Integration Theories of International Organizations

 

Theories pave the way for practical establishment to come forth. The analysis and comprehension of theories are the first steps to achieving any form of development, either personally or within society. This essay highlights the main properties of the six integration theories of International Relations, specifically under the International Organizations strand. Integration ideologies refer to those notions that propose reorganization, restructuring, or simply the creation of an international organization, group, or community. Throughout this thesis, I will analyze the following integration theories: Functionalism, Neo-functionalism, Inter-governementalism, Customs Union, optimal Currency area, and finally, Fiscal Federalism.

However, before a thorough discussion of each integration theory is pursued, I will first assess their importance in society. Integration theories are notions with varying characteristics; nevertheless, regardless of how unique each theory may be, their essential aim is to "integrate" societies, or more simply, to "incorporate". Ultimately, these theories aim to create working groups, communities, and bodies. One such example that stands out is the United Nations. The UN is a political intergovernmental organization formed so that member countries can collectively resolve or combat issues that they face. Or even to stop common dangers that threaten their stability and peace, such as wars and terrorism. These integrations can take two general forms: the first is political, and the other is economic. Now, I briefly examine the characteristics and importance of each of the six integration theories mentioned above.

Firstly, functionalism can be described with the words purpose and role. This notion of global integration surfaced due to the experiences of the Second World War. As per its founders, Emile Durkheim and Robert Merton, functionalism (in the aspect of integration) views the world as an organism. They propose that a state or country is like an organism with separate yet interrelated biological functions that operate to perform a role that supports each other and ultimately supports the organism's survival. Therefore, being inter-related means that when there is an issue in one aspect of the organism, all others collectively attempt to resolve this issue, hence saving the organism. Durkheim and Merton discuss the possibility that countries could essentially behave in the same manner and operate as one unit or organization. As a result, problems such as wars, disasters, and terrorism can be collectively resolved, and achievements will be jointly celebrated. Organizations displaying some degree of functionalism (with modifications) in terms of collaboration are the United Nations, the European Union, the African Union, and the Pacific Island Community, among others. Quite obviously, due to the nature of the theory, which encourages all states to work collaboratively, it is safe to argue that this theory is pro-globalization. Another integration theory considered to be an upgraded version of functionalism is neo-functionalism.

Secondly, as its name points out, neo-functionalism closely relates to functionalism. Neo means new, so basically, new functionalism. This notion has been described as an updated version of functionalism, although with astounding and very clear differences. Scholars credited with its creation are Jeffrey Alexander and Ernst Bee Hass; they define neo-functionalism as a notion that encourages regional integration, which will improve state relations in the region and ultimately reap other aligned benefits associated with regionalism. They described neo-functionalism as an evolved or modified version of functionalism that attempts to propose an answer to the critics of the (former) functionalist ideas. Primary benefits of integration via this notion can be observed in the following areas: increased interdependence between states, organizational capacity to resolve disputes, and building strong international communities. However, naturally, there are setbacks (even to an idea thought to be flawless). Among others, the disadvantages of regional integration included a decline in nationalism and a loss of nation-state identity. As a result, to encourage the prospect of integration via neo-functionalism, Hass points out the positive effects of regional integration, including spillovers, the transfer of domestic allegiance, and technocratic automaticity. Because neo-functionalism encourages regional integration, it can be assumed that its main integration competitor is globalization. An alternative theory is inter-governmentalism.

Thirdly, the discussion of inter-governmentalism is not complete without the mention of neo-functionalist elements. This is because, in essence, intergovernmentalism opposes most of the neo-functionalistic ideologies. More precisely, inter-governmentalism argues that the primary elements of whether to integrate or not still lie with the individual nation-state and not the supranational or regional organizations, as argued by neo-functionalism. Inter-governentalism assumes the definition of an integration theory that argues for the importance of states as vital actors that influence integration. The notion does not necessarily propose any new ideas; it simply rebuts the points expressed in neo-functionalism. The theory further purports that integration at the regional level is a direct result of decision-making and/or influence at the national level. This theory basically takes the stand that countries are significant actors, and their power should not be overlooked or undermined in relation to regional integration at the international level. Another integration theory that stresses the importance of nation-states is the Customs Union.

Furthermore, unlike the other theories, the Customs Union encourages integration primarily for economic benefits. The Customs Union can be described as a bloc, or more simply, a community of traders. The founder of this economic theory, Jacob Viner, defined it as a notion that encourages free trade (among agreeing members) with relaxed trading barriers such as the removal of tariffs. Part of this agreement is to view non-member states as third-party trading partners, which essentially means that trading priorities and benefits are first shared within the union. However, notable problems associated with the theory include changes in price and production (output), which cause instability in the union as one party produces more of a particular good than the agreed amount and vice versa with prices. In brief, a customs union encourages states to create economic trading blocs where priority and trading advantages must first be given to member states. The second economic theory that encourages state integration is the Optimum Currency Area.

Moreover, the Optimum Currency Area (OCA) theory also encourages integration with economic benefits, but unlike the customs union, OCA focuses on regional groups. Credited with revolutionizing this theory is Canadian economist Robert Mundell, who defines the theory as an economic philosophy that supports the use of a common currency in areas that are regionally closer or those that are within a shared jurisdiction. When it was first introduced, OCA was viewed as an opposition to the Bretton Woods monetary management system. Apart from the obvious fact that OCA encourages state integration, Mundell highlights that when a group or region has a common currency, benefits that can be achieved are easy labor movement with fewer travel restrictions, economic interdependency and support given to smaller economies by bigger ones, open trading with minimum trading barriers, and having a larger market for products. While these benefits may seem attractive, Mundell outlines in his thesis that the OCA theory cannot be simply applied anywhere; there are specific conditions in which the theory will flourish. These conditions are as follows: the existence of a large and integrated market; the presence of flexible pricing and wages; an established centralized budget; and lastly, the existence of a similar business cycle. The most notable region enforcing OCA with various modifications is the European Union. In brief, the OCA argues that areas, specifically regions, should use a common currency. In this proposition, it highlights the benefits and pre-existing environment that the OCA needs. Another economic theory, but one that does not encourage regionalism but rather supports the assessment of favorable economic conditions, is the theory of fiscal federalism.

Finally, the fiscal federalism theory is the only economic integration notion that involves the decentralization of powers. It was founded by German-born American economist Richard Musgrave in 1959. Musgrave defines his concept as a model that describes the division between different levels of government: the federal/central, state, and local governments. Also, fiscal federalism attempts to explain the financial and economic relationship between these levels of government. To simplify, he uses a nuclear family as an example. In this example, the father (federal or central government) allocates money to the mother (state government), and then the mother gives money to their children (local government) based on their needs. This is the financial relationship and basis of Musgrave’s theory. Of course, it must also be noted that because money is given based on need, local governments must ask for it, and by doing so, they must clearly identify which need they want to satisfy. When local governments ask for finance, it is called "grant", but if it is given to them, it is called "aid". However, as a result of this, some of the theory’s disadvantages include the unfavorable distribution of money and the lack of accountability by the local governments. It is arguable that fiscal federalism can be applied under different government systems, but according to Musgrave, it is best applied where there is a federal government in place. Examples of countries using fiscal federalism are the United States, Canada, and India. In essence, fiscal federalism is an economic theory that outlines the financial relationship between different levels of government in a federal system of government.

In summary, integration theories of international organizations aim to integrate single units into larger international groups, organizations, or communities. The theories studied can be further categorized into political and economic integration theories. This thesis outlined six such integration theories. The theory of functionalism views the world as an organism and individual states as organs, all of which function to support the organism; accordingly, the world should operate. Neo-functionalism, on the other hand, is considered to be an enhanced version of functionalism and argues for regional integration. Inter-governmentalism prioritizes nation-states and contends that nation-states are the primary influencers of regional integration. Further, a customs union encourages countries to create regional trading blocs where state-to-state relations can grow. In another economic case, the optimum currency area theory proposes that regionally and geographically related states should use a common currency. And fiscal federalism studies the financial relationship between the different levels of government. All in all, this paper identified that a customs union, an optimum currency area, and fiscal federalism encourage integration through economic means. Contrarily, functionalism, neo-functionalism, and inter-governmentalism propose integration via political means. In order for international organizations to be established, there have to be mechanisms to guide their structure and organization; this is essentially the reason behind the existence of these integration theories.

 References

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