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Market Integration and Public Goods: Commercial Interests
and Development of a Unified Currency in the United States
David C. Johnson
Department of Political Science
University of California, Los Angeles
Interdependence theory argues that institutionalization of international economic
institutions is a natural function of market globalization. (Goldstein et al 2001) Proponents of
realism maintain, however, that while expanded international organizations play a role in
coordinating decisions, states control law-making and ultimately direct the development of
international rules and institutions. (Mearshimer 2001; Gilpin 2001) Which is it? Do the
European Union and the WTO represent a legalization of international market rules or merely
symbiotic coordination between independent states?
The establishment of the WTO, creation and expansion of the European Union,
proliferation of regional free trade areas globally and other examples demonstrate that
economics matters in international politics. Technological advances in transport
(containerization and air travel particularly), computing and communications have deepened
international markets and established micro and macroeconomic basis for regulatory
integration.
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States, though, have historically been reluctant to relinquish sovereign authority
to international organizations. In selected areas where the network benefits are significant,
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There should be limited contention over whether or not the international market is integrating. According to
World Bank figures, annual global private capital flows grew from 4.2 percent of global GDP in 1970 to 29.1
percent in 2000. Trade flows as a percentage of global GDP roughly doubled from 25.4 percent in 1960 to 48.7
percent in 2002. The number of immigrants to the United States alone increased from 1.0 million in 1941-1950
to 9.1 million in 1990-2000. Gross annual FDI flows were US$1.5 trillion in 2000, up from US$8.85 billion in
1970. (See World Development Indicators database, www.worldbank.org, and Immigration and Naturalization
Service figures, www.ins.gov.)
Convention