Essays in Honour of J. George Waardenburg
Edited by Servaas Storm and C. W.M. Naastepad
Chapter 3: Cart before the horse: National versus international integration
J. Mohan Rao 1. INTRODUCTION International ﬂows of goods and of ﬁnance capital have doubtless increased sharply over the last few decades. Non-traditional manufacturing exports from the newly industrializing countries (NICs) of Asia to the developed world have scaled new heights. Some have heralded a new era of globalization marked by rapidly growing world trade and capital movements. Others argue, however, that the world economy is actually less integrated today than it was in the late nineteenth century (see for example Rodrik, 1998). But such comparisons invite further scrutiny. It is true that labour movements, in the form of mass migrations from the old world to the new, were substantially higher during the nineteenth century than they are today. Similarly, net capital outﬂow relative to gross national product was much higher in the UK prior to World War I than at any time since. But a large share of these labour and capital ﬂows was restricted to the same group of countries which today account for the lion’s share of goods ﬂows. The signiﬁcance of capital and labour movements in such a comparison cannot be considered apart from trade ﬂows. Economies may be ‘integrated’ by goods ﬂows even in the absence of any factor movements. Turning to trade volumes relative to national incomes, measured openness in the US and in Europe peaked before World War I, fell sharply between the wars and trended upward after World War II. By this measure, the advanced economies of the world are...
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