Globalisation and regional integration
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Globalisation and regional integration have transformed the world economy in the past half-century. Nowhere have these two processes been more dramatic in their scope and speed than in the 27 countries of central eastern Europe and the Baltic states (CEB), south-eastern Europe (SEE) and the Commonwealth of Independent States (CIS) in which the EBRD operates.
The transition economies have emerged from long periods of communism and economic self-sufficiency within the Council for Mutual Economic Assistance (CMEA, the Soviet-era trade bloc). Their transition towards a market economy has involved in most– but not all– countries an outward focus demonstrated through trade liberalisation and openness to foreign investment. The resulting changes in the structure and direction of trade and the inflow of capital have been substantial. The change in the structure of production has also been dramatic. While initial disruptions to production were severe and in some countries prolonged, the region has in recent years seen a strong recovery. Beginning in 1994 in CEB, this recovery has in recent years extended to SEE and the CIS (see Chapter 3).
The impact of globalisation, however, is not confined simply to changes in output over the medium term. Globalisation dramatically increases freedom and domain of choice for consumers and producers and for savers and employees, which is important in its own right and fundamental to sustained growth. This in turn has a significant influence on what is required of government and, in a democratic system, demanded from it. For example, producers require from government economic policies that are predictable and effective market-supporting institutions that enable them to compete in the global economy. At the same time, employees require access to education and training, health care and a "safety net" that enable them to participate in the market economy.
The process of globalisation has had a significant influence on the role of government in industrialised market economies. This has been just as significant in the transition economies, particularly in the EU accession countries (see Chapter 2). The transition economies stand to benefit substantially from international integration, gaining from trade between economies with very different resource endowments and from the influence of globalisation on the effective development of marketsupporting institutions.
As well as exerting a significant influence on the role of government within countries, globalisation reveals the need for effective governance at the regional and global levels. For example, the need for global environmental protection and management of greenhouse gas emissions requires a global response (see Chapter 5). Similarly, the expansion of trade requires the regional integration of the transport infrastructure to facilitate the flow of trade, particularly in transition economies where infrastructure was designed for a trade system that was largely confined to the communist countries (see Chapter 4). These examples point to the need for international or intergovernmental mechanisms to support the effective management of the global economy.
On balance, the processes of globalisation and regional integration have been and will continue to be beneficial to those affected by them. Where there have been losers– and where there may be more in the future– the response should be not to raise the drawbridge but to create mechanisms to safeguard them against deprivation and hardship. Where there are increased interdependencies between countries, the response should be to develop mechanisms and institutions that support this process. However, before it is possible to make an assessment of the impact of globalisation and regional integration on central and eastern Europe and the CIS, some key concepts need to be defined and put into context.
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