Geography Reference
In-Depth Information
institutions concerning governance and trade, without taking into account
the role of economic geography. The reason Alesina and Spolaore (2005) are
able to ignore these economic geography and fragmentation-coordination
arguments, is that the types of cases they discuss are implicitly countries
or regions which are already located in rich, open and integrated super-
regional and multinational markets. In the modern global context, in many
ways these types of places are actually the exception, not the rule. It is where
such markets operate (such as EU, NAFTA and so on) that the advantages
of globalization are most evident, rather than in highly cartographically
fragmented environments such as the continent of Africa (Venables 2010).
Indeed, an enormous achievement of the European Union has been to inte-
grate so many different countries into something akin to a unified system in
which small countries can still thrive. Comparing the EU with Africa dem-
onstrates that unless we explicitly consider the underlying economic geog-
raphy logic of the super-regional context in which an individual country is
located, any arguments concerning the institutional advantages of large or
small countries are of little value.
Most recent work increasingly suggests that there are no simple ideal
institutional typologies for promoting national economic development
(Rodrik 2007), and as we see here, the development possibilities logic
resulting from national and multinational institutional arrangements will
themselves also depend heavily on both the existing economic and politi-
cal geography (Collier 2007). In today's global economy, multinational
coordination of institutional and regulatory regimes between neighbour-
ing countries is critical in order to foster home market and agglomera-
tion effects. Free trade relations are no longer simply seen as a matter of
comparative advantage and specialization, but rather in terms of the need
to foster market and production scale effects, and especially those built
around the development of knowledge, technology and innovation. As we
have seen throughout this topic, multinational firms are critical drivers of
these international technology transfer processes, and the economic geog-
raphy of globalization depends crucially on how and where MNEs decide
to invest. Indeed, the need to foster the cross-border investment flows
essential for promoting home market scale effects underpins the logic of
the creation of the EU Single Market. Similar considerations also apply to
different degrees in the case of all of the various super-regional arrange-
ments which have emerged in the modern era of globalization, including
EU, NAFTA, CER, APECD, ASEAN and MERCOSUR. Although
quite different in nature, each of these multinational groupings is designed
precisely to change the institutional relationships between the member
countries in a manner which reduces their separateness and increases their
mutual openness and interdependence.
