuela), as well as the Plan of Immediate Action, approved in 1988 by the countries of the Central American Common Market (Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua) which aims at a new stage of liberalisation in reciprocal trade (R. Tamames, Estructura economica internacional, cit.). Following the end of the 1980’s, moreover, Caricom, the Economic Community of the Caribbean (which groups together 13 countries including Jamaica and Trinidad and Tobago), undertook to create a single market by 1994 (C. James, “Changing World Gives Caricom Goal New Urgency”, in The Financial Times, 9 July 1991); while Argentina, Brazil, Paraguay and Uruguay set themselves a similar goal for 1995 in the context of Mercosur, the common market of the southern tip of South America (E. Balis, “How Important is Trade within Regions of the World”, in The Financial Times, 22 July 1991). It should be added that at present a group of three (comprising Colombia, Mexico and Venezuela) also operates in the region, and that bilateral liberalisations of trade are envisaged between Venezuela and Chile, and Chile and Mexico (D. Fraser, “Mexico and Chile to Sign Free Trade Agreement Next Month”, in The Financial Times, 2 August 1991). The countries of ASEAN (Brunei, Indonesia, Malaysia, The Philippines, Singapore and Thailand) have also abandoned the exclusively military nature of their grouping and are now aiming to create a free trade area by the end of the decade (L. Siong Hoon, “Asean Turns to Region’s Trade”, in The Financial Times, 31 July 1991).
[10] These figures are calculated as a proportion of intra-area imports and exports compared to the world total. For other statistics concerning the concentration of commercial flows around the principal poles of the world economy, see M. Beaud, La triade Etats Unis-Japon-RFA au coeur de l’économie mondiale. L’Etat du monde 1989-90, Paris, La Découverte, 1989 and R. Tamames, Estructura economica internacional, cit.
[11] See M. Melvin, International Money and Finance, II ed., New York, Harper & Row, 1989.
[12] See F. Praussello, Le interdipendenze economiche fra il Nord e il Sud del mondo, Op. cit.
[13] See F. Onida, “Sintesi della ricerca”, in AA.VV. Strategie multinazionali, Milan, Ed. del Sole 24 Ore, 1987.
[14] See A. Hamilton, The Financial Revolution, the Big Bang Worldwide, London, Penguin Books, 1986.
[15] See J. Bush, “US Gear up to Meet the Challenge of Globalization”, in The Financial Times, 20 December 1989.
[16] See M. Melvin, International Money and Finance, Op. cit.
[17] See BIS, 60th Annual Report, Basle, 1990. Simultaneously, between 1981 and 1988 the loans agreed on international capital markets doubled in terms of current dollars, rising from $200.6 to $370.5 bn (Nations Unies, Etude sur l’économie mondiale 1989, New York, 1989). In relative terms, the relationship between loans granted on the international markets and worldwide imports increased from 6 percent in 1980 to 19 percent in 1986 (L. Dini, La rivoluzione nei mercati finanziari, Documenti della Banca d’Italia, No. 231, 1988).
[18] See J. Friedman, Oligopoly and the Theory of Games, Amsterdam, North Holland, 1977.
[19] See P. Bryant, Money and Monetary Policy in Interdependent Nations, Washington, The Brookings Institution, 1980.
[20] See R. Cooper, Economic Policy in an Interdependent World, Cambridge, The MIT Press, 1986.
[21] In this way, for example, Germany, which fulfils a debatable leadership role within the EMS in that it is in a position to offer the public benefit of “monetary stability” to the other member countries (P.C. Padoan, “Sistema monetario europeo e politiche nazionali”, in P.C. Padoan (ed.), Politiche monetarie e politiche di bilancio nella Comunità europea, Bologna, Il Mulino, 1988), will see its intervention capability increase as a result of the constitution of European monetary union – if, as emerges from the Maastricht Treaty, this is initiated along the lines indicated by the Bundesbank and reflected in the Delors Plan (Committee for the Study of Economic and Monetary Union, Report on Economic and Monetary Union in the European Community, Bruxelles, 1989).
[22] In a technical sense the non-cooperative solution is not “Pareto-ottima” (K. Hamada, The Political Economy of International Monetary Interdependence, Cambridge, The MIT Press, 1985).
[23] See A. Safarian, “Introductory Comments and Summary Report on Part III”, in J. Dunning and M. Usui (eds.), Structural Change, Economic Interdependence and World Development, Op. cit.
[24] See S. Lall, The New Multinationals. The Spread of Third World Enterprises, Chichester, Wiley, 1984.
[25] See F. Onida, Sintesi della ricerca, op. cit.
[26] See Banca d’Italia, Relazione del Governatore, Rome, 1991.
[27] See United Nations Centre on Transnational Corporations, The Triad in Foreign Direct Investment, New York, 1991.
[28] See Banca d’Italia, Relazione del Governatore, op. cit. 1991; F. Onida, “Patterns of International Specialisation and Technological Competitiveness in Italian Manufacturing Industry”, in F. Onida and G. Viesti (eds.), The Italian Multinationals, London, Croom Helm, 1988.
[29] See OCDE, L’investissement direct international et le nouvel environnement économique, Paris, 1989.
[30] See Cominotti and Mariotti (eds.), Italia multinazionale 1990, CNEL, Milan, Franco Angeli, 1990.
[31] Japan has followed a particularly dynamic policy as regards moving into Europe, creating bridge-heads in an effort to gain substantial sales quotas within the Community’s domestic market. In general (supported by a strong expansion of direct investments which showed a six-fold increase in the course of the 1980’s), Japanese multinationals aim to create independent regional networks within the EC and the United States, as well as in Asia, operating preferably in the electronics and automobile sectors (United Nations Centre on Transnational Corporations, The Triad in Foreign Direct Investment, op. cit.).
[32] It must, however, be emphasised that during the recessions, direct investments still showed greater dynamism than internal investments (OCDE, L’ajustement structurel et les entreprises multinationales, Paris, 1985).
[33] See R. Schieppati, “I diversi modelli-paese di multinazionalizzazione”, in AA.VV. Strategie multinazionali, op. cit.
[34] See United Nations Centre on Transnational Corporations, The Triad in Foreign Direct Investment, op. cit.; D.A. Julius, Global Companies and Public Policy: the Growing Challenge of Foreign Direct Investments, London, Royal Inst. of International Affairs, Pinter Publisher, 1990.
[35] See J. Dunning and R. Pearce, The World’s Largest Industrial Enterprises, II ed., Farnborough, Gower, 1985.
[36] See C.A. Michalet, Les multinationals face à la crise, Paris, PUP, 1985.
[37] See C.A. Michalet, ibid.
[38] See OCDE, L’ajustement structurel et les entreprises multinationales, op. cit.
[39] See F. Onida, Sintesi della ricerca, op. cit.
[40] See A. Tasgian, “Strategia di sviluppo e prospettive di crescita dei PVS dell’Asia orientale e sud-orientale”, in F. Volpi (ed.), Debito estero e sviluppo del terzo mondo, Milan, Angeli, 1989.
[41] See World Bank, World Development Report 1989, New York, Oxford University Press, 1989.
[42] See World Bank, World Development Report 1988, New York, Oxford University Press, 1988.
[43] See A. Tasgian,“Il finanziamento estero dello sviluppo del Terzo mondo: recente evoluzione e prospettive”, in Economia internazionale, nos. 3-4, 1988; M. Marenco, “Determinanti e responsabilità nella crisi debitoria del Terzo mondo”, in F. Praussello e M. Marenco (eds.), La Comunità europea di fronte alla crisi debitoria del Terzo mondo, Genoa, Ist. Studi Economici Università di Genova, 1990.
[44] See F. Praussello, “L’inadempimento nel quadro degli approcci alternativi ai modelli di debito estero dei paesi in via di sviluppo”, in F. Praussello and M. Marenco (eds.), La Comunità europea di fronte alla crisi debitoria del Terzo mondo, op. cit.
[45] See M. Marenco, Determinanti e responsabilità nella crisi debitoria del Terzo mondo, op. cit.
[46] See E. Dieter and D. O’Connor, Technologie et compétition mondiale, Paris, OCDE, 1989.
[47] See Banque Mondiale, Rapport annuel 1990, Washington, 1990.
[48] See F. Vergara, Tableau de bord de l’économie mondiale. L’Etat du Monde, 1989-90, Paris, La Découverte, 1989.
[49] See A. Tasgian, Strategia di sviluppo e prospettive di crescita dei PVS dell’Asia orientale e sud-orientale, op. cit.
[50] See NU, Etude sur l’économie mondiale 1989, op. cit.
[51] See E. Dieter and D. O’Connor, Technologie et compétition mondiale, op. cit.
[52] See A. Tasgian, Strategia di sviluppo e prospettive di crescita dei PVS dell’Asia orientale e sud-orientale, op. cit.
[53] See P. Guerrieri and P.C. Padoan, “L’economia politica internazionale dall’egemonia all’oligopolio”, in P. Guerrieri and P.C. Padoan (eds.), Un gioco senza regole: l’economia internazionale alla ricerca di un nuovo assetto, Milan, Franco Angeli, 1984.
[54] See M. Beaud, La triade Etats-Unis-Japon-RFA au coeur de l’économie mondiale, op. cit.
[55] These statistics, from Eurostat (EC Basic Statistics, 25th ed., Luxembourg) do not however take account of export flows activated in the host-countries of multinational corporations. For the United States it is calculated that industrial production carried out abroad by American multinationals amounts to one fifth of their production on US territory (M. Beaud, La triade, op. cit.).
[56] See World Bank, World Development Report 1989, op. cit. The quotas are calculated with reference to world GDP, and do not take into account the domestic product of countries that are not members of the World Bank: Albania, Angola, Bulgaria, Cuba, Czechoslovakia, the ex-GDR, Mongolia, Namibia and the ex-USSR.
[57] See Ph. Lemaitre, “Les Etats-Unis contre les Douze”, in Le Monde, 9 July 1991. As a whole, the reduction in differentials between the main poles of the western economy can be explained by the greater dynamism with which Europe and Japan took advantage of the main factors behind the long term dynamics of economies after the Second World War: the process of technological catch-up, and the adoption of free-trade policies, which improved the allocation of resources. Hence, in the golden age of world growth between 1950 and 1973, Western Europe and Japan showed major productivity improvements, while the United States stagnated. During this period, for example, GDP per working hour increased by an annual average of 5.3 percent in Japan, France, Germany, the Netherlands and Great Britain, compared to 1.6 percent growth in the period 1870-1950. In contrast, the United States’ 2.5 percent increase in labour productivity in the years 1950-1973 hardly differed at all from the gains obtained in the period 1913-1950. See A. Britton, Economic Growth in the Market Economies 1950-2000, Discussion Papers Vol. 1, no. 1, New York, United Nations Economic Commission for Europe, 1992.
[58] This is the calculation, based on market values, which has been recently introduced by the United States Department of Trade. If the formerly-used criterion (based on historic values) is applied, foreign debt amounted to $664 bn at the end of 1989 (M. Prowse, “American Net Debt to Rest of World Increases”, in The Financial Times, 3 July 1991).
[59] After the stage which eliminated tariffs that impeded the free circulation of products, and the creation of the agricultural union, the attempt to create economic and monetary union between EC countries in the course of the1970’s ended in failure – among other things because of the proliferation of external shocks (F. Praussello, Le vicende monetarie internazionali (1944-1977), Florence, Guaraldi, 1977).
[60] See Banca d’Italia, Relazione del Governatore, Rome, 1989.
[61] See P.C. Padoan, Sistema monetario europeo e politiche nazionali, op. cit.
[62] See F. Praussello, “Il programma di completamento del mercato interno”, in ILRES, Liguria: economia e società di fronte a1 1992, OSE 1989, Genoa, Marietti, 1990.
[63] See EC Commission, Completing the Internal Market: White Paper from the Commission to the European Council, Com. (85) 310 def. 1985.
[64] The objective of 5 million new jobs could be reached if active employment policies were adopted, since policy makers would enjoy greater room for manoeuvre, thanks to the reduction of inflationary tensions due to the elimination of trade barriers. See P. Cecchini, The European Challenge, London, Wildwood House, 1988.
[65] See T. Padoa-Schioppa, Efficienza, stabilità, equità, Bologna, Il Mulino, 1987.
[66] See Committee for the Study of Economic and Monetary Union, Report on Economic and Monetary Union in the European Community, op. cit.
[67] Reports by the Commission on progress made towards the objective of “1992”, published in March and October 1990, confirm that European companies plan new investments, mergers and joint ventures in the wake of the full opening-up of markets (L. Kellaway, “EC Company-Reaction to 1992 Encouraging”, in The Financial Times, 15 March 1990; EC Commission, The Single European Act: Count-down to 31 December 1992, European File no. 13/90, October, Luxembourg, 1990).
[68] See NU, Etude sur l’économie mondiale 1989, op. cit.
[69] See A. Aganbegyan, The Challenge: Economics of Perestroika, London, Hutchinson, 1988.
[70] See S. Brittan, “Gorbachev’s Place: at Arm’s Length”, in The Financial Times, 18 July 1991. The economic situation of the Republics which belonged to the Soviet Union was bound to deteriorate dramatically after the collapse of the USSR, with resultant sharp falls in income and industrial production. At the end of 1991, national income and industrial production fell by 15 and 12 percent respectively compared to 1990 levels, which were already somewhat depressed. As for inflation, for the whole of 1991 it came to 700 percent. See Know How Rus’, January 1992.
[71] See L. Szamuely, “Economic Reforms in the European Member Countries of the Cmea”, in L. Marcolungo, M. Pugno and F. Targetti (eds.), L’economia mondiale in trasformazione, Milan, Franco Angeli, 1988. On the difficulties of transition to a market economy in the former Soviet Union see also A. Aslund, Gorbachev’s Struggle for Economic Reform, Ithaca N.Y., Cornell University Press, 1989; L. Grigorev and O. Korciagina, “Evolution of the Crisis and Progress of the Reform in the USSR”, in Most, no. 1, 1991.
[72] The economic reform introduced in the Russian Republic at the beginning of January 1992,with the drastic liberalisation of prices for most products, underwent major changes from the very next month. See J. Lloyd, “Russia Retreats from Economic Reform Plans”, in The Financial Times, 4 February 1992.
[73] See J. Pinder, The European Community and Eastern Europe, London, Pinter, 1991.
[74] See M. Aglietta and Ch. de Boissieu, “Une ancre monétaire pour l’Est”, in Le Monde, 14 May 1991.
[75] The calculation in 1991 dollars of the total resources mobilised in the Marshall Plan is contained in The European, “Gorbachev Must Get the Support he Needs”, 14-16 June 1991.
[76] See R. Lawrence and W. McKibbin, “Counting the Cost of German Unification”, in The Financial Times, 15 March 1990.
[77] After the reorganisation of trade caused by the collapse of the centralised planning system, and by pan-German unification, it is expected that the countries of Eastern Europe will absorb around 15 percent of exports from the new German state, compared with 13 percent for the FRG and 60 percent for the GDR before the fall of the Eastern regimes. See P. Artus and Ch. de Boissieu, “La mue du mark”, in Le Monde, 20 March 1990; and B. Thanner, “Welche Rolle spielt das vereinte Deutschland in der Weltwirtschaft”, in P. Eisenmann & G. Hirscher (eds.), Die deutsche Identitaet und Europa, Munich, V. Hase & Koehler Verlag, 1991.
[78] See M. Duverger, Le lièvre liberal et la tortue européenne, Paris, Albin Michel, 1990.
[79] See K. Woolfson & L. Walker, “New Bloc Reopens Old Routes of Empire”, in The European, 26-28 July 1991.
[80] In connection with the French position, Lesourne also points out the contradiction between the necessity of a deepening of the Community and Mitterrand’s opposition to increased powers for the European Parliament. See J. Lesourne, “Quelles institutions pour l’après-communisme?”, in Le Monde, 10 July 1991.
[81] After the Soviet conservatives’ failed coup in August 1991, the idea of the Eastern European countries becoming politically affiliated to the Community sooner rather than later, was once more taken up – this time by even the most serious European newspapers. See E. Mortimer, “Time to Open the Club of the West”, in The Financial Times, 21 August 1991.
[82] See S. Sideri, Effetti dell’apertura dell’Europa orientale e della crisi del Golfo sulle relazioni Nord-Sud, Relazione al Convegno “Le relazioni commerciali e finanziarie Nord-Sud all’inizio degli anni ‘90”, Università di Pavia, 17 June 1991.
[83] See P. Lemaitre, “Les Etats-Unis contre les Douze”, op. cit.
