Challenges to Economic Cooperation
The textbook paradigm of a perfectly competitive market of n sovereign nations engaged in international economic relations by way of exchange of m final products, given the comparative taste patterns and production maps of membereconomies, continues to elude us. I argue that economic regionalization becomes an option, of course, with a firm commitment to globalism. Regionalism and globalism have become ways to maximize the welfare of all microeconomic units—households and business corporations—in all economies of the world. The preWorld War II model of economic regionalization brought distant economies under an umbrella wherein the home governments of respective regions provided the stability of the macroeconomic core with monetary and fiscal policy formulation and effective coordination. The satellite economies soon rebelled against the authoritarian home governments. The postWorld War II model of economic regionalization grouped the sovereign national economies into two major groups—the North and the South, with the United States dollar, given its fixed gold value, being the anchor of the free world’s macroeconomic stability. The rich nations in the North and the poor nations in the South often became hostile bargainers and ended up by establishing a duopolyduopsony market pattern, contributing to the failure of welfare maximization of the world economies. Neither of the two above models survived. On August 15, 1971, the U.S. dollar ceased to be the anchor of the global macroeconomic stability. Needless to add that the hostilities of the Cold War caused much havoc to the postWorld War...
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