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    1. Compare the importance of

    a.) Nationalism Regionalism

    b.) Regionalism Globalization

    c.) Globalism Religionalization


    The second question - that of importance - is seemingly the easiest question to

    answer. Nationalism has been used to explain earth-shattering events such as the

    break-up of the Ottoman Empire, Austria-Hungary, and most recently the Soviet Union -

    just to mention a few examples. Moreover, it is not just a force of the past; the Kurds,

    the Basques, the Palestinians, and many other groups and conflicts testify to the

    continued importance of nationalism. In sum, nationalism has behavioural

    consequences which makes it well worth closer examination.

    Still, it is possible to argue that factors other than nationalism was, and is, the

    driving force behind the events ascribed to nationalism in the paragraph above. Maybe

    economic variables best explain the collapse of the Soviet Union? Maybe religious

    factors were more important than nationalism in the break-up of the Ottoman empire?

    Maybe the Palestinian movement is best understood in term of the personal interests of

    an elite?

    Connor disagrees:

    Explanation of behaviour in terms of pressure groups, elite ambitions, and

    rational choice theory hint not at all the passions that motivate Kurdish, Tamil, and Tigre

    guerrillas or Basque, Corsican, Irish, and Palestinian terrorists. Nor at the passions

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    leading to the massacre of Bengalis by Assamesc or Punjabis by Sikhs. In short, these

    explanations are a poor guide to ethnonationally inspired behaviour (p. 74)

    Thus, Connor argument is that explanations in terms of relative economic

    deprivation, elite theory, and rational choice are falsified by historical experience.

    History shows that nations demand independence regardless of their economic situation

    compared to the rest of the state. The Basque are better off than the rest of Spain; the

    Irish were worse off than the rest of the United Kingdom. History, Connor claims, also

    shows that religious and class bonds are weaker than ethnic ties. Witness, for instance,

    the failure of Lenin's call to the working class not to participate in World War I, and the

    failure of religious leaders to prevent Christians from fighting Christians in the same war

    (p. 156). Finally, focusing on the elite cannot explain why the masses so readily acceptthe message of nationalism. True, the elite may exploit, and manipulate nationalist

    feelings, but surely there must be something to be exploited in the first place. In short,

    alternative factors are not powerful enough - we need to examine nationalism in order to

    explain important historic events.

    If the importance of nationalism is beyond doubt, its precise nature, its

    relationship to other concepts (such as the state), its causes, its consequences, and its

    future are more debated. Moreover, in order to say that nationalism was, and is, an

    important facto in shaping history we must at the very least have a rough idea about

    what nationalism is. This is the topic to which I now turn.

    What is nationalism?

    According to Connor, a "nation consists of a group of people who believe they

    are ancestrally related" (preface, xiv). Nationalism, in turn, is defined as "loyalty to the

    ethnic group" (p. 40). Loyalty in this context implies willingness to sacrifice, for instance

    being willing to give your life to defend the group in a war. This definition of nationalism

    should be sharply distinguished from patriotism (loyalty to the state). In relatively

    homogeneous societies - like Germany, Japan and Norway - the two are easily

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    confused, but in multi-ethnic societies there are many examples of conflicts between

    loyalty to your ethnic group and loyalty to the state.

    Having defined a nation and nationalism, Connor goes on to examine the causes

    and the nature of these concepts. Why, for instance, do we believe that we are

    ancesterally related to the members of our nation. The cause of this belief cannot be

    rational evaluation of evidence, since the factual basis for arguing that, say, all Germans

    descend from a common German Eve is clearly empirically false (p. 217). How, then, do

    we explain why people believe in the myth of the nation and are nationalists?

    One possible explanation is evolution. To explain this allow me to recall an

    observation from Richard Dawkins' book The Selfish Gene (I here rely on my fallible

    memory). Lengthy observation of a bird colony established the following facts: A bird-

    mother would almost always risk her life defending her children against an intruder. A

    uncle, however, was less frequently willing to risk his life to protect a single child,

    although he was more inclined to do so when the lives of two or three children were at

    stake. Finally, even more distant relatives would only defend the children if more than

    four lives were threatened. In short, the closer the DNA resemblance, the more the bird

    were willing to sacrifice. Why should this be so? The obvious answer is evolution. A

    species with a DNA code that told it to sacrifice its life defending everybody - even other

    species - would become extinct. In the same way, one might speculate whether human

    willingness to make sacrifices for your relatives (real or imagined) can be explained by


    Connor does not speculate on the evolutionary causes of nationalism. He simply

    notes that "its well-spring remain shadowy and elusive" (p. 92). Moreover, the precise

    nature of the bond is also elusive, although in general Connor argues that "the national

    bond is subconscious and emotional rather than conscious and rational in its inspiration"

    (preface, xiii).

    I have so far presented Connor's definition of nationalism and his discussion of

    its nature and its causes. This leaves maybe the most important topic: The link between

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    nationalism and the events claimed to be caused by nationalism (like the collapse of

    Empires). Exactly how did the ethnic bonds between people lead to, for example, the

    collapse of Austria-Hungary?

    Being a strong believer in methodological individualism, I want to explain events

    by reference to the individuals who were involved. The key question is thus what forces

    make an individual behave as he does. The most parsimonious answer to this question

    - that employed by economists - is rational selfishness. In short, people do what they

    think is best for themselves. In this perspective, only two main variables explain

    behaviour: aims and beliefs. Of course, one might go further - as sociologists often do -

    to try to explain the aims and beliefs we have. For instance, there are hot and cold

    mechanisms that shape our beliefs, and our preferences are also shaped by variousmechanisms. Wishful-thinking is an example of hot belief-formation (beliefs influenced

    by what we want to be true); Incorrect beliefs about the distance to an object when the

    weather is good is an examples of cold belief-formation (beliefs influenced by

    systematic cognitive mistakes); and sour-grapes is an example of preference formation

    (that we do not want what we cannot get). Regardless of whether we try to explain

    preferences and beliefs, the key to the economist approach is the prediction that of all

    the possible actions an individual faces, he will choose the one that he believes is best

    at satisfying his aims. Using this frame, rational choice theorists have lately invaded

    political science. My question is then: Where nationalism fit into this picture (if at all).

    Being loyal to your ethnic group, Connor's definition of nationalism, is not a belief

    - nor is it an aim. Instead, it seems to be an action inspired by emotions (the bond we

    feel to those we believe are our relatives). And emotions are not the only factor causing

    problem for the narrow economic view of man. Another factor is norms which influence

    behaviour without being an aim or a belief. For instance, rational-choice theory cannot

    explain why people vote (the effort is simply not worth the small amount of influence

    from one vote), while norms of duty ("it is my duty to vote") may explain voting. In sum,

    to the question of what drives human beings we can give three main forces: Interests,

    passions and reason. [For more on this distinction see Jon Elster (1996): Doing our

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    level best, The Times Literary Supplement, 29. March, pp. 12-13. Also available from

    The Jon Elster Page at URL: www.geocities.com/hmelberg/elster.htm]

    Interests are our selfish desires, and it is relatively obvious that our behaviour is

    motivated by this factor - for instance, consumer behaviour. That we are motivated by

    passions, should also be relatively obvious. For example, revenge and hate are rarely

    rational, although often a powerful motivator for behaviour. Lastly, reason can be

    associated with impartial rules: We want to have good reasons for our actions and we

    feel that these reasons should go beyond pure self-interests. The reason we vote is

    neither interests, nor passions, but that we think it is the right think to do.

    What is the proper role of nationalism in this extended frame? As mentioned,

    Connor believes nationalism is an action associated with an emotion. Emotions, in

    general, have what one might call 'action tendencies'. As Jon Elster writes: " The first

    urge of the envious person is to destroy the object of his envy or, if that is impossible, to

    destroy its owner. The action tendency of shame is to hide or disappear; that of guilt, to

    make atonements and repairs; that of anger, to strike: that of fear, to run; that of joy, to

    dance." [Elster (1996), Rationality and the emotions, Economic Journal(September

    1996), vol. 106 (438), pp.1386-1397. Also available from the Jon Elster Page.] The

    'action tendency' of feeling related to a person, then, must be to protect and advance

    that person; or more generally, to advance and protect the group.

    Let me now return to the original question: What is the link - the causal

    connections - between nationalism and the events ascribed to nationalism? Building a

    new state can, in part, be viewed as facing a series of prisoner dilemma's problems. As

    an example of this problem, consider the defence of a community. Could the community

    be defended without a central authority with the power to coerce people? Without a

    central authority, each individual would have to face the following question when a

    potential danger loomed on the horizon: Should I leave my family and defend the

    community? (Or, should I leave my family to fight for a new state?) Assume the payoffs

    can be visualised in the following figure:

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    Fight Not fight

    Fight 7, 7 1, 10


    Not fight10, 1 3, 3

    The motivation behind these payoffs is that if none of us fight, we will end up in a

    relatively bad situation (occupied, but alive; everybody gets 3). If only Igor fights there is

    a high probability that he will die, but he will also defend the country so Pal can live in

    freedom (so, Igor's expected payoff is 1, while Pal gets 10: freedom and no fighting). If

    both fight, they greatly reduce the probability of dying, and the expected payoff to each

    is 7 (fighting is costly, but liberty is good).

    What will Pal and Igor choose? A rational and selfish person, say Igor, would

    reason as follows: If Pal fights, it is best for me not to fight (I get 10 instead of 7). Now, if

    Pal chooses not to fight, it is also best for me not to fight (I get 3 instead of 1). So,

    whatever Pal chooses it is best for Igor not to fight, and this is what he will choose. But

    the same reasoning applies to Pal, whatever Igor does, it is most profitable for him not

    to fight, so this is what he will do. The end result is that both choose not to fight and they

    both get 3 in payoff. The paradox, of course, is that they could have done much better if

    they both had fought (get 7 each). But this solution is not available, if one person

    chooses to fight the other has an incentive to cheat - to avoid fighting, to make the other

    person carry the burden while you free ride. This shows how individual rationality can

    create collectively disastrous results.

    What is the solution to this problem? If a state is created with the power to punish

    those who cheat, this will change the payoffs so as to make it profitable to fight. In this

    way the state can solve the problem of the prisoner's dilemma (as it is called).

    Moreover, defence is not the only example of a how individual rationality may create

    collectively disastrous results. To mention a few examples: Individually fishermen have

    an incentive to fish too much; factories an incentive to over-pollute; and people an

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    incentive to under-invest in prevention of epidemics. Faced with these problems most

    countries have opted for some kind of state intervention.

    In what way does nationalism affect the story above? Recall that Connor defines

    nationalism in terms of willingness to make sacrifices for the group. Within my frame,

    there are at least two ways of visualising this. First, to say that people will choose to

    fight even when it is not in their material interests. Second, to argue that being a

    nationalist changes that payoffs, so that it makes fighting more profitable - for instance

    by including psychic gains from fighting on behalf of your group. In any case, the point is

    that ethnic bonds between people can make the co-operative solution more likely since

    it makes individuals more willing to make sacrifices on behalf of the group. This shows a

    more detailed picture of how nationalism can explain the collapse of empires: Asnationalism grows in new nations, more and more people become willing to make the

    sacrifices necessary to fight for nationhood - scarifies that are individually not profitable

    but because of nationalism people are no longer propelled solely by selfish and material

    cost-benefit considerations.

    Can nationalism be studied scientifically?

    A person can accept that nationalism is both important and roughly definable,

    but still doubt the utility from studying nationalism. This, of course, depends on the aim

    of our study. Three such aims are: to explain (historical events), to predict (future

    events) and to recommend (finding policies to deal with nationalism).

    One reason why focusing on nationalism may run into problems on all three

    accounts, is that explanations based on emotions are very hard to quantify. Consider

    the following competing arguments:

    1. "Person X did Y since his aim was to become rich and action Y was believed

    to earn him $1000"

    2 "Person X did Y because his emotions made this the most profitable actions"

    (Or, "because his emotions made him do Y")

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    The first argument can be tested, since it is possible to examine what the person

    would do if he received less than $1000 to do Y (e.g. give less blood the less you are

    paid). The second argument has a circular quality (everything can be explained by

    saying that "he felt like doing it"), and it is much more difficult to test. The monetary

    payoffs are observable, the emotional payoffs are not. This is one reason why

    explanations based on emotions may be less reliable than rational choice explanations.

    Lack of quantifiability, and lack of a formal mathematical model, also makes

    predictions difficult. Rational choice supporters, on the other hand, have the advantage

    that they can make predictions based on the "as-if" assumption. That is, when they

    make predictions they need not assume that people actually are rational, only that they

    behave "as-if" they were rational. For instance, if we were to predict the shot and angleof a pool-player, we might find that a quite complicated mathematical model accurately

    predicts the strength and angle of his shot, but we need not claim that the pool player

    actually goes through these calculations in his head before he makes the shot. There is,

    I think, no similar argument available to make predictions based on emotional


    Finally, policy recommendations may also be best when we use a framework

    based on the belief that people respond to material incentives. For example, assume

    that you want to reduce the crime rates in a country. Two alternative proposals are then

    put forth:

    1. To try to change people's norms and attitudes

    2. To increase the sanctions (e.g. increase tickets for speeding)

    The effect of these measures do not only depend on whether people are

    motivated by norms or rational cost/benefit calculations when they commit crimes, but

    also on the ease, predictability and relative efficiency of changing norms vs. incentives.

    One may even admit that emotions are very important in certain kinds of crime, but as

    long as there is some element of cost-benefit considerations the net payoff from

    focusing on changing the incentives may be much larger than the net payoff from trying

    to change attitudes. The simple reason is that it is hard to change attitudes (since the

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    causal mechanisms are relatively uncertain, and - moreover - it may take a long time

    and be very costly), while it is easy to change the sanctions.

    Return now to the original question: To what extent can nationalism be studied

    scientifically? I have so far made general arguments to the effect that the lack of

    quantifiability and precise models makes this study difficult - whether your aim is to

    explain, to predict or to recommend. In the following I want to make this argument a bit

    more precise, as well as discussing Connor's arguments on the possibility of scientific

    study of nationalism.

    On several occasions Connor seems very sympathetic to the argument that

    nationalism cannot be studied scientifically. For instance, he discusses an article by

    Ladis Kristof to the effect that: "Dissection and logic, even in concert, may prove not

    only inadequate but misleading when applied to the study of sensory loyalties" (p. 112).

    Similarly, he quoted Freud who writes about "many obscure and emotional forces,

    which were the more powerful the less they could be expressed in words" (p. 203).

    Finally, Connor himself writes that "... nations, national identity, and nationalism are 'the

    stuff that dreams are made of,' and this helps to account both for their emotional appeal

    and for their resistance to rational inquiry" (p. 210).

    This does not imply that the study of nationalism is worthless. As Connor argues,

    nationalism "can be analysedbut not explained rationally" (p. 204, my emphasis). By

    analysed, he means that it is possible to examine "the type of catalysists to which it

    responds ..." (p. 204). In short, what factors make nationalism grow or decline, and what

    factors shape its form. This kind of examination is possible within a "normal" scientific

    frame, using historical examples, surveys and statistics.

    I am not too convinced by the argument that emotions are resistant to rational

    investigation. Too see why we must distinguish between rational (or scientific)

    investigation and explanations based on rational choice. Given a set of evidence, I may

    rationally conclude that a person was motivated by love (or hate) when he did X.

    Rationality or scientific investigation, is then simply a way of evaluating evidence. There

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    is nothing inherently impossible in "rationally" concluding that people sometimes are

    "irrational" - in fact there is a great deal of evidence which points in this direction (see,

    for instance, experiments by Kahneman, Slovic and Tversky).


    I started with the question of why I should be interested in nationalism. While I

    think nationalism both has important consequences, and that it is possible to gain a

    rough understanding of what it is, I am less certain whether a focus on nationalism is

    "useful" if the aim is to find reliable scientific theories that can be used to shape policy.

    Assume, for the sake of argument, that we after much work have a "scientifically" good

    argument that the situation in Kazakhstan would improve if they started to follow the

    civic model of national integration. The problem, of course, is that the elite need not bemotivated by the "scientifically" best policy, but simply by more brute considerations of

    what is best for the elite and how they can maintain their power. In sum, I am not yet

    convinced that the study of nationalism is useful from a policy perspective, but I am

    more convinced that it is important from a historian's standpoint - to explain historical

    events. However, even there doubts remain about its reliability. But, then again, no

    explanation is certain!


    In "New Regionalism: How Globalization Reorders the Three Worlds

    of Development," Reynolds provides an intellectual methodology for

    focusing beyond national macroeconomic policy so that the particular

    policy needs of localities and regions can be analyzed and addressed.

    The article highlights the importance of local and regional institutions

    and political, financial and civic leaders. It encourages their inclusions

    in policy making. It emphasizes the interdisciplinary factors involved in

    development economics analysis and policy making at the local and

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    regional level.

    "Regions are endowed with different cultures, historical backgrounds,

    climates, proximity to national and world markets, and endowments of

    natural resources. Increased international exchange and the regional

    integration of national economies may well cause clashes among

    cultures, races, gender groups, workers and management, regional

    versus national authorities, and those who espouse different economic


    The "Three

    Worlds" of


    The three worlds of Cold War analytical discourse

    have thankfully become irrelevant with the end of that



    The current world

    order has divided

    itself in general

    terms into three

    segments based

    on "a new pattern

    of international and




    similarly useful for

    current analytical


    There is a clear new pattern now, Reynolds points out.

    This current world order has also divided itself in general

    terms into three segments based on "a new pattern of

    international and interregional economic stratification"

    similarly useful for current analytical discourse. These

    three segments "show patterns ofconvergence and

    divergence among nation states and their subregions."


    The Cold War "First World" remains - defined now by its

    advanced economic and political development. However,

    the nonaligned Cold War "Third World" has divided into

    those nations that to some substantial extent have aligned

    themselves with globalization and the processes of

    economic development and those that in general terms do

    not participate in any meaningful way in international

    commerce and thus fail to develop economically or

    politically. The Cold War Soviet bloc "Second World" has

    disappeared - its constituent parts similarly spinning off

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    into these two economic development spheres - some

    even migrating into the European Union and eventual

    "First World" status.


    For purposes of analysis, Reynolds regroups these

    nations from the Cold War second and third worlds into a

    postwar grouping of "Second World" developing nations

    and "Third World" nations with little or no participation in

    international commerce and thus little or no economic

    development. (These Third World nations remain

    chronically undeveloped despite decades of massive aid

    flows and hectoring advice from international institutions.)&

    He then goes several steps further to group localities and

    regions into these categories to facilitate consideration of

    Third World regions and localities that may exist even

    within and across the borders of First World and Second

    World nations. Similarly, there are localities within

    economically Third World nations that rate Second World

    or even First World status. Reynolds mentions many

    examples - most noteworthy the differences among

    regions and localities within China, India and Mexico.


    The "New Regionalism" is offered by Reynolds in the

    hope that identification of Third World regions and

    localities within Second World and even First World

    nations will help focus analysis and direct policy

    responses appropriate to their needs. It is his hope that

    First World assistance and creativity will find ways of

    encouraging the development of the "enterprise, civil

    society and good governance" needed by Third World

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    nations in place of the coercive and populist governance

    they currently suffer from.


    The good news is that the economic First World

    continues to widen. "High income/high productivity"

    regions now include even "enclaves of prosperity" in

    emerging nations, as well as in areas of Russia, eastern

    Europe, eastern China, major parts of Japan, and in Hong

    Kong and Singapore.


    More good news is found in the increasing ranks of the

    economic Second World. These "emerging marketregions" include large parts of eastern China, some key

    provinces in India, sections of Mexico's northern states

    and a few other of its subregions, and areas of Brazil, and

    Argentina, among others.


    But there is still a disappointing Third World - still falling

    behind - still failing to participate in international

    commerce - and still continuing to lack the political,

    economic and societal essentials for the development of

    prosperous market systems. Typically, in these states, the

    politically influential flourish, rent-seeking activities are

    widespread, and the people's commerce is of little or no

    concern to government.

    "[Political] elites and private wealth-holders who capturea large share of the growth dividend often operate out of

    short-term self-interest rather than long-term stability and

    sustainability. They fail to address the needs of those in

    the developing regions of their own countries -- part of

    today's 'New Third World' -- just as the beneficiaries of

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    globalization in the First World tend to ignore those who

    lag behind at home as well as abroad."

    The importance of competent, "far-sighted"

    leadership is stressed by Reynolds. Governments must

    not only facilitate commerce at the national level, they

    must analyze and overcome particular barriers to

    participation and the financial obstacles within their

    subregions. They must cushion the adverse impacts of

    change to defuse opposition. Reynolds mentions as an

    example the allocation of funds from rapidly developing

    eastern regions in China for construction of railroad links

    in the western provinces.

    "The old school of development economics no longer

    commands center stage, having made its major

    contributions during the period of post-World War II

    reconstruction and the Cold War. The new approach must

    factor in regional differences in comparative advantage

    based on different endowments of natural and humanresources, social access, technological know-how and the

    limitations that arise when a labor-abundant region subject

    to a dominant currency can't devalue to match its lower


    Reynolds mentions some of the myriad policy areas

    that may need attention by particular nations and regions.

    These include agricultural protectionism, aging

    populations, declining industries, minority groups and

    migrant workers, macroeconomic constraints and policies,

    education and physical infrastructure, tax policy, access to

    national and global markets, access to financial capital,

    institutional and cultural change, safety net provisions to

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    cushion the problems inevitable with rapid change, and

    much more.


    Globalization is a complex, many faceted economic

    structure. Productivity governs demand - today's

    production provides value for yesterday's savings - both

    productivity and production increasingly rely on an

    interdependent global market system. And as always,

    human capital is the vital ingredient that provides the

    "entrepreneurship, creativity, leadership, and hard work"

    that makes the system function.

    "Cultures matter as well, and history, and the psychology

    of expectations. So entrepreneurship must be cultural as

    well as economic, and politics must reflect a broader

    spectrum of interest, even though this may slow the

    process of exchange. Solutions in a second-best world

    must be second-best."

    Each locality and

    region has its own

    peculiar mix of

    advantages and

    disadvantages that

    must be addressed

    with suitable mixes

    of policies.

    The unequal nature of the global economic advance

    is emphasized by the author. Each locality and region has

    its own peculiar mix of advantages and disadvantages

    that must be addressed with suitable mixes of policies.

    Indeed, that is the reason that he developed the "New

    Regionalism" analytical framework.

    "Each region has its own character, resources, and

    conditions of supply and demand that determine its

    economic potential. But the long-term competitiveness of

    a region may differ sharply from its short-term conditions.

    A region's long-term potential can be transformed into

    short-term competitiveness -- long term comparative

    advantage becomes short-term competitive advantage --

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    by the right mix of technology, entrepreneurship, risk-

    taking finance, and public policy to provide the necessary

    economic and social infrastructure."

    Revenue sharing is an important policy tool, but can

    easily be overdone.

    "Russia and Argentina provide examples of the noxious

    impacts when all or most revenues for regional

    governance come from the central government.

    Separation of local and regional spending authority from

    the responsibility for revenue generation can destroy the

    incentive for conscientious efforts by local and regional

    officials to facilitate local and regional commerce."

    Risk-taking should properly be left in private hands.

    Government should not pick winners and losers. However,

    government and non-government organizations at local

    and regional level have vital roles in coordinating

    business, labor and community interests, facilitating the

    people's commerce, and attending to the financial, fiscal

    and infrastructure needs of backwards regions.

    "For those

    economies that

    wish to enter the

    global race to

    prosperity it isnecessary to open

    up access in terms

    of laws and

    institutions that

    "This is where an inclusive approach to development

    economics meets the new regionalism. It requires

    cooperation and far-sighted planning to provide education,

    infrastructure, access to technology, credit, and

    information about future opportunities at home and abroad-- including other regions in the same nation state."

    Migration policy is an obvious area where national policy

    must be tailored to suit regional and local conditions.

    Reynolds points out, for example, that NAFTA fails to

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    provide the basis

    for those

    enterprises that

    prove able to take

    advantage of the

    expanding world


    consider local and regional factors, but this omission is

    mitigated somewhat by cross-border cooperation among

    civil authorities, employers and labor organizations.

    "Much depends on access to the market and on

    institutions that ensure a level playing field for those in a

    world that looks flat but is really uneven. Access is

    everything. For those economies that wish to enter the

    global race to prosperity it is necessary to open up access

    in terms of laws and institutions that provide the basis for

    those enterprises that prove able to take advantage of the

    expanding world market.

    Small businesses and large businesses play a role, as

    well as foreign investment and mergers to help access

    markets. Innovation, branding, and the ability to access

    expanding global demand are among the ways that firms

    enjoy sufficient receipts to earn increasing profits, pay

    higher wages, improve the quality of products, innovate,and provide safeguards for the environment - "and avoid

    the pitfalls of 'commodity hell' -- in which all goods and

    services are reduced to generic commodities, and the

    entrepreneur is relegated to a bureaucrat."

    "In this paper I call for legal and institutional change to

    spread the benefits of growth more broadly and to open

    access to all. But there is immense skepticism about

    political regimes that are slow to act for interests other

    than their own, about cultures that reinforce stagnation

    and repression, and appeals to traditional values that

    foster reaction."

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    Fortunately, prosperity has enabled the beneficiaries of

    First World prosperity to entertain philanthropic

    tendencies and concerns for the less fortunate. But that

    concern must be guided by analysis with a regional and

    even a local focus if it is to generate effective assistance



    A famous economist, Joseph Schumpeter, once discussed the nature of

    capitalism. To him, capitalism is creative destruction, a way of responding to major

    waves of technological change. The United States has represented the incarnation of

    this ideal and will continue to do so in the future. Capitalism relies on the free flow of

    information and goods. This is key not only to domestic economies but to the global

    economy as a whole. This week there will be a meeting of both the IMF and the World

    Bank. Just as Seattle was lined with protesters that did much to hamper any progress

    that could be made at the WTO meeting last November, protests are planned at the IMFand World Bank meetings.

    Most protestors come with a purpose; to protect the environment, to prevent

    child labor, to protect industries. Others claim that globalization will exploit weaker

    nations or steal markets from the richer. The sad thing about all of this is that the

    protests do little to aid their causes and in most cases, actually end up hurting the world

    in general. To see what I mean, let me give my take on each of these issues.

    (Granted, I am strongly biased in my opinion.)

    The environment. Let me start off on the right foot, I strongly believe in

    protecting the environment, and I hope I can make this evident. Increasing trade will

    hurt the environment. Where's the argument? Businesses tend to hurt the

    environment so we should make sure that growing nations like China will not grow so

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    they won't hurt their environment. There is some truth to this argument. The industrial

    revolution in Britain churned up so much smoke and soot that the trees were lined with

    black soot. It had disastrous effects for the environment and for the health of the

    English population. What happened? Progress happened, simply put,and the British

    passed a certain level of income. This development led them to stop worrying about the

    bare necessities like food and clothing, and they began concerning themselves with

    other goods such as clean air and water (yes clean air and water can be thought of as

    goods; they are called public goods.). Economists can show that for pretty much every

    country, this is true. Once individuals in the country reach a certain level of income

    (now it is around 4-5 thousand), they began to spend more on public goods. It makes

    intuitive sense that if I can provide for my family, I am more willing to spend to protect

    the environment. This trend pushes the idea that we should allow all nations free

    access to the global economy so that they can grow and develop. The richer a nation

    is, after this 4,000 to 5,000 income level, the more concerned it will become about

    protecting the environment. Therefore it is vital that the developed nations aid the

    undeveloped through freer markets.

    What about child labor and the world's poor? Globalization is not to blame for

    the domestic policies of one nation. The Chinese government should be responsible for

    making sure that its citizens are safe and healthy. Trade is often used as a bargaining

    chip, but what people don't realize is that it's a costly chip. Not only for the US, but for

    the world's poor as well. Why use economic sanctions and trade barriers to force a

    government to change its domestic policies towards the impoverished? These

    sanctions themselves hurt the poor. I am not a politician, but there has to be a better

    way. In a recent article, the Economist magazine was quoted as saying, "Governments

    are apologizing for globalization and promising to civilize it. Instead, if they had any

    regard for the plight of the poor, they would be accelerating it, celebrating it, exulting in it

    - and if all that were too much for the public, they would at least be trying to explain it."

    (Which is what I am attempting to do.)

    Capitalism is creative destruction. Some industries are inefficient, and

    sometimes resources are re-allocated with freer flows of trade. What people have to

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    realize is that international trade doesn't represent a threat, it represents an

    opportunity. Short term losses are always outweighed by the long term gains from

    trade. This opportunity is for increased gains from trade and a more efficient and

    productive economy. This is not a new concept. It was introduced hundreds of years

    ago by a man named David Ricardo as comparative advantage, and today it is the

    cornerstone of all international economics. The idea is simple, that increased trade will

    lead to higher productivity and more prosperity.

    Often the argument is made that globalization exploits developing nations or

    globalization will hurt the developed countries as jobs will be lost to cheaper working

    competitors. Ross Perot mentioned a "great sucking sound" as NAFTA would cause

    US jobs to make a run for the border. NAFTA's been around. Neither Mexico nor theUS has experienced either of these two effects. In fact, the economic effects of NAFTA

    have been positive, if anything. Economics can show that freer trade, if it has any

    effect, will have a positive effect for both nations. Developing nations, where economic

    growth is so important, especially should gain from freer trade.

    International cooperation is key to the success of the world's economy. The

    purpose of this article is to attempt to dispel some misinformation in one of the most

    pressing economic issues of the day. Globalization is a source of progress and not

    harm. Countries are nothing but lines on a map. People are people, and there's no

    reason why in today's world a large proportion of the world's 6 billion should have to live

    below the poverty line.


    Two major trends are affecting the international economic system today:

    globalization on one side, and regionalization and regionalism on the other side.

    Much literature has so far studied the interaction between these two attitudes in the

    international politico-economic framework. This interaction is indicative of a significant

    factor which has greatly affected the developments in the world economic order,

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    particularly after the World War II and the Uruguay Round.

    In this article we attempt to identify the strategic interrelation between globalization and

    regionalization. The main question here is: What impact has the globalization process

    had on the regionalization of economic relations? Will the developments caused by

    regionalization accelerate the globalization process, or slow it down?

    Any analysis of the economic globalization should be made in the framework of

    an international system, emerged after the Cold War; because following that period all

    international issues are looked into from an international perspective which is much

    different from the past.

    New Wave of Regionalization: Major expansive political, economic and

    technological developments in the world have caused new definitions to be set forth for

    economic and trade growth which is driven by the attitude to regionalize economic

    relations among nations.

    These developments include interdependence at international level;

    international productivity; end of militarism and the bipolar strategy; emergence of an

    international tripolar trade system with its centers in Europe, Southeast Asia and

    America; and the extensive economic and political presence of new industrial nations.

    After the Cold War, globalization prompted countries to enter into regional groupings in

    a bid to gain a more economic maneuver power.

    The first wave for regionalization of trade and economic relations after the

    World War II emerged in Europe. The United States fully supported this trend in 1950s

    in the framework of the multilateral hegemonic orderwhich it initiated after the War.

    Since 1980s and especially in 1990s a new, growing wave of regionalizing trade and

    economic relations emerged both in industrial and developing countries in form of

    NAFTA, APEC and other regional pacts. At a theoretic level, regionalization can be

    viewed in various ways:

    1. As a reaction against globalization of economy

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    2. As a preliminary phase in globalizing foreign trade and economic relations and to

    accelerate the world economic unification

    3. As a strategic choice (for the US) vis--vis the problems that international economic

    development system has created.

    Globalization Vs. Regionalization: Some economic and political experts

    believe that globalization is related to a set of international elements which accelerate

    the interaction and interdependence between governments and also between civil

    societies at the politico-economic international system.

    Organization for Economic Cooperation and Development (OECD) states that

    globalization is mainly indicative of a trend which includes the development of

    international trade and foreign direct investments, growing internationalization of

    monetary, financial and credit markets and also the growth and development of foreign

    capital markets.

    In this perspective, globalization of economy is referred to as sectorial

    economic unification process which necessitates a deep interpenetration of national

    economies and also a direct advanced competition between them.

    MacEwan states in Between Globalization and Nationalism, Socialist Register that the

    globalization of economy is moving toward development and more expansive, free

    international distribution without any limitation in trade and economic relations.

    However, economist Paul Krugment defines globalization as opening of the national

    markets to international trade.

    In order to explain how to benefit from globalization, it is assumed that free

    transfer of economic resources including capital, labor and also competition will

    encourage economic and technological cooperation between economic systems of

    participating countries.

    Many definitions have so far been proposed for the process of regionalization of

    trade and economy. Some authors believe that this process is initiated in a specific

    geographical area between countries which have accepted common values among

    themselves and base their foreign economic relations and policies on these accepted

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    values. Seeking a common identity could be another motive for countries which

    regionalize their economies. These countries have a feature in common: They adopt

    discriminatory privileges and procedures against non-member countries.

    In a general perspective, regional settings are based on the followings:

    1. Gaining interest through increasing incomes and more effective regional production


    2. Achieving more political and economic power in negotiating with other regional

    groupings, and

    3. Facilitating economic and political cooperation in the framework of regional unions.

    Finally, various forms of regional settings include:

    1. Joint ventures in specific manufacturing sectors

    2. Free economic zones

    3. Customs unions

    4. Common markets

    5. Economic and political unions

    The birth of WTO has been a giant stride toward globalization of economy and

    trade, but despite this success, many blows have been exerted on the collective and

    multilateral liberalized trade as basis for free world economy by the new wave of

    regionalization.During the 1980s and especially in 1990s the growing partnership between

    countries both industrial and developing has played a major role in creation of new

    regional economic blocs.

    It can now be concluded that undermining pluralism and multilateral system in

    the world economic negotiations and the growing rise of regional economic and trade

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    ties indicate a sort of resistance against globalization. Meanwhile, the interaction

    between regionalism and globalization are quite obvious, but very complicated. In other

    words, in spite of the fact that eye-catching progress has been made toward further

    regionalization of economic ties, the trend of globalization is a much powerful and

    nonstop preference at international level, specifically in financial and monetary

    structures as well as manufacturing.

    Impact of Globalization on Economic Regionalization: The viewpoints of experts

    regarding the positive and negative impacts of globalization on regionalization of

    economic ties are quite mixed. Advocates of globalization argue that this trend can bring

    the underdeveloped and developing economies in a united trade system in which

    members are equal and do not sustain any discrimination. Thus globalization canencourage the benefits of trade for both developed and developing countries.

    It should not be forgotten that the level of positive effects of globalization by both groups

    of countries totally depends on the competitiveness and economic power of them,

    meaning that industrial countries are the first who would get the benefits of globalization

    while poorer countries may sustain great losses as a result. Therefore, globalization

    may bring about two completely opposite phenomena: encouraging economic and

    political unification of countries into an international system and escalation of economic,

    political and social instability in member countries.

    The resistance of vulnerable countries which are at a lower level in terms of

    power and competitiveness would appear in form of regional economic associations.

    Advocates of regionalization are seeking to somehow reduce the above-said negative

    impacts of globalization. Regionalization is aimed at preserving the economic power,

    national and regional competitiveness of countries which have felt to be threatened by


    Regional resistance movements are especially supported and encouraged by

    national beneficiary groups and companies which cannot match their foreign rivals in

    terms of competitiveness.

    In another viewpoint, regionalization can be looked at as a strategic choice. In

    this line the policies for creation or strengthening regional associations are reviewed

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    based on the principle of convergence of interests in the economic, political and trade

    dimensions between multinational companies and their respective governments.

    This alignment of governments and multinational companies interests are basically

    aimed at preserving and encouraging the responsiveness of countries to structural and

    fundamental developments which occur in the international economic system. This is

    not limited to developing countries, but occurs in large industrial nations.

    On the other hand, pursuing the objective of raising competitiveness of countries in the

    international system has brought about unsecured economic and manufacturing

    conditions. These negative impacts could lead to huge economic, social and political

    crises in developing and less developed countries and even, in a limited form, in

    industrial countries. The progress of computerized communications and information

    dissemination has created such conditions under which the economic power depends

    less on manpower and is instead dependent on exploiting computer information

    technology properly. This has led to lowering the living standards of labor force

    especially in developing countries. To combat such poor conditions some countries

    have decided to protect their domestic industries in resistance against economic


    The objective of regional economic blocs which are the foundation for moving

    toward regionalizing trade and economic ties, is mainly creating of a sort of harmony

    among the following opposing objectives:

    1. Further expansion of predicted benefits and privileges of flexible specialization

    2. Protecting domestic and regional industries which have relatively lower competitive


    Also, the globalization of economy in some dimensions has led to declining the

    countries political power. In spite of the fact that globalization is a solution to economic,

    political and environmental problems which necessitate a collective and global

    management, in some cases it has led to undermining political interests of national

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    governments. Because of such negative impacts of globalization, it is expected that the

    international politico-economic system would witness conflicts between economic blocs.