Question

What are the economic and political arguments for regional economic integration? Given these arguments, why don't we see more substantial examples of integration in the world economy. What was the effect of the creation of a single market and single currency with the EU on competition within the EU? Why?

Answer 1

Economically a regional economic integration is one of the most effective to develop a diverse market with free flow of factors of productions. An integration helps to optimize the resources across borders in the most suitable and cost effective manner. However, it comes with its fair share of problems politically. It leads to creation of jobs which hunts cheap labor and thereby take away employment opportunity from the local population. It also creates a polarized market where factor of production like labor generally overcrowds a country where capital and infrastructure is in abundance which lead to population mismanagement and security threats. However, an integration of economies substantially improves a regions trade potential by harmonizing the regional cooperation. Historically, number of integrated economies have been formed but with recent problem related to lack of infrastructure and security facilities in major regions among the group, countries are reluctant to form further groups.

European union has been one of the leading economic integration that we have witnessed and this amalgamation have helped the region a lot. But this growth was hampered after economies within the group have started competing among each other bu attracting resources of neighboring countries and creating a monopolistic or duopolistic market system. Even the currencies of major economies like UK and Germany started influencing the single currency as most of the transactions took place on those currencies and even a lot of currencies were pegged to them. Along with this the problem over crowding population have impacted the sentiments of the economic co-operations.