International Integration

I. REGIONAL INTEGRATIONErnst B. Haas

BIBLIOGRAPHY

II. GLOBAL INTEGRATIONWolfram F. Hanreider

BIBLIOGRAPHY

III. FUNCTIONALISM AND FUNCTIONAL INTEGRATIONP. G. Bock

BIBLIOGRAPHY

IV. ECONOMIC UNIONSRichard G. Lipsey

BIBLIOGRAPHY

I. REGIONAL INTEGRATION

The term “integration” refers to a process whereby the quality of relations among autonomous social units (kinship groups, tribes, cities, trade unions, trade associations, political parties) changes in such a way as to erode the autonomy of each and make it part of a larger aggregate. In specifically political discussions the term is reserved for the analysis of such changes among more or less “sovereign” political units, and in the study of international relations the term is confined to the analysis of cumulatively changing relations among states, resulting in their acceptance of some new central authority. Historically, such authority has most commonly been imposed by military force—by a conquering group upon the vanquished. In order to distinguish “integration” from the forcible establishment of empires we must specify that the erosion of local autonomy may be based on deliberate and voluntary decisions by actors or result from unintended consequences of such decisions, but it may never rest on force.

Specifically, “regional” integration refers to that process among two or more states on a geographically confined scale, at a level below that of global integration, which sums up such world-wide phenomena as international law, the United Nations, and world trade or population movements. So defined, “regional integration” is an identifiable process in ancient Greece, eighteenth-century and nineteenth-century North America, and nineteenth-century Germany, to cite some obvious instances. Regional integration since 1945 has been an observable phenomenon in both eastern and western Europe, in the “Atlantic area,” the Middle East, Africa, Latin America, and in the Western Hemisphere as a whole. At the same time, “regional disintegration” has been apparent in the weakening of ties among the heirs of former colonial empires, the British Commonwealth, and the French Community.

“Integration” is sometimes also used to specify the result of a process of erosion of autonomy—the condition which obtains at the termination of the process; but we shall confine the meaning to the process. The term is important as an analytical tool in the hands of scholars and observers generalizing about the ideas and motives of political actors who are likely to describe their actions with such terms as “unification,” “federation,” “rapprochement” “establishing peaceful relations,” or “bringing prosperity to all.” Integration, therefore, is also an objective concept for summing up and projecting the possibly subjective aims of political actors.

Regional integration as a concept

Considered as an analytical concept, regional integration sums up a number of separate but related concerns appropriate to the study and—within limits —prediction of regional integration processes under way in various places. It groups behavioral and institutional forces describable by the term “spill-over,” which in turn draws on the notion of “functionalism” and “functional integration.” Regional integration concepts also rely on certain tendencies inherent in bureaucratic organizations. In particular they rely on the tendency of international organizations to expand along functional lines, with the help of functional legal ideas responding to new perceptions of need by the actors.

Specifically, the term “spill-over” describes the accretion of new powers and tasks to a central institutional structure, based on changing demands and expectations on the part of such political actors as interest groups, political parties, and bureaucracies. It refers to the specific process which originates in one functional context, initially separate from other political concerns, and then expands into related activities as it becomes clear to the chief political actors that the achievement of the initial aims cannot take place without such expansion. Demands and expectations for further centralized spheres of activity develop from perceptions of inadequate performance on the part of existing institutions. The inadequacy of the performance is attributed to an insufficient grant of powers or timid policy on the part of the central authorities; hence the claim for new central powers to achieve better performance is a direct outgrowth of the earlier institutional system and the realignment of group expectations produced through it.

By means of the spill-over concept we can analyze broad movements of integration without having to posit identity of aims or perfect agreement among the actors. Integration may proceed merely on the basis of a series of parallel and mutually complementary realignments of expectations and demands, with each actor merely seeking “to get the most out of” the initially centralized functional context. Application of the concept thus permits the projection of integrative trends without having to assume profound consensus among the states.

The extent to which the actors perceive the probable results of their demands on the over-all system is a crucial component of the concept. One type of “learning” is conducive to the progressive adoption of behavior patterns further reinforcing spill-over tendencies; but another type of “learning” may well stop the trend dead in its tracks: there is nothing inevitable in it. One type of “learning” rests on the reasoning associated with the concept of “unintended consequences.” Actors striving for the better achievement of some aims dear to them will commit themselves to modes of behavior which have the unintended result of strengthening certain central institutions, or result in the creation of such institutions. The aims motivating the actors are —to them—manifest and overt, but the logic of events transforms the consciously expected results into something not wholly anticipated in terms of dependence on new central authorities.

Now two things can happen: the actor, having learned that unintended consequences can follow from his initial desires, may consciously make the unintended a manifest desire and thereby deliberately contribute to the process of centralization; but he may also draw the conclusion from the trend of spill-over events that his initial aims were to blame for the unintended and unwanted consequences, thereby compelling a reformulation of initial aims. The second case would produce an adaptation with disintegrative results. In that event the chain of events associated with the spill-over concept would come to a halt. There is little ground for believing that this outcome is less likely than integrative consequences. The positive spill-over concept summarizes adaptive tendencies of extreme fragility—tendencies which have been reversed in many well-known historical situations.

Regional integration as a process

Federations

The history of regional integration is as old as recorded efforts to achieve the peaceful unification of sovereign entities, efforts which have in the past been described under such rubrics as “federation,” “leagues,” and “alliances.” The literature devoted to these experiences in the past has stressed the political component in the aims of the actors and has tended to assume the need for a pre-existing political consensus for the continuation of integration. Furthermore, emphasis was put on the analysis and description of the constitutions of such entities; the grant of power to central authorities was taken as the measure of political consensus among the integrating units. Hence, the usual conclusion older writers developed was that the mere convergence of military and security aims was an insufficiently permanent demand, preventing leagues and alliances from acquiring the constitutions necessary for integration and therefore disappearing once an immediate military danger was averted. In the analysis of federations stress was put on the question of whether ultimate sovereignty lies with the central or the local governments, whether the “will” to be a nation was stronger than the desire to be locally autonomous. Relatively little effort was devoted to analyzing the patterns of interaction summed up under the spill-over concept. The presumption in favor of the primacy of actors’ political aims militated against raising the question of whether political consensus can emerge from functional preoccupations.

Communities

Since the end of World War II the emphasis has been reversed. Scholars (and many actors), impressed with the constantly increasing powers of governments to deal with almost all facets of life—particularly economic welfare—began to be interested in exploring the connection between patterns of commercial, social, and technical transactions and the growth of common or converging aims among important actors. Questions of social structure, demography, migration, economic development, and psychological distance were added to the earlier concern with military and armaments questions in dealing with regional integration. Specific proposals for regional integration were advanced in western Europe (such as the Schuman and Pleven plans in 1950) seeking to build eventual political federation on a substructure of closer ties and common practical concerns generated by institutional steps merging certain vital sectors of the national economies and the defense establishments. In addition, several common and centrally determined plans arose as an unintended consequence of institutional and programmatic patterns in the fields of defense and economic welfare. The initial tasks and powers of many agencies (for example, the Organization for European Economic Cooperation, OEEC; the North Atlantic Treaty Organization, NATO; the Organization of American States, OAS; and the United Nations Economic Commission for Latin America, ECLA) proved insufficient and gave rise to unplanned growth in functionally restricted fields. Concomitantly, a new body of law developed, regulating, for the states concerned, the new types of functional transactions.

Since the institutional forms associated with this development defied traditional constitutional classifications and tended to change de facto with the accretion of new tasks, the discussion of “federation” as the technique for regional integration gave way to the terms “community” and “community formation.” With the failure of two frontal attempts to establish a united western Europe by means of political federation (Council of Europe during the years 1949-1951; European Political Community, 1952-1954) the notion of “community” has gained wide currency, especially in connection with ambitious efforts to use the mechanism of economic integration and the establishment of “common markets” as the functional trigger for the spill-over process. Such efforts at community formation have spread from western Europe to Latin America (Latin American Free Trade Association since 1961; Central American Common Market since 1960) to independent Africa with discussions for an African common market (since 1962), and to regional economic planning in eastern Europe (Council for Mutual Economic Assistance, CEMA, since 1956).

European economic integration. The most dramatic illustration of the community building process is the functional and geographic expansion of the scope of western European economic integration. The initial step was the creation of a common market for coal and steel in 1952, eliminating not only trade barriers among the “Continental Six” (Belgium, France, Italy, Luxembourg, Netherlands, West Germany) but also involving common policies on the rules of competition, subsidies, cartels, and investments. Expectations built up among the actors participating in the coal-steel nexus resulted in demands which simply could not be carried out by the existing central mechanism, the European Coal and Steel Community. Demands which spilled over from this sector thus infected the field of economics generally, resulting by 1958 in the establishment of the European Economic Community and Euratom, the latter owing its origin in part to the inability of the Coal and Steel Community to resolve a major European fuel crisis. New economic pressures and relationships which were generated by the union of the “Continental Six” spilled over geographically and led Britain, Denmark, Norway, and Ireland to seek membership in the Common Market in 1962.

The actors in regional integration

The initial steps of economic integration influence four distinct types of actors, who seek to adjust to the change by making demands which, in turn, tend to reinforce integration.

(1)Expanding group expectations emerge among industrialists, dealers, and trade unions in the initially merged economic sectors. A desire to bring as yet unintegrated but closely related economic sectors under the central rules becomes manifest, as well as a desire to develop means of political control over these larger issues. And in the process of reformulating expectations and demands, the interest groups in question approach one another across national boundaries by forming new asso ciations while their erstwhile ties with national friends deteriorate.

(2)Among political parties a similar phenom enon takes place. Here the spill-over makes itself felt by the desire to control the new central administrative organs, agencies of a pronounced technocratic character—whether these be federal or intergovernmental in legal competence. But, in addition, the larger field of legislative action opens up opportunities for the realization of party programs heretofore stymied in the immobilisme of tightly partitioned national economies. This is as true for the welfare-state-minded socialists as it is for free-trade-oriented liberals. Both think they stand to gain from the new dispensation.

(3)Furthermore, the process asserts itself in the relations among civil servants, national government offices, central banks, and technical advisers. A commitment to the realization of agreedupon economic goals permits of no indefinite sabotaging of collective decisions. Momentary crises and obstacles tend to yield only if the bureaucrats agree to new central control devices. Commitment to one set of joint measures leads inexorably to later commitments for additional joint measures in order to carry out the first set. National bureaucracies thus tend to interpenetrate one another in the peculiar European institutional context in which integration is carried on.

(4)Finally, integration is advanced by the inability of governments and private actors outside the system of states undergoing integration to remain aloof from the process. In making the decision to join the union they then expose themselves to the spill-over tendencies implicit in the relations among interest groups, political parties, and civil servants, thus confirming and accelerating the trend initiated by the original governmental decision to join.

Patterns of regional integration. As the summary of the evolution of the concept and the process has shown, the actual pattern of regional integration can be divided according to (1) the subject matter singled out for joint action, (2) the nature of the participating states, and (3) the kind of central institutions which they set up. By correlating items in each of these types with actual situations we can then say something about the success of specific integration efforts.

(1) Subject matter. Regional efforts at integration may proceed along a directly political front by seeking to work out joint foreign policies for the associated states (OAS, Council of Europe, Arab League, certain African groupings). Alternatively, they may stress one or several functional tasks, most commonly in the fields of customs unions, economic unions, economic development and finance, joint technological and scientific research, transportation, and telecommunications. Less commonly, the functional emphasis is placed on joint defense, military planning, and rearmament policies, sometimes through the creation of single commands and procurement systems (NATO, Western European Union, Warsaw Pact). More rarely still, the common task involves regional legal systems for the protection of human rights (Council of Europe, OAS).

(2) Nature of participating states. Much hinges on whether the participants in regional integration are mutually homogeneous or not. Organizations grouping states of dramatically different power, economic development, and political institutions rarely function harmoniously (OAS, CEMA). Organizations grouping states with political systems, political parties, interest groups, and social institutions which differ from member to member find it difficult to make common policy on anything but the most trivial functional concerns (Arab League, OAS, UN Economic Commission for Europe).

(3) Institutions. Regional organizations range from the minimal traditional intergovernmental conference to the extreme of a federation with limited purposes. The intergovernmental arrangement predominates (NATO; OEEC; Organization for Economic Cooperation and Development, OECD; OAS; Arab League; CEMA; UN regional economic commissions). Decisions are made by instructed national delegates, usually on the basis of unanimity, aided by a central secretariat with minimal powers and many commissions of technical experts, recruited nationally and regionally. Truly federal institutions existed for some purposes in east Africa and functioned in the unsuccessful West Indian Federation until 1962. The European communities, however, feature “supranational” institutions, a hybrid of federal and intergovernmental techniques of making decisions and allocating power. These “supranational” techniques, which are also found in many other intergovernmental organizations, militate against the autonomy of functional concerns because they demand the participation of so many public and private decision-making units.

Supranationality. The institutional characteristics of supranationality are unique in three ways. First, they involve the simultaneous presence of instructed high-ranking governmental representatives, uninstructed or permissively instructed experts recruited from the national bureaucracies, experts representing the major interest groups, and the “European” staff of experts and high-ranking officials who, on behalf of the communities, make proposals and seek to arrange compromises among clashing demands. Second, a parliamentary and quasi-legislative factor is introduced through the debates and resolutions of transnational political parties active in the European parliament. Finally, the existence of an independent European judiciary with complete jurisdiction over economic integration matters automatically removes the possibility of seeking national legal remedies against unpopular central decisions (European Communities’ Court, European Court of Human Rights).

Decisions filtered through this process rarely reflect the untrammeled wishes of any one party, whether it be a powerful national ministry or a marginal interest group. Every decision is a compromise between politicians, industrialists, farmers, trade unionists, and bureaucrats. The parties redefine their conflict and work out a solution at a higher level, which almost invariably implies the expansion of the mandate or task of an international or national governmental agency. In terms of method, this upgrading of the parties’ common interests relies heavily on the services of an institutionalized mediator—whether a single person or a board of experts—with an autonomous range of powers. In terms of results, this mode of accommodation maximizes integration: policies made pursuant to an initial task and grant of power can be realized only if the task itself is expanded, as reflected in the compromises between the states interested in the task.

Factors maximizing integration

Certain kinds of organizational tasks are by nature expansive while others are easily confined. The ideal task for maximizing the spill-over tendency must be closely related to welfare, highly specific in terms of initial requirements, and yet broad enough so that the initial requirements cannot be achieved without the grant of new powers.

Specificity of task is essential, with respect to such assignments as creating a common market for narrowly defined products, unifying railway rates, removing restrictive practices in certain branches of industry, removing import quotas by fixed percentage points during fixed periods, and the like. Functional specificity, however, may be so trivial as to remain outside the stream of human expectations and actions vital for integration. This would seem to be the case with the standardization of railway rolling stock, for example, or the installation of uniform road signs. The task, in short, must be both specific and economically important in the sense of containing the potential for spilling over from one vital area of welfare policy into others.

Expectations of rewards entertained by crucial national elites must be regionally complementary. Hence, organizations grouping states of widely differing power and economic potential rarely provide an ideal setting for the continuation of integration. A frontal attack on political unity seldom succeeds, and the functional concentration on defense and armaments displays less tendency toward spill-over than the creation of common markets. Concentration on cultural programs and the implementation of values relating to the protection of human rights have so far resulted in little active integration.

Hence it can be concluded that for organizations to expand their task they must first be based on specific expectations of the participating elites. While these need not share a profound consensus on ends or means, their objectives must nevertheless be parallel or converging. They may achieve their agreement on the basis of differing paths of reasoning, and their desire to work together may be purely tactical or motivated by sheer expediency. However, their values must be sufficiently congruent to make possible cooperation in joint institutions for purely instrumental motives. Elites lacking even this rudimentary sharing of values will prove to be unprepossessing partners in a cooperative enterprise.

Furthermore, rigid elite structures are unlikely to attain a sufficient degree of instrumental receptivity to the aspirations of others. An elite which recruits its members from large segments of society, which is both rationally and bureaucratically organized, and which eschews firm ideological commitments is most likely to prove receptive to the stimuli associated with the spill-over concept. Totalitarian elites do not qualify for such a role any more than do oligarchical cliques in traditional societies. Members of open elites may permit themselves to be co-opted into international and supranational administrative bodies and thereby commit their followers to active participation in spill-over tendencies while not feeling that they are betraying their beliefs or their followers. Members of closed elites are unlikely to possess this kind of adaptive ability.

The elites best equipped for participating in changing social situations in which the spill-over process may be manifest are the kinds produced by societies with considerable social mobility, technical and professional education, industrial-managerial values, and a high degree of tolerance for technocratic-bureaucratic efficiency. While active industrialism need not be a precondition, the desire to industrialize probably must be; even though high standards of consumption need not exist, the will to create such standards should prevail; and although democracy in the formal sense need not prevail, toleration for dissident groups and a desire to placate them must be present.

Regional integration in action

This characterization of tasks and elite skills suggests that regions marked by homogeneously dstributed pluralistic-democratic elites are likely to integrate rapidly if there is some instrumental attachment to a shared aim. It suggests also that homogeneously distributed totaUtarian elites with a sharp common purpose, or at least, elites agreeing internationally on some well-defined ideological program, are equally equipped to advance integration. On the other hand, regional associations characterized by a heterogeneous distribution of elites in member states and by very sporadically shared aims have great difficulty achieving a central programmatic and institutional consensus going beyond the minimum common denominator of preserving the territorial and functional status quo; such groupings are likely to stress sovereignty, nonintervention, equality, and intergovernmental cooperation for the achievement of these minimal tasks. Only a sudden realization of common danger is likely to break through this minimalism and then trigger a supranational integration process. This theme will now be illustrated.

Western Europe

By the end of the 1960s the six countries of the European communities may achieve economic and de facto political union with respect to all functions concerning economic and social welfare. In the process they will absorb such smaller regional groupings in Europe as Benelux, WEU, the Scandinavian system, and the European Free Trade Association (EFTA). Because of size and industrial potential the EEC countries will continue to attract the members of EFTA (Austria, Denmark, Norway, Portugal, Sweden, Switzerland, United Kingdom) so that an integrated European economy will emerge. The extent to which common markets and economic union must force over-all political union is less clear. Efforts are being made to reserve joint political and military decisions to a confederal structure, which would be superimposed over the existing supranational institutions. Military and foreign policy integration among western European states has been the result of NATO aims and programs, not specifically European ones. The future of political unification, therefore, is closely connected with the pattern of Atlantic integration.

North Atlantic area

Military integration and foreign policy coordination in NATO evolved gradually in response to military weakness during the Korean crisis (1950-1953); such integration had not been intended by the chief architects of NATO in 1948. Since 1953, however, integration has proceeded largely in areas where costs were great and savings for welfare purposes could be achieved only through joint and centrally planned action. Until the question of developing a multinational nuclear force for the alliance came to the fore in the early 1960s, military integration had not proceeded far beyond the initial creation of joint commands, procurement systems, air defense arrangements, and intergovernmental political consultation machinery. Changes in eastern Europe, nuclear deterrents and the European aim of assuring speedy collective control over their use, served to confuse the common aim of the member states and caused disintegration in NATO. In the areas of trade, investment, and the coordination of foreign economic policies, OECD provides the vehicle for North Atlantic integration, a vehicle which has not acquired supranational features. Integration here, as elsewhere, is very much a function of a sense of danger and common purpose triggered by the integration of rival regional blocs in world politics.

Eastern Europe

After the death of Stalin in 1953 and the evidence of unrest in communist eastern Europe (especially the Hungarian revolution in 1956), a deliberate policy of joint economic planning was initiated through CEMA, based on the doctrine of a “socialist division of labor” and a “world socialist economy.” This resulted in the growth of a planned regional economy featuring national economic specialization. Tied to a political process of consultation among “fraternal” Communist parties and to a military process of joint planning similar to NATO’s, an integrated European communist realm based on polycentric authority is taking shape.

Middle East

Efforts to forge all-Arab unity on the basis of the purely intergovernmental Arab League failed because of the irreconcilable aims of the nationally based revolutionary and the traditional elites. Member states consistently intervened in each other’s affairs rather than making a joint policy. Integration, therefore, proceeds on the basis of partial unions and federations among ideologically kindred revolutionary regimes stressing similar programs of drastic economic and social modernization.

Africa

In principle all new African states share a commitment to the values of pan-Africanism, the unity of the “African personality,” and the need to pool resources for speedy economic modernization. As in the Middle East, however, the elite and party structures are regionally heterogeneous, so a variety of unstable groupings have arisen. One of the dividing issues is whether association with the EEC will advance modernization or open the door to “neocolonialism.” Hence the states stress sovereignty and nonintervention more consistently than joint action through the Organization of African Unity.

Western Hemisphere

The same is true of the OAS, which unites a very heterogeneous collection of states and elites. They have agreed on joint action only in the face of obvious common military danger from one of their own number. The possibility remains that multilaterally administered economic development and technical assistance programs will trigger a supranational institutional development. The same is true of joint antisubversion policies and the protection of human rights.

Latin American economic unions

Two economic groupings with unstable membership are functioning—the Latin American Free Trade Association (LAFTA) and the Central American Common Market. Both are based on the underlying common doctrine that industrialization can develop more rapidly on the basis of regional markets, specialization agreements among new industries, and joint investment planning; both are reacting, in part, to an economic threat perceived by their elites as posed by the EEC and the United States. Political union is not overtly demanded and the cohesive sentiment flows from a shared “underdog” mentality which may not readily lend itself to a marked spill-over tendency. LAFTA is likely to grow in proportion to the lack of growth of OAS programs and powers, and vice versa.

Other areas

Efforts at regional integration in Asia have been superficial and sporadic. Economic unification among southeast Asian countries, following the same argument as Latin America, has been delayed by territorial disputes. In Asia regional common markets and joint economic planning are discussed but are not being implemented, in large part because of the heterogeneity of elites and the unequal industrial potential of the prospective member states. Efforts at regional integration in the former British West Indies at first developed along the lines of joint functional programs, to be followed by political federation. However, the more rapid development of local national sentiment in Jamaica and Trinidad and speedy local economic development reduced expectations of future rewards, thus dooming the federation. The same process also defeated the proposed federation of Tanganyika, Kenya, and Uganda.

Ernst B. Haas

[See alsoFederalism; International Organization; INTERNATIONAL POLITICS; INTERNATIONAL RELATIONS; PAN MOVEMENTS.]

BIBLIOGRAPHY

Brzezinski, Zbigniew K. (1960) 1961 The Soviet Bloc: Unity and Conflict. Rev. ed. New York: Praeger.

Busey, James L. 1961 Central American Union: The Latest Attempt. Western Political Quarterly 14:49-63.

Cerny, Karl H.; and Briefs, Henry W. (editors) 1965 Nato in Quest of Cohesion. New York: Praeger.

Deutsch, Karl W. 1953 Political Community at the International Level: Problems of Definition and Measurement. Princeton Univ. Press.

Deutsch, Karl W. et al. 1957 Political Community and the North Atlantic Area: International Organization in the Light of Historical Experience. Princeton Univ. Press.

Diebold, William 1959 The Schuman Plan: A Study in Economic Cooperation, 1950-1959. New York: Praeger.

Dreier, John C. 1962 The Organization of American States and the Hemisphere Crisis. New York: Harper.

Etzioni, Amitai 1965 Political Unification. New York: Holt.

Fenwick, Charles G. 1963 The Organization of American States: The Inter-American Regional System. Washington: Pan American Union.

Friedmann, Wolfgang G. 1964 The Changing Structure of International Law. New York: Columbia Univ. Press.

Haas, Ernst B. 1958 The Uniting of Europe: Political, Social, and Economic Forces, 1950-1957. Stanford Univ. Press.

Haas, Ernst B.; and Schmitter, Philippe C. 1964 Economics and Differential Patterns of Political Integration: Projections About Unity in Latin America. International Organization 18:705-737.

Jensen, Finn; and Ingo, Walter 1965 The Common Market: Economic Integration in Europe. Philadelphia: Lippincott.

Korbonski, Andrzej 1964 Comecon. International Conciliation No. 549.

Lawson, Ruth C. (editor) 1962 International Regional Organizations: Constitutional Foundations. New York: Praeger.

Legum, Colin 1962 Pan-Africanism: A Short Political Guide. New York: Praeger.

Lichtheim, George 1963 The New Europe: Today and Tomorrow. New York: Praeger.

Lindberg, Leon N. 1963 The Political Dynamics of European Economic Integration. Stanford Univ. Press.

Macdonald, Robert W. 1965 The League of Arab States. Princeton Univ. Press.

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Political And Economic Planning 1959 European Organisations. London: Allen & Unwin.

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Scheingold, Stuart A. 1965 The Rule of Law in European Integration. New Haven: Yale Univ. Press.

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II. GLOBAL INTEGRATION

Political integration may be defined as a cumulative process of change in the nature of relations among more or less sovereign political units, such as states, during which these units voluntarily accept some kind of new central authority. This process requires at least four constituent elements: (a) the political units involved must permit the establishment of central institutions which promulgate policies; (b) the functions of this central authority may not be trivial or vague but must be important and specific; (c) the functions, or tasks, performed by the central institutions should be inherently “expansive”; (d) the political units must remain committed to the common enterprise because they perceive ensuing benefits.

The disintegration or diminution of local autonomies may be the consequence of deliberate choice by the decision makers of the units or it may be the unintended consequence of policies which initially had no foreseeable connection with resulting processes of integration. In either case, integration refers to a process which is voluntary and hence endows the new central authority not only with power but also with legitimacy. Imposition of a central authority by military conquest—historically, the main force which induced autonomous political units to submit to a new central authority—thus cannot be viewed as an example of integration as defined here.

Global integration, in contrast to regional integration or the integration of structures of authority within a state, refers to processes of integration during which functions are delegated to a new central authority whose decisions are accepted as legitimate by the component members of world society. What constitutes the members of a world society, or world society itself, is a question that can be investigated historically. Different historical periods are characterized by different types of world society, and the attributes of the members of these world societies may also differ quite radically in terms of size, number, absolute and relative power, internal cohesion, value systems, objectives, and so forth. The members of the world society may be nation-states (as is generally the case today), empires, principalities, city-states, or any other forms of political organization endowed with the authority to deal with external affairs.

The boundaries of a world society are determined by the frequency of interaction among its members. As a consequence, several “world” societies may have existed simultaneously because one world society—whose members interacted frequently—was not aware of the existence of other world societies or because it deliberately chose to keep interaction with its environs to a minimum. In some cases, such as the Inca world of a.d.1200-1530, the outer limits of such world societies can be determined fairly accurately; in other cases, such as the ancient empires of the Middle East or the empires that bordered the Mediterranean, the difficulties of delimitation are greater.

Contemporary world society is a global society and, in fact, is about to transcend its global confines and extend into outer space. The attributes of this contemporary global world society and the nature of its component members can be usefully described and summarized by the term “international system.” That is, the contemporary international system may be regarded as one of many possible ways in which the members of a world society can interact. An international system in turn may be defined as a pattern of relations among the major units of world politics (states) that is characterized by the absolute and relative power of these units and by the conflicting and converging objectives pursued by these units. The resulting patterns of power and purpose are thus the consequence of the physical and psychological-motivational forces that operate within and among the major units.

Processes relevant to integration

Interaction. It is important, both historically and analytically, to distinguish between processes of interaction among the members of a world society and processes of integration. Clearly, there can be no processes of global integration if there are no processes of global interaction; at the same time, frequent interaction can take place without diminution of the autonomy of the members that could lead to the establishment of a new central authority. The frequency of interaction and the range of different types of interaction among the members of the contemporary international system are probably higher and more extensive than in any other period of history. This is in large part the consequence of technological developments in the fields of communications and transport which have “shrunk” the world, allowing social interaction to take place with relative speed and economy.

Interdependence

The consequences of this increased interaction on relationships of interdependence are somewhat ambivalent. On the one hand, interdependence, when perceived, at times has been resisted and measures have been taken to counteract it. In recent history some states, or groups of states, have deliberately sought to reduce their dependence on other states of the international system—say, in matters of military security, the exchange of raw materials or finished commodities, etc.—so as to preserve for themselves a higher degree of political maneuverability or to deny advantages to an actual or potential opponent. Restrictions on international travel and on the free flow of labor across international borders, and restrictive immigration or emigration policies, are other examples of curtailing social interaction with the expected consequence of reducing some type of interdependence.

Furthermore, it can by no means be taken for granted that increasing interaction, even if coupled with interdependence, must necessarily lead to ensuing processes of integration. For example, in examining historical developments, the closer one gets to the modern age and its increasing opportunities for interaction, the fewer the historical examples of full-fledged successful integration of two or more previously sovereign units. For both psychological and practical reasons the modern nation-state has become the most important source of authority and the central arbitrator for groups and individuals with conflicting interpretations of what constitutes the public good and how to share its benefits equitably. With the development of modern nationalism in the late eighteenth and in the nineteenth century, the nation-state emerged as the most important large-scale sociopolitical organization that could command the overriding loyalty of groups and individuals and provide the psychological satisfactions of identifying with and serving a common cause. Although international causes, such as communism, international socialism, and Zionism produced rival value systems, the nation-state remained by and large the central authority endowed with the legitimate exercise of sovereign power. (In recent years this phenomenon is poignantly illustrated by the centrifugal tendencies which have affected both cold war camps and which have taken as their focal point a reorientation of public policy around the authority of the nation-state. It is further illustrated by the ardent nationalism displayed by the ruling elites of the developing nations of Africa and Asia.) These essentially psychological dimensions were buttressed by developments which delegated to the modern social-service state extensive functions for regulating economic life and for providing social welfare services. As a result the modern nation-state became, and in a large measure has remained, the central authority and major institutional structure for the effective conduct of both external and internal affairs. [SeeNation.]

Interpenetration

Notwithstanding these qualifying factors, the contemporary international system is generally regarded as being so highly interdependent that some analysts have suggested the term “penetration” as most applicable for describing the relationships of mutual influence among the members of the system. James Rosenau, for example, has proposed the concept of a new kind of political system, the penetrated system, to comprehend the fusion of national and international systems. He argues that national societies have become so penetrated by their external environment that they are no longer the only source of legitimacy or even of the employment of coercive techniques and that, consequently, national political systems now permeate, as well as depend on, each other and that their functioning now embraces actors who are not formally members of the system (1966, pp. 63-65).

Perhaps the most striking manifestation of the phenomenon of penetration is that many of the national units in the contemporary international system find it more and more difficult, if not meaningless, to distinguish between foreign policy and domestic policy. This holds true not only for the developing new nations that are going through the slow processes of modernization and the building of a viable nationhood but also for the industrialized nations of the Northern Hemisphere whose reallocations of resources and values are strongly affected by international factors. The occupation regimes of Germany and Japan in the postwar period, United States involvement in South Vietnam, United Nations operations in the Congo, foreign aid grants which require the recipient states to adhere to a specified program of utilization—these are just a few examples of where the allocation of values in a national unit is strongly affected by the prevailing patterns of power and purpose in the international system. Not only are domestic allocations of values strongly affected by the international environment, but national decision makers have begun to recognize that in a large number of issues external events have a direct impact on the allocation of values which traditionally took place largely within the domain of essentially national institutional structures.

Nowhere is the phenomenon of interpenetration more clearly visible and institutionalized than in the operations of regional international organizations which are endowed with some measure of supranational authority, that is, in functional contexts such as the European Common Market, where interpenetration has in fact led to processes of integration.

Another example of interpenetration is a result of the changing nature of the nation-state. As John Herz (1959) has cogently argued, the previously existing “hard shell” of physical, legal, and psychological boundaries which national systems have traditionally maintained vis-a-vis their external environment is becoming increasingly “permeated,” primarily because of developments in modern weapons technology and the application of economic and psychological warfare. Indeed, one cannot think of a more fundamental, or unavoidable, type of interdependence or interpenetration than that which results from the possibility that a nuclear exchange between members of the system may abolish the system itself.

All these examples—and they are by no means exhaustive—go beyond the mere fact that there is an increasing interdependence among national actors in the system; rather, they are examples of a process of interpenetration in which the traditional political, economic, legal, and psychological boundaries separating the nation-state from the environing international factors are becoming increasingly tenuous.

Global integration and the UN

Measured against the magnitude of the tasks that evolve from the conditions of the international system, and in spite of the interpenetrative attributes of present-day world politics, existing global integrative structures cannot be regarded as anything more than inadequate and minimal. International law and the functioning global organizations that are effectively operating bodies and approximate the precepts of integration, such as the Universal Postal Union (UPU), the International Labour Organisation (ILO), and some of the other UN specialized agencies, do not greatly influence the major political concerns that preoccupy the members of the international system. Although not entirely noncontroversial, the essentially technical and rather specialized nature of the tasks performed by these functional organizations preserves a certain “autonomy of functional contexts” that does not lend itself to extensive “spillover” into more controversial, political areas. [SeeInternational Integration, article on Functionalism And Functional Integration.]

Some of the most important functions for a stable but dynamic world order, such as providing a central and authoritative machinery for channeling forces of change in ways that avoid a violent disruption of world society, are denied anything but a loosely structured organizational construct on the global level. Some of the functions that were explicitly or implicitly assigned to the UN, such as collective security, peaceful change, and pacific settlement tasks, have resulted in neither patterns of expectations nor patterns of behavior that portend an integrated international system with a corresponding accretion of power for a central authority. It is nonetheless useful to consider these functions, if only to highlight the strictures against global integration that prevail in the contemporary system and to point out the effect of global functional efforts on processes of regional integration.

Collective security

The hope that global integrative trends would lead to a world society whose members would resolve their conflicts with a minimum of violence is at the heart of the more ambitious proposals for an integrated international system. A key attribute of a highly integrated international system would thus be a central authority endowed with a monopoly of the legitimate use of physical force. The concept of collective security, as embodied in the UN Charter, does not correspond precisely with the idea that a central global authority should possess this kind of authority over the use of force. It is, however, sufficiently similar in its intended effect—i.e., that a collective response can stifle an aggressor—and, moreover, supplies a concrete historical example of attempts to regulate the use of force among the members of the international system by a global organization. [SeeCollective Security.]

Four major factors of the international system made it extremely difficult for the UN to operate effectively in the functional area of collective security.

(a) The anticipated harmony of interests among the “Big Five,” the permanent members of the Security Council, evaporated rapidly. The developing polarization of conflict, perceived interests, and ideology between the Soviet bloc and the Western powers shattered the concert envisaged by the framers of the Charter. In addition, the global dimensions of the postwar international system made the cold war blocs evaluate most conflicts arising in the system in the light of their possible repercussions on the East-West balance of power.

(b) The polarization of perceived interests between the cold war blocs was coupled with a polarization of capabilities. Up to the late 1950s, power in the international system was not diffused but concentrated in two power blocs—more specifically, in the alliance superpowers, the United States and the Soviet Union.

(c) The very nature of the state system posed vexing problems for UN collective security functions. The possibility of making rather clear distinctions between domestic and international issues is an important premise for collective security responses because they are triggered most unambiguously when transgression involves the violation of territorial integrity. For reasons already noted, this condition could not be met in many parts of the world. Particularly in conflicts between colonial powers and their colonies, and among some of the new states, it was often difficult to distinguish between internal and external dimensions of a conflict. Moreover, the outcome of an essentially domestic power struggle was often assessed by the cold war antagonists in a global context because it could affect the cold war balance of power.

(d) Finally, the UN itself became a forum which the superpowers exploited for their national policies and in which they sought to gain the support of the membership for cold war issues. The UN was thus prevented from securing the flexibility of alignment against an aggressor which is required for collective security functions.

In light of these strictures, it is not surprising that the success of the UN in this task area was minimal. However, “collective security” functions were performed in the international system by structures other than the UN. For example, the restraints imposed on each other by the two cold war military blocs and the gradually developing nuclear “balance of terror” undoubtedly contributed substantially to the stability of the international system. This is one of the most striking ironies of the postwar international order: factors that stabilized the system at the same time prevented global collective security functions. The polarization of power and purpose—undoubtedly a stabilizing influence because of the resulting deterrence effect—was antithetical to a collective security arrangement which ideally requires diffusion of power, albeit with centralized ad hoc management in the event of aggression.

Peaceful change and pacific settlement

In contrast to collective security functions, peaceful change operations require that the global institution concern itself with (a) the merits of the dispute (that is, make a value judgment about the need and type of changes in the international system); (b) the internal political attributes of the disputants; and (c) the forces of unrest, before they escalate to the point of aggression. In short, a peaceful change operation entails a management of ends and projects that requires a positive attitude toward change, substantive evaluation of aspirations, and concern with the internal disposition of states.

The operational assumptions of pacific settlement functions are a hybrid between those of collective security and peaceful change. Instead of sanctions (as for collective security operations), pacific settlement relies chiefly on methods of mediation, conciliation, and inquiry. Pacific settlement is not as much concerned with the intrinsic merit of the dispute as peaceful change is (in fact, it implicitly encourages compromise), but neither does it envisage a purely instrumental response as the means of management of collective security. [SeeInternational Conflict Resolution.]

UN “balancing.” With the impasse experienced by the UN in the task area of collective security, the organization gradually turned to alternative functions which in some ways are akin to the operational assumptions of peaceful change and pacific settlement. This was accomplished through the processes of “balancing” (cf. Haas 1955; 1956). The concept of balancing describes and rests upon an intricate negotiating process in the UN during which the Afro-Asian members, as neutral mediators, traded their support on cold war security issues in which the superpowers were interested against the superpowers’support on colonial, social, and economic issues in which the mediators were interested. In particular, the superpowers sought to enlist the symbol of the UN for their cold war projects by supporting the neutrals’ projects of colonial emancipation, human rights, and economic development.

Clearly, in its balancing operations the UN became involved in functional contexts that called for declarations and commitments as to what the world ought to be like and how the organization could aid in its transformation; that is, the UN had to take a stance on the substantive merits of a grievance and, as a corollary, had to become concerned to some extent with the internal political conditions of the member states. To have done otherwise would have meant abdication of the organization’s relevance not only in the task area of collective security but also in the area of peaceful change and pacific settlement.

What is particularly striking is that the UN’s limited success in the peaceful change area (for example, Palestine, the former Italian colonies, the Togo trust territories, West Irian, and the general issue area of colonial emancipation) was made possible not so much in spite of, but because of, cold war tensions. For example, the shift of influence from the Council to the Assembly and the blurring of functions between the two bodies was in good part an outgrowth of the collective security impasse resulting from the use of the veto in the Council. This provided the growing number of smaller powers with the parliamentary lever to exert a stronger influence over UN functions than their actual power would have justified. Their role as mediators in the cold war conflict and UN influence in the creation of new states further enhanced their advantage in a setting of multilateral diplomacy, cross-functional balancing, and egalitarian voting procedures. The basis for these permissive conditions was that both cold war camps, in competing for the allegiance or at least neutrality of the new states, were committed to advocating and supporting forces of change, modernization, and economic development.

On the whole, all the obstacles that hampered UN collective security functions—polarization of power and purpose in the earlier phase of the postwar world, heterogeneous membership of the international system, north-south polarization of economic development and industrial capacity—were precisely the factors that allowed the UN to fulfill important, if limited, functions in the area of peaceful change and pacific settlement.

The processes of balancing in the UN had a twofold implication for international integration. First, although balancing operations did not lead to processes of global integration, they reflected and underscored a high degree of interdependence among the members of the international system. This, in turn, had a significant effect on bargaining processes among the members of the Western alliance in the context of the North Atlantic Treaty Organization (NATO) and the European Common Market: that is, global balancing had an impact on regional integration (cf. Haas 1956; 1961). As noted, bipolarity of power and the nuclear standoff between East and West prevented institutionalized global collective security but stabilized the international system. Nuclear bipolarity, however, also produced fissures in the Western alliance by eroding previously more complementary security interests among the Western powers. The ensuing tensions within the alliance were sharpened by differing policies on the pace of colonial emancipation and by the conflicts which developed between the United States and some western European allies because of economic regionalism and nationalism in western Europe. It is here that global balancing had an important effect on regional integrative ventures. To the extent that the differences among the Western allies could not be fully adjusted on the level of Western regional organizations but had to be further compromised at the global UN level in order to obtain a united Western voting posture, the world organization contributed to the adjustment of interests not only among, but also within, regional groups.

Second, processes of balancing not only reflected the shifting patterns of power and purpose in the international system but to some extent aided in systemic transformations by providing for them an institutional setting which made them clearly visible. When the major alignments in the system shifted from the postwar bipolar pattern to a tripolar one after the Bandung Conference and to a multipolar pattern thereafter with the admission of a large number of African nations, the UN forum served as an institutional structure where these shifts became clearly manifest and could be utilized by all parties concerned for cross-functional balancing. Even though these processes resulted in only minimal global integrative trends, they played an important role by symbolizing the interdependence among the members of the international system.

Wolfram F. Hanreider

[See alsoAlliances; Collective Security; Diplomacy; International Politics; Systems Analysis, article onInternational Systems. Other relevant material may be found underInternational Relations.]

BIBLIOGRAPHY

Claude, Inis L. (1956) 1964 Swords Into Plowshares: The Problems and Progress of International Organization. 3d ed. New York: Random House.

Claude, Inis L. 1961 The Management of Power in the Changing United Nations. International Organization 15:219-235.

Claude, Inis L. (1962) 1964 Power and International Relations. New York: Random House.

Deutsch, Karl W. 1953 Political Community at the International Level: Problems of Definition and Measurement. Foreign Policy Analysis Series, No. 2. Princeton Univ. Press.

Deutsch, Karl W. et al. 1957 Political Community and the North Atlantic Area: International Organization in the Light of Historical Experience. Princeton Univ. Press.

Haas, Ernst B. 1955 Types of Collective Security: An Examination of Operational Concepts. American Political Science Review 49:40-62.

Haas, Ernst B. 1956 Regionalism, Functionalism, and Universal International Organization. World Politics 8:238-263.

Haas, Ernst B. 1961 International Integration: The European and the Universal Process. International Organization 15:366-392.

Haas, Ernst B. 1962 Dynamic Environment and Static System: Revolutionary Regimes in the United Nations. Pages 267-309 in Morton A. Kaplan (editor), The Revolution in World Politics. New York: Wiley.

Haas, Ernst B. 1964 Beyond the Nation-state: Functionalism and International Organization. Stanford Univ. Press.

Herz, John H. 1959 International Politics in the Atomic Age. New York: Columbia Univ. Press. → A paperback edition was published in 1962.

Jacob, Philip E.; and Toscano, J. V. (editors) 1964 The Integration of Political Communities. Philadelphia: Lippincott.

Jenks, C. Wilfred 1958 The Common Law of Mankind. New York: Praeger.

Lindberg, Leon N. 1963 The Political Dynamics of European Economic Integration. Stanford Univ. Press.

Mangone, Gerard J. 1951 The Idea and Practice of World Government. New York: Columbia Univ. Press.

Mitrany, David (1943) 1966 A Working Peace System: An Argument for the Functional Development of International Organizations. 4th ed. Chicago: Quadrangle Books. → The 1966 edition includes material added between 1948 and 1965.

Rosenau, James N. 1966 Pre-theories and Theories of Foreign Policy. Pages 27-92 in R. Barry Farrell (editor), Approaches to Comparative and International Politics. Evanston, III.: Northwestern Univ. Press.

III. FUNCTIONALISM AND FUNCTIONAL INTEGRATION

Functionalism in its different meanings is a much discussed topic [seeFunctional Analysis]. This article, however, will deal only with the specialized meaning that the term has in international organization, tracing its origins and influence in international affairs, and emphasizing its contributions to the study of international integration.

Functionalism in international organization

Starting in the late nineteenth century, a number of scholars took the proliferation of international organizations—like the Universal Postal Union and the International Telegraphic Union—as an indication of a growing sense of world community and as a guarantee for future international stability. Paul S. Reinsch, Leonard Woolf, G. D. H. Cole, Pitman Potter, and others (see Martin 1950; Engle 1957) have all expanded on these basic points. But it was David Mitrany who best formulated the doctrine and the theory of functionalism in international organization. His essay A Working Peace System (1943) summarized the main arguments of the functionalists and by its very title drew attention to their major claim: functionalism is the road to a lasting peace. This claim has been the main target—and a very easy one—of the attacks on the functionalists. However, a close examination of the doctrine reveals that it may have other, more useful ideas to offer to the student of international relations.

The functionalist doctrine

The functionalist believes that contemporary nationalism rests on factors which cut across national lines, i.e., that there is a movement away from a demand for national rights and toward a demand for services (Mitrany 1943, p. 17. It must be remembered that Mitrany was writing during World War II and was predicting the shape of the postwar world by projecting the domestic trend toward welfare statism into the international arena). The functionalist maintains that social and economic maladjustments are the basic causes of war and that social and economic welfare is the precondition of peace. The real task of our common society is the conquest of poverty, ignorance, and disease; our social interdependence is all-pervasive and all-embracing.

The existing state system, according to the functionalist, contributes to international tensions and conflicts because it is institutionally inadequate. It cannot deal with basic global problems because it arbitrarily divides global society into national units based on territory, and not on the problem to be solved. International institutions based on function rather than on territory would be appropriate for the solution of such problems. Establishing such institutions is possible, he argues, because social activities can be separated into political and nonpolitical (“technical”) ones. The particular activity (or function) will determine the form of the agency in any given case.

Furthermore, the experience gained in one area can be transferred to other areas so that a successful institutional device can serve as a model for devices in many different settings. Successful experience will spread and accumulate, forming part of the foundation for an international society. (This idea serves as the basis for the “spill-over” concept discussed below.)

The existing state system, in the functionalist canon, promotes the subjective allegiances which send men to war. International bodies that focus attention on areas of common interest may, on the other hand, foster international loyalty among people at large and counteract harmful nationalistic attitudes. Similarly, the leaders of national states—politicians, diplomats, and soldiers—are blinded by their narrow view of their national interests and do not have the proper perspective to encourage international cooperation. Experts working for international organizations will develop international loyalties and will help to create a peaceful international community.

Finally, the most basic premise of the functionalists, albeit not explicity stated, is that human beings are fundamentally rational, that they see the advantages of harmony over conflict in social relations, and that they can control their destiny through the evolutionary steps that will lead to a peaceful world.

The functionalist program emerges quite simply and clearly from the above premises. In selected areas of life, “comprehensive and solid” authorities will be created. Some of these already exist, but many more must be added, until a “web of international activities and agencies” will “overlay political divisions” (Mitrany 1943, pp. 10-11). ultimately, international government, consisting of the sum of these agencies, will be coextensive with all international activities. Coordination among these various organizations will also emerge functionally. First there will be ties between individual bodies, based on common needs and problems. When these prove inadequate, groups of agencies will start to work together. Later, general international planning agencies will emerge, covering broad ranges of activities. Finally, a general political authority will emerge, out of the necessity for over-all coordination. (However, this last step is left rather vague and is not considered of immediate importance.)

The functionalists do recognize that difficulties may arise in the course of implementing their program, but they claim that such difficulties are merely mechanical and can be mechanically solved as they arise.

Criticism. Among the more sophisticated critics of functionalism is Inis Claude ([1956] 1964, chapter 16), who rejects most of the functionalist premises. War, he states, is not a product of economic and social conditions; rather, to quote Kelsen: “the unsatisfactory situation of world economy is the consequence of war” (1944, p. 16).

Furthermore, Claude rejects the notion of the “separability” of the economic and social strata of life from the political, and even if they could be separated, he believes that states would insist on putting off welfare matters until they had solved the political issues that divide them.

As for transferring cooperative experience from one sphere to another and accumulating cooperative spirit, here again Claude is pessimistic, believing that functional development is bounded by political issues and will expand only until halted by some crisis. “The problem of the recurrent setback, the interruption and disruption by war of the projects of functionalism for the eventual elimination of war, poses a critical dilemma” (Claude [1956] 1964, p. 354).

Claude also challenges the functionalists’ reliance on human rationality, particularly the rational transfer of loyalties from national to international agencies. New institutions do not necessarily create new loyalties. Finally, Claude notes that the functionalist program for building the foundation of peace is a long-range one, and he is not sure that all that time is available (presumably before another world war erupts).

Most of this criticism is, of course, directed at the programmatic features of functionalism, challenging the proposition that this is the road to peace. In other words, Claude is engaging in an ideological debate (other critics do the same, only not as well). The empirical evidence he presents is not much better than the original evidence presented by the functionalists. However, regardless of the validity of these assertions and counterassertions, functionalism must also be examined from two other points of view: (a) as a phenomenon in international politics and (b) as a theoretical contribution to the study of international organization.

Functionalism in operation

Functionalists advocate building on existing foundations—extending the network of international agencies and increasing their powers. As already noted, this practical approach is one of the chief attractions of functionalism, for functional international organizations have existed for well over one hundred years, and their number has steadily increased. Accurate figures are hard to obtain because they depend on one’s definition of a functional international organization. However, a general picture of governmental and nongovernmental organizations can be found in the Yearbook of International Organizations (see also Reuter 1956; Angell 1965).

In the nineteenth century, as a result of the rapid technological progress and the exploitation of new sources of energy, the range of international relations was greatly widened and nations found more and more common interests, which led to the creation of numerous international organizations, both private and governmental (Mangone 1954). From the functionalist’s point of view, the most significant of these institutions were the “public unions” or “administrative unions.” These generally started as treaties signed by states to protect specific interests. The treaties led to the establishment of international bureaus or secretariats which coordinated the activities of the members and handled administrative matters. Periodic meetings were held at which representatives of the member states set broad policies, generally making decisions by unanimous vote only.

These organizations emerged primarily in the fields of communications, transport, and commerce, and to a lesser extent in the areas of health and social welfare. Thus they represented primarily the economic and social interests of nations and were comparatively untouched by issues of war and peace. Several of these public unions have survived both world wars and are still functioning—some as specialized agencies of the United Nations but others as independent organizations. It is easy to see why the functionalists lay so much emphasis on separating economic from political issues and on increasing the number of such organizations: these are the ones that have continued to function and, within their limited spheres of competence, have achieved considerable success.

The founders of the League of Nations, although at first reluctant, did finally incorporate articles 23-25 into the Covenant (Walters 1952, vol. 1, p. 59). These articles suggest at least an awareness of functionalist concerns. Article 23 sketches areas of social concern; article 24 provides for administrative coordination of existing international bureaus, and even for the financing of such bodies if placed under the direction of the League; and article 25 is devoted to encouraging international health and prevention of disease. (Since a whole article is devoted to matters of health, it is quite clear that this was considered, at the time, a most important functional area.)

As the League started to operate, these “functional” aspects of its work assumed increasing importance. It set up technical committees, organized conferences, started technical assistance, and conducted studies in social and economic problem areas (Asher et al. 1957). In fact, most retrospective appraisals of the League single out this area of activity as its most notable achievement. For example: “In retrospect, the successes scored by its functional agencies seem to be the main redeeming features of the record of the League …” (Claude [1956] 1964, p. 357; see also Goodspeed 1959, pp. 76-77).

Although the League recognized the autonomy of some international public unions, such as the International Labour Organisation (ILO), it was basically committed to centralizing all its activities. The Council, therefore, was in charge of coordinating, supervising, and controlling even economic and social matters. The political pressures that were thus brought into the functional field were of some concern to the League, and a special committee was established to recommend improvements. The Bruce Report (League of Nations 1939) recommended the creation of a special body of governmental representatives and experts to replace the Council as the supervisory agency of the League’s technical activities. In other words, this was a functionalist solution.

During and after World War II there was a growing awareness of the need for international social and economic collaboration. The United Nations Charter specifically provided for specialized agencies and for coordinating welfare activities through the Economic and Social Council (articles 55-72). It may be an exaggeration to call the whole United Nations system “a full fledged experiment in the application of the functional theory to international affairs” (Claude [1956] 1964, pp. 357-358), but there is no doubt that functionalist ideas were influential in creating the machinery for dealing with social and economic problems (Asher et al. 1957, pp. 420-639).

Since the drafting of the charter, the functional program of the United Nations has expanded considerably, and there has been an increase in the number of functional agencies outside the United Nations system (Jessup & Taubenfeld 1959, pp. 85-116, 117-134). True, in many fields the international organizations concerned have quite narrow, limited functions of an essentially administrative nature, and the important policies and decisions are made by the member states individually. Nevertheless, in several cases “supranational” political power has been given to the organizations, and in the case of the European Economic Community and its predecessors, the road seems to be leading to political integration.

In the discussion thus far it has not been made clear whether these functional phenomena were directly related to the work of the functionalists. Clearly, David Mitrany, Gunnar Myrdal, James Avery Joyce, and others used these international developments to illustrate their claims, but it is far from certain that these men, in turn, influenced the events. All one can say is that functionalist ideas influenced a considerable number of international civil servants and even some national leaders, both before and after World War II.

Important individuals like Albert Thomas of the ILO, Lord Boyd Orr of the Food and Agriculture Organization (FAO), Brock Chisolm of the World Health Organization (WHO), and Aake Ording of the United Nations International Children’s Emergency Fund (UNICEF) often expressed views that would have pleased any functionalist (Schuman 1952). These men all occupied important positions during the formative years of their organizations and undoubtedly helped to create an atmosphere favorable to functionalism. In the European context, Jean Monnet, Walter Hallstein, and others have also expressed views that show their sympathy with functionalist ideas.

To conclude, the significance of functionalism in operation is that both international organizations and their leaders reflect many of its views and assumptions, and follow policies that agree with its programs.

Theoretical contributions

The fact that functionalist ideas were derived from international phenomena, and in turn influenced some policy makers and international institutions, draws attention to the contributions that functionalism can make to the study of international relations. It shows the importance of certain aspects of international relations that would otherwise be neglected and raises important questions about the nature of international political processes. In so doing, moreover, it enables students to use concepts and techniques from other areas of political science and from other social sciences to examine international relations.

The study of functional international organizations has traditionally occupied few scholars, and the topic has been allocated few pages in most books on international organization; general works on international relations barely mention them. Although this situation still prevails, there are signs of change, and credit is due to the functionalists and their emphasis on the role of such organizations (see, e.g., Alexandrowicz 1962).

The questions that arise out of the functionalist emphasis apply to several aspects of international relations. For example, do institutions precede functions or vice versa? Mitrany argued that only when the need for an organization is clear will that organization emerge. On the other hand it is obvious that as organizations grow, they subsume new functions and occasionally even create them. Clearly the relationship is worth investigating. Another example: What kind of constitution should an international organization have? Mitrany claimed that nothing could be worse than a written one. Yet most international bodies do in fact have some founding document—be it a covenant, a charter, or a treaty. Is this a factor in their difficulties? Should such agencies have unwritten constitutions? No constitutions? The connections here to international public law are obvious and important. A final example: Mitrany has been criticized for suggesting the Tennessee Valley Authority as a model for international public authorities. Much of the criticism may be valid, but the critics do not systematically examine why the analogy is faulty. The groundwork for such examinations is only now being laid, but clearly much can be learned by comparing national and international functional agencies (Alger 1963).

In addition to the institutions themselves, functionalism draws attention to the parts played by interest groups in international politics. Here, too, traditional scholarship was deficient, concentrating merely on governments and, at best, mentioning the domestic influence of pressure groups on foreign offices and diplomats. Very occasionally someone would refer to international nongovernmental organizations, only to dismiss them as mildly interesting but unimportant. There is, however, some evidence that the role of nongovernmental bodies is by no means insignificant, and their influence may occasionally even exceed that of governments (Meynaud 1961; Bock 1966).

Functionalists are often accused of having an idealized and therefore “unrealistic” view of human nature when they suggest that international institutions will develop international loyalties in their officials and help to overcome divisive national loyalties. This criticism oversimplifies the true position of the functionalists who also claim that officials may act to promote international interests even though their reasons are nationalistic. This argument can, of course, be empirically tested. Careful investigation will be able to determine the effects that working for an international organization has on the individuals concerned. At present, information of this kind is practically nonexistent. (But see some recent contributions in Kelman 1965.) In fact, little is systematically known about international civil servants, their backgrounds, their attitudes, etc. Even less is known about government representatives and interest group officials who act in the international arena. By drawing attention to these questions, functionalism opens another area for investigation.

Functionalism has also had a definite impact on the study of international law since 1945. The work of scholars like Philip C. Jessup and Howard J. Taubenfeld (1959), C. Wilfred Jenks (1958), and Wolfgang Friedmann (1964) clearly bears the mark of functionalist ideas. Friedmann, for example, notes with approval that “a functional approach to international organization correlates the development of international law and organization with political and social realities and tendencies of international life” (p. 276). A further reflection of this influence is the growth of international legal studies devoted to functional concerns, e.g., trade, conservation of resources, and social welfare. [SeeInternational Law.]

But perhaps the major contribution of functionalism has been to the study of international integration. It is precisely in these terms that Haas (1964) examines it and finds it, on the whole, quite useful. The concepts of separability, transferability, and spill-over, which play such an important role in all discussions of international integration, originate in the ideas of the functionalists; and, of course, at the heart of the doctrine of functionalism lies the notion of integrating the nation-state system into a world community to achieve lasting peace.

Functional international integration

The concept of functional international integration, which refers to the integration of “technical” or “noncontroversial” activities of nations, forms a part of the broader concept of international integration. [SeeInternational Integration, articlesonGlobal Integrationand Regional Integration.] Since the concept is of recent origin and since little work has been done on it, it might be useful to trace its origins before discussing its characteristics and potentialities.

Interest in “world community,” “world government,” the “commonwealth of man,” or “one world” is, of course, quite old (see the survey in Schuman 1952); but only since the end of World War II have social scientists made serious efforts to study the phenomena described by these labels, largely because only since then have there been enough such phenomena to make empirical study worthwhile. [SeePeace.]

The growing interdependence of the nations of the world as a result of the enormous rate of technological change has been the subject of much comment. However, this interdependence has by no means been a one-way street leading to internationalism or a sense of world community. There has been an increase in world trade and international communication, which has brought developed countries into closer commercial relationships; at the same time poorer countries have been encouraged to multiply their international trade and financial contacts (Kindelberger 1965). But the same technological advances have also enabled national governments to increase their powers and activities and have made nationalism more popular and intractable than before. This process has been furthered by the growing discrepancy between rich countries and poor, by the fact that most developed countries devote a smaller part of their resources to foreign trade than they did in the past, and by the decline of large-scale international migrations which were quite common before 1914 (Deutsch et al. 1957, pp. 22-25). Similarly, the development of nuclear weapons has had a mixed effect, on the one hand creating the interdependence of “a community of fear” and encouraging negotiations and cooperation, and on the other hand increasing the tempo of the arms race and whetting the appetite of individual nations to acquire nuclear weapons of their own. Yet, important as the problem of interdependence is, it has not had as great an impact on scholarly interest as have the post-1945 developments in Europe. The evolution of a European economic community and the beginnings of political unification have presented economists and political scientists with data and have led them to develop the concept, or rather concepts, of “international integration.” (Scholars are still far from agreeing on a definition of the term.)

Two other developments have contributed to the interest in integration and have broadened its subject matter. First, the emergence of a large number of new nations, many of them without unified political traditions or “sense of community,” has led scholars to study “national integration.” Second, the combination of technological advances and rapid urbanization has created problems inside many industrial countries; local or metropolitan governments are incapable of providing for the needs of people and larger units have not yet emerged; scholars, therefore, have begun to talk about “community formation” and “regional integration.”

International integration, political as well as economic, has been defined variously as a process, a condition, or both. Arguments can be made for all three positions, but, from my point of view, defining integration as a process is the most useful. This has led me to accept the definition of Leon Lindberg, according to which political integration is “the process whereby nations forgo the desire and ability to conduct foreign and key domestic policies independently of each other, seeking instead to make joint decisions or to delegate the decision making process to new central organs” (1963, p. 5). Lindberg goes on to suggest that this process requires four conditions: (1) the development of central institutions and policies; (2) the assignment to these institutions of important spe-fic tasks; (3) an inherently expansive nature to these tasks; and (4) the continued commitment of member states, i.e., they must continue to see their interests as consistent with the enterprise. (For different approaches see Jacob & Toscano 1964, pp. 1-11; Deutsch et al. 1957, p. 5; North et al. 1960.)

Note that this definition does not deal with the result of the process. Thus, no point is postulated at which integration is complete. For that matter, no special predetermined line of evolution is established; the process of integration may go on for any length of time and may result in a new political entity, but it does not have to.

As already indicated, most of the scholarly work on integration by economists and political scientists has concerned the European community, although some very recent studies have dealt with Africa (Nye 1965) and Latin America (Wionczek 1966). The emphasis has naturally been on regional phenomena, and very little attention has been paid either to global or to functional phenomena.

Economic integration

A possible exception to the emphasis upon regional phenomena can be found in the work of some economists. There is probably consensus among economists to regard economic integration as a process and a condition: a process encompassing measures to abolish discrimination between economic units belonging to different national states and a condition in which various forms of discrimination between national economies are absent (Balassa 1961, p. 1). As such, economic integration can take various forms, from free trade area to customs union to common market to economic union to complete economic integration, and it also describes the steps leading to the attainment of each of these forms. [SeeInternational Integration, article onEconomic Unions.]

As to the means and objectives of economic integration, two extreme views may be contrasted: the “liberalist” and the “dirigist.” The liberalist approach, also called “functional” (but not to be confused with our usage of the word), involves gradually eliminating impediments to commodity movements and eventually establishing “a larger market in which the laws of supply and demand can be effective without regional administrative intervention” (Sannwald & Stohler [1958] 1959, p. 84). The advocates of this approach (e.g., Maurice Allais, Wilhelm Roöpke, and M. A. Heilperin) equate integration with trade liberalization and oppose the establishment of supranational institutions or, indeed, any form of political unification. Proponents of the dirigist or “institutional” approach (e.g., André Philip, Maurice Bye) say that integration should be established through positive administrative measures and maintained through continuous administrative action. They propose creating a supranational authority with the delegated functions of coordinating economic policies. (Obviously it is the dirigists who are closer in approach to the functionalists.)

By and large, however, economists agree on the way in which to study integration and tend to concentrate on such subjects as commodity and factors movements, size and growth of markets, economies of scale, and external economies. They acknowledge that political aspects are “of great consequence” but “leave it for the political scientist to determine the political implications of such developments” (Balassa 1961, pp. 6-7).

When political scientists do look at the work of the economists—and far too few have done so—they are not quite sure of its contributions. Haas and Schmitter seem to feel that “sophisticated economic analysis” and “pure economic theory” are not especially helpful, because the political actors do not see things the way economists do. On the other hand, they admit that economic analysis could indicate “the limits of the politically possible” if only economists could agree on welfare gains and losses in particular cases. Furthermore, they argue for viewing economic union as a prelude to political integration, even though the chief actors may not see it that way in the beginning (Haas & Schmitter 1964, pp. 707-709).

Global and functional integration

Clearly, the relationship between economic and political integration needs further exploration. I believe that the study of economic integration can certainly contribute to the study of international political integration along several important lines.

First, political scientists can use the concepts and techniques evolved by economists to study global integration, even though most of the economists’studies have been regional and European in scope. The universal process of economic integration, though much less advanced than the regional one, is nevertheless measurable in the same terms. And while the political elements that are absent from the economic formulation will not be discovered by this approach, it is fair to assume that precisely these elements are least developed on the global level. In brief, this approach could supply data on what might be called the “infrastructure” of the integration process.

Second, economic integration can be viewed as an important instance of functional integration, i.e., the integration of “technical” or “noncontro-versial” activities of nations. Since almost all the empirical data on global integration concerns precisely such activities, this concept needs further elaboration. (Functional integration can, of course, also play an important role in the study of domestic integrative attempts—national, regional, or even local.)

Separability. The terms technical and noncon-troversial have been used, rather than nonpolitical, to avoid the pitfall which trapped the functionalists. In their desire to promote international agencies they insisted that political and nonpolitical (i.e., social, economic, scientific, technological, etc.) activities can be separated and that the latter can be dealt with while the former remain in abeyance. Critics were quick to point out that such separability is a myth, since all the nonpolitical activities mentioned have definite political implications, and that as soon as nations feel their impact, they will intervene politically and destroy or at least change the nature of the organization, if indeed they don’t create it as a political instrument in the first place.

This criticism is well taken, but to go further and argue that there is, therefore, no meaningful difference among international activities along these lines is totally unjustified. Every international activity may well have its political implications, but so long as the actors perceive it as primarily technical, noncontroversial, or unimportant to their major political concerns, it can be placed in a separate category for purposes of analysis and comparison. From this point of view, the idea of separability does come into play, and we can talk of the “autonomy of functional contexts” (Haas 1961), of functional international organizations, and of functional international integration.

There is some historical evidence that functional approaches were dominant in the early stages of most cases of international integration (Deutsch et al. 1957, p. 87). These approaches were the intermediate ground in those integrative attempts which led to the establishment of a new political entity as well as in those that led to more pluralism. In either instance, leaders found functional steps congenial and useful to advocate. Such steps do not visibly encroach on national sovereignty; they do not imply automatic political unification; and they generally do have immediate, visible, beneficial effects. Thus, “practical” men can support them. On the other hand, eventual expansion of integration into other fields, extending even to full-fledged political unity, is not excluded, so “idealists” can also rally round. Finally, functional activities are, by definition, specialized, and interest only limited segments of the population; national leaders, therefore, do not perceive them as threatening their domestic reputation. Consequently, functional international organizations meet with very little political opposition in most nations.

Spill-over. The major importance of functional integration, however, lies in the unintended consequences that such efforts have for the international integrative process. According to some observers, an “expansive logic” operates. Jean Monnet is represented as feeling that “the very disequilibrium produced by the integration of one sector and the nonintegration of the surrounding ones, the pressures from the central institutions and from the new community-wide political processes, will result in an ascending spiral of integration” (Hoffmann 1963, p. 530).

This idea of the expansive logic of functional integration is closely related to the “spill-over” concept evolved to explain the progress of integration in the face of the separate and autonomous policies that constitute each stage of the whole integrative process. The spill-over describes the way the powers and tasks of an institution expand because its existing powers and tasks are inadequate to meet the demands and expectations of the political actors involved. These expanded tasks then lead to further actions and new expectations and still further expansion. The concept helps us to analyze integration efforts without having to assume that all the participants share the same view of the desired end product. Spill-over is a significant concept because it draws attention to the different patterns of growth of institutional authority and of the decision-making process in international bodies.

Functional integration proceeds through the progressive delegation of the decision-making power. At first the decisions may be made in individual capitals on the basis of recommendations from an international nongovernmental group; then they are made jointly by representatives of nations in an international conference; and finally they are made by the international agency itself, thus contributing, almost casually, to international integration.

Another unintended consequence of the functional integrative process is the emergence of a new type of international actor: the functional specialist. He may be an international civil servant or a national specialist, but in either case preliminary studies show that he begins to feel a sense of community and develops a special interest in maintaining the system. His increasing decision-making power, of course, reinforces these feelings and allows him, if he is one of the more capable members of the organization, to initiate creative personal action to further the integrative process.

In conclusion, it should be obvious that functional international organizations are important agents in functional integration and should be studied from that point of view. There is no need to prejudge the case by implying that all such organizations inevitably lead to world peace and greater international unity. Quite the contrary: many of them may lead to conflict and disunity. However, it is clear that either result can be assessed in terms of the integrative process; and it is, therefore, important to find out which organization contributes how much under what circumstances and for what reasons to international integration or disintegration. This kind of research should rank high on the agenda of needed work in international organization and could lead to important contributions to international relations theory.

P. G. Bock

[See alsoInternational Organization; Peace. Other relevant material may be found underIntegration; International Relations.]

BIBLIOGRAPHY

Alexandrowicz, Charles H. 1962 World Economic Agencies: Law and Practice. New York: Praeger.

Alger, Chadwick F. 1963 Comparison of Intranational and International Politics. American Political Science Review 57:406-419.

Alker, H. R.; and Russett, B. M. 1964 World Politics in the General Assembly. New Haven: Yale Univ. Press.

Angell, Robert C 1965 An Analysis of Trends in International Organizations. Peace Research Society, Papers 3:185-195.

Asher, Robert E. et al. 1957 The United Nations and Promotion of the General Welfare. Washington: Brookings Institution. → An authoritative, scholarly analysis of policy and administration.

Balassa, Bela A. (1961) 1962 The Theory of Economic Integration. London: Allen & Unwin.

Bock, Peter Gidon 1966 A Study in International Regulation: The Case of Whaling. Ph.D. dissertation, New York Univ.

Claude, Inis L. (1956) 1964 Swords Into Plowshares: The Problems and Progress of International Organization. 3d ed. New York: Random House.

Deutsch, Karl W. et al. 1957 Political Community and the North Atlantic Area: International Organization in the Light of Historical Experience. Princeton Univ. Press.

Engle, Harold E. 1957 A Critical Study of the Functionalist Approach to International Organization. Ph.D. dissertation, Columbia Univ.

Friedmann, Wolfgang G. 1964 The Changing Structure of International Law. New York: Columbia Univ. Press.

Goodspeed, Stephen S. 1959 The Nature and Function of International Organization. New York: Oxford Univ. Press.

Haas, Ernst B. 1961 International Integration: The European and the Universal Process. International Organization 15:366-392.

Haas, Ernst B. 1964 Beyond the Nation-state: Functionalism and International Organization. Stanford Univ. Press.

Haas, Ernst B.; and Schmitter, Philippe C. 1964 Economics and Differential Patterns of Political Integration: Projections About Unity in Latin America. International Organization 18:705-737.

Hoffmann, Stanley 1963 Discord in Community: The North Atlantic Area as a Partial International System. International Organization 17:521-549.

Jacob, Philip E.; and Toscano, J. V. (editors) 1964 The Integration of Political Communities. Philadelphia: Lippincott.

Jenks, C. Wilfred 1958 The Common Law of Mankind. New York: Praeger.

Jessup, Philip C; and Taubenfeld, Howard J. 1959 Controls for Outer Space and the Antarctic Analogy. New York: Columbia Univ. Press.

Kelman, Herbert C. (editor) 1965 International Behavior: A Social-psychological Analysis. New York: Holt.

Kelsen, Hans 194t Peace Through Law. Chapel Hill: Univ. of North Carolina Press.

Kihl, Young Whan 1963 A Study of Functionalism in International Organization, With Special Reference to the Cases of the Universal Postal Union and the International Telecommunication Union. Ph.D. dissertation, New York Univ.

Kindelberger, Charles P. 1965 Trends in International Economics. American Academy of Political and Social Science, Annals 358:170-179.

Kitzinger, Uwe W. (1961) 1963 The Politics and Economics of European Integration: Britain, Europe and the United States. Rev. ed. New York: Praeger. → See especially Chapter 3. Previous editions were published under the title The Challenge of the Common Market.

League Of Nations 1939 The Development of International Co-operation in Economic and Social Affairs: Report of the Special Committee. Geneva: The League.

Lindberg, Leon N. 1963 The Political Dynamics of European Economic Integration. Stanford Univ. Press.

Mangone, Gerard J. 1954 A Short History of International Organization. New York. McGraw-Hill.

Martin, Curtis W. 1950 The History and Theory of the Functional Approach to International Organization. Ph.D. dissertation, Harvard Univ.

Meynaud, Jean 1961 Les groupes de pression interna-tionaux. Lausanne (Switzerland): Études de Science Politique.

Mitrany, David (1943) 1966 A Working Peace System. 4th ed. Chicago: Quadrangle. → The 1966 edition includes additional material dated 1948-1965.

North, Robert C.; Koch, Howard E.; and Zinnes, Dina A. 1960 The Integrative Functions of Conflict. Journal of Conflict Resolution 4:355-374.

Nye, J. S. 1965 Patterns and Catalysts in Regional Integration. International Organization 19:870-884.

Reuter, Paul (1956) 1958 International Institutions. New York: Rinehart; London: Allen & Unwin. → First published in French.

Sannwald, Rolf; and Stohler, Jacques (1958) 1959 Economic Integration: Theoretical Assumptions and Consequences of European Unification. Princeton Univ. Press. → First published in German.

Schuman, Frederick L. 1952 The Commonwealth of Man: An Inquiry Into Power Politics and World Government. New York: Knopf.

Sewell, James P. 1966 Functionalism and World Politics: A Study Based on United Nations Programs Financing Economic Development. Princeton Univ. Press. → Compares the operational impact of the IBRD, IFC, IDA, and the UN Special Fund in a “functionalist” context.

Walters, Francis P. (1952) 1960 A History of the League of Nations. Oxford Univ. Press.

Weiner, Myron 1965 Political Integration and Political Development. American Academy of Political and Social Science, Annals 358:52-64.

Wionczek, Miguel S. (editor) 1966 Latin American Economic Integration: Experiences and Prospects. New York: Praeger.

Yearbook of International Organizations. → Published since 1948. Brussels: Union of International Associations.

IV. ECONOMIC UNIONS

The partial integration of the economies of a group of countries can take a number of characteristic forms. A preferential tariff system is composed of a group of countries charging lower tariffs on products imported from each other than are charged on products imported from the rest of the world. A free trade area is composed of a set of countries with no tariffs on trade among themselves but with no common tariff against the outside world. A free trade area requires customs points at internal borders since, in their absence, goods destined for any member would enter the area through the member country with the lowest rate of tariff on that good. A customs union has free trade between member countries plus a common external tariff. A customs union does not require customs points to regulate the movement within the area of goods imported from outside the area. A common market is a customs union with additional provisions to ensure the free movement of factors of production between member countries. An economic union is a common market with some provision for common monetary, fiscal, and other governmental policies, while complete economic integration implies a single economic policy over all the participating countries.

Historically, economic policies to foster the freer movement of factors and goods have usually been associated with political objectives. The United States provided one of the earliest experiments in economic union, and this was combined with political union. In this case the union became inward-looking, erecting a tariff barrier against the outside world and fostering local industrial development; imports as a percentage of national product declined steadily from quite a high level at the outset to a level of less than 3 per cent in the 1960s. The political unification of Germany was also associated first with a customs union, the Zollverein, and later with a high-tariff policy introduced by Bismarck in the 1870s which fostered domestic industries at the expense of imported goods and coincided, as in the United States, with an era of rapid industrial development. In the 1930s, under the impact of the great depression, Britain abandoned her 100-year-old policy of free trade and adopted the imperial preference system. Under this system member countries of the commonwealth and empire adopted tariffs on most imports but set their rates substantially lower on goods originating in other member countries than on goods from non-members.

After World War II, economic unions of various kinds became popular, undoubtedly in reaction to the inadequacies of the old nation-state. The West Indies common market was originally linked to the political drive to establish the West Indies Federation. Plans are also proceeding to group Argentina, Brazil, Chile, Paraguay, Peru, Uruguay, and Mexico into the Latin American Free Trade Association and to unite El Salvador, Guatemala, Honduras, and Nicaragua into the Central American Common Market. The movement toward economic integration that has aroused most interest is the one that developed in western Europe shortly after the war. The Netherlands, Belgium, and Luxembourg first formed a customs union, then a full economic union. Subsequently, these three Benelux countries plus France, Germany, and Italy formed the European Common Market. In 1960 the “outer seven” countries of Austria, Denmark, Great Britain, Norway, Portugal, Sweden, and Switzerland formed the European Free Trade Association.

The early stages of the European Common Market (ECM) were very successful. A schedule was drawn up for the phased elimination of tariff on manufactured goods; subsequently the timetable was adhered to and sometimes accelerated. In the contexts of fully employed economies these tariff reductions have generally caused less economic dislocation than many had feared at the outset. Extending the Common Market to cover the agricultural sector has, however, proved to be very difficult. The central authorities of most countries are committed to a much more comprehensive and complex set of interventions in the agricultural sector than in manufacturing. Arrangements for establishing a single agricultural market and a common agricultural policy were not agreed on at the outset, but a timetable was set up for the various stages of negotiations on this subject. It subsequently proved impossible to adhere strictly to this schedule for delayed agreement.

There can be little doubt that the drive toward the ECM was motivated mainly by those whose ultimate aim was the political union of Europe and who saw economic union as a means to this political end rather than as a means to more specific economic goals, such as improving the efficiency of resource allocation, increasing the degree of competition, or raising the rate of growth. The Common Market negotiations were successful because there was a climate of opinion in favor of some supranational development in Europe. As time has passed and the ravages of World War II have become more remote to memory, the climate has swung back to a more nationalistic outlook. This change has been particularly marked in France, and it has undoubtedly made more difficult the skillful handling of the two largest problems confronting the Common Market in recent times: the as yet unsuccessful attempts to agree on terms for the entry of Great Britain into the market and the extreme difficulties encountered in finding a solution to the agricultural problem.

Analysis of economic welfare effects

In spite of the obvious political motivation behind the European and other common markets, evidenced by the lack of interest of member countries in attempts to quantify the potential economic gains, economists have been interested in discovering and quantifying the sources of potential economic gains and losses arising out of such unions. And the discussion of such issues among economists has been given considerable practical importance by the fact that politicians in those countries which want to stay out of the European and other economic unions because they disapprove of the political objectives have been forced to ask themselves if their countries can afford the economic cost of doing so.

A theoretical study begins with a classification of tariff systems. A nondiscriminating tariff system charges a single ad valorem rate on all commodities. A discriminating tariff system discriminates between commodities when different rates are charged on different commodities and discriminates between countries when different rates are charged on a single commodity, the rate varying with the country of origin. All of the forms of partial economic integration distinguished at the outset of this article involve the introduction of geographically discriminating tariff systems.

In the past, statesmen have often taken differing attitudes to preferential tariff systems and customs unions, condemning the former and praising the latter. From the economists’ point of view there is no fundamental distinction between the two. The critical factor in both cases is the introduction of a geographically discriminating tariff system, and what matters is that the rate of tariff on goods coming from other member countries is made lower than the rate on goods coming from outside countries; the situation when the tariff on members is zero is only a special case.

Static considerations

It has become customary to divide the effects of unions into static and dynamic ones. Static effects concern resource allocation, the location of consumption, and the terms of trade. We shall consider each of these in turn.

Resource allocation. The effects of a customs union on resource allocation have been divided by Viner (1950) into trade-creating and trade-diverting effects. If two or more of the member countries have an industry producing some commodity under tariff protection, then, with the abolition of tariffs on trade between union members, the lowest-cost source of supply within the union will capture the union market and will drive out the higher-cost sources of supply. This change represents a shift toward lower-cost sources of production, and it creates trade between union members where previously protected industries had each satisfied its own national market. Such a change is called a trade-creating one. If, however, one of the union countries has a tariff-protected industry producing some commodity, X, while at least one other union country does not have such a protected industry, then trade diversion is likely to occur. Before the union, the nonproducing country would be buying from the cheapest possible foreign source, since its tariff system would not distort the real structure of the relative prices of one good imported from alternative sources. The customs union does, however, distort these relative prices. If the protected industry’s price without tariff is less than the price of the same good bought from the outside world including tariff, then the nonproducing union country will switch from buying from the outside world to buying from its union partner. This causes a shift of resources from lower-cost to higher-cost sources of production and diverts one of the partners’ trade from nonunion sources of supply. Both trade-creating and trade-diverting effects can occur if the formation of the union leaves unchanged the average level of tariffs on goods from third countries. If the formation of the union is the occasion of increasing tariffs against nonunion countries, then the trade-diverting element will be reinforced.

Consumption patterns. Customs unions also affect the pattern of consumption by changing the structure of relative prices of goods. Even if production were totally unaffected by the union, there would tend to be a reallocation of world consumption. The union has the effect of lowering the relative prices of goods imported from other union countries vis-a-vis the prices both of domestically produced goods and of goods imported from the outside world. This will usually cause each union country to consume more of the goods produced by its partners and less of goods produced both domestically and by nonunion countries. The welfare effects of these consumption changes are most easily appreciated intuitively by considering the two sets of changes in relative prices separately. The union brings relative prices into conformity with the real terms of trade existing between union countries and, ceteris paribus, this tends to raise welfare, but it creates a divergence between the relative prices of goods imported from other union countries on the one hand and from the outside world on the other. Ceteris paribus, this tends to lower welfare.

Terms of trade. The third main effect of a union on welfare is through the terms of trade. Generally, the trade-diverting effects of the union will mean that union countries are reducing their demands for goods from nonunion countries, and this will usually tend to turn the terms of trade in the union’s favor. If the tariffs levied by the union countries against the rest of the world were at or above the optimum level before the union was formed, this “favorable” change in the terms of trade will tend to lower union welfare.

All three static effects can either raise or lower welfare, so there can be no general qualitative prediction about the direction of the welfare changes caused by customs unions. Some generalizations about factors pushing the balance toward gain or loss have been put forward. The most important are that unions are more likely to bring gain in each of the following circumstances: (1) the larger the area covered by the union, because the larger the area, the larger is the volume of trade creation likely to be relative to the volume of trade diversion; (2) the higher the level of preunion tariffs between union members, because the higher the level, the more nearly self-sufficient the members will have been and the larger the number of protected industries that may be subject to trade creation; (3) the further apart the unit costs in the different union countries of any commodity subject to trade creation, because the further apart the costs, the greater the gain per unit of trade created; (4) the lower the level of preunion and postunion tariffs against the outside world, because the lower the level, the smaller the number of commodities subject to trade diversion; (5) the closer together the unit costs of union and nonunion members for any commodity subject to trade diversion, because the smaller will be the loss per unit of trade diversion; (6) the lower the outside world’s own general level of tariffs, because the lower this is, the smaller the distorting effect on the relative prices of union and nonunion members’ goods as seen in markets both within and without the union.

Quantification of gains. Several notable attempts have been made to quantify the possible welfare effects of customs unions or of other tariff cuts on a similar scale. The most important are those of P. J. Verdoorn (1960), H. G. Johnson (1958), and J. Wemelsfelder (1960). All of these have come up with the answer that the potential gains from resource reallocation are extremely small—probably a once-for-all gain on the order of the magnitude of 1 per cent of a country’s national income. This gain, which is equivalent to that brought about by no more than a few months of economic growth, seems hardly worth making a vast effort to attain or taking any substantial risks to obtain. Clearly, the whole case of free trade versus modest tariffs on the order of 10 per cent or 20 per cent ad valorem needs to be rethought in the light of these figures.

A simple calculation, using no more than one or two well-known facts, shows that the results of the detailed studies mentioned above are unlikely to have underestimated the order of magnitude of the static gains. Typical tariff levels of European countries prior to the formation of the Common Market were on the order of 20 per cent. This meant that the maximum level of inefficiency of a protected domestic industry was 20 per cent. The average level was likely to have been closer to 10 per cent than to 20 per cent. The percentage of a country’s resources that are engaged in producing goods inefficiently under tariff protection is more difficult to estimate, but the upper limit can be taken as the percentage of resources in those industries which are unable to cover existing costs without tariff protection. This could hardly have exceeded 10 per cent of total resources in the countries of western Europe and is likely to have been much less in many. Taking these rough orders of magnitudes, we have 10 per cent of a country’s resources producing goods on average 10 per cent less efficiently than they could have been produced abroad. Eliminating this inefficiency should raise the over-all productivity of a country’s resources by 1 per cent, thus raising national income by the same figure.

Dynamic considerations

With the publication of the above estimates the supporters of economic unions shifted their case from static arguments, which were the ones mainly relied on until then, to dynamic arguments. The main dynamic considerations are economies of scale, the effects on market structures, and the effects on the underlying growth rate.

Economies of scale. Let us consider the industries in a particular member country that are efficient enough to survive the formation of the union. If, in the preunion situation, their domestic and export market was not large enough to allow all significant economies of scale to have been exhausted, then the enlargement of the market consequent to the formation of a union will allow further scale economies to be realized, and the reduction in real unit costs of production will contribute to a once-for-all rise in living standards. The rise may, of course, be spread over several years, while the economies are realized through time, but it is not a source of permanent change in the rate of growth.

Effect on market structures. If the unified market contributes to wider competition and breaks down monopoly positions in the formerly protected markets of individual member countries, then the formation of the union may lead to welfare gains. If, on the other hand, the climate of the union is conducive to the formation of monopolies and restrictive practice agreements, welfare may be lowered. It is also believed by many that the chill winds of international competition will force more efficient behavior on people who were formerly sheltered behind high national tariff walls and were willing to earn only modest profits in return for quite unadventurous business behavior.

Effect on long-term growth rates. The possible effect of a union on long-term growth rates is more difficult to determine. If larger firms have more funds to devote to research and development than have the smaller firms that satisfy separate national markets, this could be an important source of dynamic gain. If the union fosters a more competitive spirit which in turn leads to a more active search for innovations, this could also be important. On the other hand, it is possible that some member areas could suffer seriously if the union accentuates regional inequalities by reinforcing the advantages of already well advanced areas. The way in which this could happen is outlined in the works of Myrdal (1956) and Perroux (1955) that are discussed briefly later in this article.

Quantitative importance of dynamic gains. Empirical knowledge of the quantitative importance of the dynamic factors is sketchy. Various economists have given widely different guesses on the unex-ploited economies of scale existing in the various countries of western Europe. Bela Balassa (1961) has reviewed much of the evidence and has made a good case for the existence of unexploited economies in the Common Market countries, thus supporting the belief that an increase in the size of the market consequent on the formation of the ECM would lead to some reduction in real costs of production. We have virtually no knowledge, however, of how significant this would be in quantitative terms. As in the case of resource reallocation, the gains could be trivial. If, say, 20 per cent of a country’s productive units found their real costs falling by 5 per cent, the gain could be in the order of a once-for-all rise in national income of 1 per cent. For the gains to be substantial, either costs would have to fall dramatically, or a very large proportion of the country’s total productive activities would have to be involved.

Empirical evidence is very sketchy on the second effect of unions: that on the degree of competition. Persons favorable to the European Common Market have suggested that, while not being hostile to bigness per se, the market authorities are trying to encourage competition. Persons hostile to the market have argued that the actions of the authorities will in the end encourage the growth of more effective monopolies than were likely when a single central policy could not affect behavior in all six member countries. The fact that both views are still argued vigorously shows that sufficient evidence has not yet been accumulated to allow us to take a final stand on the important case study of the effect of the European Common Market on encouraging or discouraging various market forms.

It has also been argued that, while not actually changing market forms, the Common Market will increase the degree of effective competition within any existing form. For example, many people in Great Britain have put great stress on the beneficial effects of continental European competition in forcing a more progressive attitude on management and labor. Others believe, however, that the adaptation of labor and management will not occur fast enough and that as a result of the sudden introduction of competition from the Continent, Britain would be turned into a permanently depressed area. It is argued that these unfavorable trends would be accentuated by the near certainty that Britain would go into the Common Market with an overvalued exchange rate due to misplaced feelings of national pride. This might reduplicate the situation of the 1920s, when Britain, following a return to the gold standard at an overvalued exchange rate, experienced a severe local depression, with over 10 per cent unemployment, from 1925 to 1930. Those holding this view argue that to take even a small chance of a large loss in order to get a fairly large chance of a small gain is a gamble that should appeal to very few.

There remains the third possible source of gain: the effect of the union on the long-term growth rate of the participating countries taken as a whole, Here we have very little evidence as yet, and about all that can be said is that the work of Lamfalussy (1961) shows that the rapid growth in “the six” cannot, with any reasonable degree of probability, be ascribed to developments in the Common Market to date.

There is also concern about the effects of the union on differential growth rates in various developed and backward areas of the union. The work of Myrdal (1956) and Perroux (1955) suggests that unions may accentuate regional inequalities as already established centers of growth attract the most mobile and most productive factors from the underdeveloped areas. This theory is in contradiction to the classical theory of resource allocation, but it can be developed as a fully consistent theory based on certain dynamic postulates. The choice between the two must thus be made on empirical grounds. Borts and Stein (1964) have produced evidence from the United States that regional inequalities tend to lessen as growth proceeds. This evidence is in favor of the classical theory, but a final verdict must await further studies. In the meantime the outcome is critical to underdeveloped economies on the fringe of the Common Market that must decide whether or not to make a determined effort to enter the organization.

The general state of empirical knowledge on all possible effects of unions, other than the realloca-tion of resources according to comparative advantage, is most unsatisfactory. The knowledge existing at the time of writing was reviewed to this effect by Lipsey (1960). In spite of a great deal of discussion and argument on qualitative issues, we remain profoundly ignorant on most of the important questions which are capable of being quantified. This lack of knowledge was dramatically illustrated by a poll of British economists taken by the London Observer at a time of British negotiations for entry into the Common Market. The opinions of highly reputable economists ran the entire gamut from “total disaster” to “enormous gains” (“The Observer . . .” 1962). Such divergent views could not be held by large numbers in the face of any solid body of evidence. The significance of some of the views expressed has been discussed in another context by Hutchison (1964).

The political implications of economic union have already been mentioned, and there can be no doubt that many supporters of customs unions and common markets see them as a first step toward political union. Some economists (for example, Meade 1953) argue that the practical problems of a common market will force greater harmony of policies on the central authorities, irrespective of their own desires. These economists thus see a high degree of economic and political integration as the inevitable result of economic union. This possibility explains the hostile attitude to economic union on the part of many who might be favorably inclined to its more limited economic objectives.

There is general agreement that some economic and social policies will have to be harmonized; minimum wage laws and corporate income taxes are two examples. It is accepted, however, and American experience seems to confirm this, that quite substantial differences in some tax rates and in some social policies can be sustained within the framework of a closely integrated common market.

To what extent independent monetary and fiscal policies can be operated is still conjectural. Clearly the high degree of economic interdependence fostered by a union, together with a fixed exchange rate policy, reduces the freedom of one country to operate a full employment policy independent of its partners. Within a union there is no way to insulate the balance of payments of one country from the effects of an inflation of that country’s aggregate demand by exchange depreciation or tax and quota policies to reduce imports. Clearly some degree of autonomy must be abandoned. Just how much and whether it is a modest or an exorbitant price to pay for the advantage of union are some of the most important unsolved problems facing policy makers today.

Richard G. Lipsey

[See also International Trade; International TRADE CONTROLS.]

BIBLIOGRAPHY

Balassa, Bela A. (1961) 1962 The Theory of Economic Integration. London: Allen & Unwin.

Borts, George H.; and Stein, Jerome L. 1964 Economic Growth in a Free Market. New York: Columbia Univ. Press.

Hutchison, T. W. 1964 “Positive” Economics and Policy Objectives. London: Allen & Unwin.

Johnson, Harry G. 1958 The Gains From Freer Trade With Europe: An Estimate. Manchester School of Economics and Social Studies 26:247-255.

Lamfalussy, Alexander 1961 Europe’s Progress: Due to Common Market? Lloyd’s Bank Review Second Series, No. 62:1-16.

Lipsey, R. G. 1960 The Theory of Customs Unions: A General Survey. Economic Journal 70:496-513.

Meade, James E. 1953 Problems of Economic Union. Univ. of Chicago Press.

Myrdal, Gunnar (1956) 1957 Rich Lands and Poor: The Road to World Prosperity. Rev. ed. New York: Harper. → First published as Development and Un-derdevelopment.

The Observer Poll of Economists’ Views on the Common Market. 1962 Observer Oct. 14, 1962.

Perroux, Francois 1955 Note sur la notion de “pdle de croissance.” Economie appliauie 8:307-320.

Scitovsky, Tibor (1958) 1962 Economic Theory and Western European Integration. Stanford Univ. Press; London: Allen & Unwin.

Verdoorn, Petrus J. 1960 The Intra-block Trade of Benelux. Pages 291-329 in International Economic Association, Economic Consequences of the Size of Nations. Edited by E. A. G. Robinson. New York: St. Martins.

Viner, Jacob 1950 The Customs Union Issue. Studies in the Administration of International Law and Organization, No. 10. New York: Carnegie Endowment for International Peace.

Wemelsfelder, J. 1960 The Short-term Effect of the Lowering of Import Duties in Germany. Economic Journal 70:94-103.