Economic Integration Amongst Centrally Planned Economies
The previous five chapters were essentially about the theory of economic integration as developed for countries which are predominantly market economies, be they advanced or developing nations. However, one of the fundamental conclusions reached was that the basic rationale for economic integration at the customs union/ common market level rested almost entirely on the achievement of economies of scale, which, in the case of developing countries, are essential for economic development given the limited size of most of the individual economies, which prevents the attainment of optimum plant efficiency. For advanced nations, the possible achievement of economies of scale is to be determined by sheer market forces. For developing nations, the implication is that industries should either be equitably distributed (in the case where economies of scale are due to horizontal integration) or that the benefits from economies of scale should be equitably distributed (in the case where economies of scale are due to vertical integration) via some appropriate monetary/fiscal arrangements. It should be apparent that, in either case, some sort of joint planning among the participating nations is warranted. For example, the equitable distribution of industries requires the setting up of some sort of common organisation, whose membership should consist of representatives (numbers chosen on equity grounds?) of the participating nations, responsible for taking allocative decisions, i.e. the organisation should be entrusted with taking decisions regarding the geographical distribution of the plants.
KeywordsMember Country Economic Integration Joint Planning World Market Price Trade Diversion
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