In the book International economic integration1 the famous economist Jan Tinbergen definitively defines the economic field, that he will elaborate in the following decades. This choice is not evident, and it is interesting to reflect on this. Tinbergen was formed professionally during the thirties and forties of the last century, when the national self-provision and autarky draw all attention. It is not surprising, that in 1945 he continues his career in the Dutch Central Planning Agency. But yet he already realizes that foreign trade is important, and he presents his views in the book International economic co-operation (also published by Elsevier). On second thoughts, that book does not entirely satisfy him, and therefore in 1954 he recasts it into International economic integration.
The thirties form the absolute flourishing period of the capitalist state interventions. Tinbergen is emotionally seized by the social and economic problems. He tries to develop economic lines of action, which can improve the quality and effectiveness of the state policy. His analyses have undoubtedly contributed to the success of the reconstruction after the Second Worldwar. But at the end of the fifties it becomes clear, that in the developed capitalist economies of the western industrial states the state has merely a modest role. It turns out that central planning fails. This is different for the developing states, which yet have to build up their industries. Tinbergen probably realizes, that precisely these states can benefit from his theories and analyses. In any case, since the sixties he is mainly active in international organizations such as the United Nations2.
For the Netherlands International economic integration is an important book, because the text rises head and shoulders above every Dutch publication, which has appeared before the Second Worldwar about the foreign trade. Due to the pillars in the Dutch society, the scientific studies were often ideologically distorted in an unacceptable manner, so that they are far from realistic. Tinbergen presents objective economic theories, which have been purged of idealistic and ethical ideas. Although Tinbergen is active in the socialist movement, International economic integration advocates liberal structures3. The economy must be mixed, with a large private market, which however leaves room for the public sector. Tinbergen notably points to the necessity of international institutions, which regulate the trade and the capital flows. In this regard, Tinbergen is far ahead of his time.
In the main text of International economic integration Tinbergen explains in a clear and understandable language, how the international economy functions. He mentions a number of important economic indicators, which allow to measure the development level of the concerned state. Tinbergen stresses that in principle all states are better off in a system of free trade. The expression economic integration implies, that the set of central regulations must have the right size. Then the economic structure and the global welfare are optimal. Some of the contents is evidently outdated. For instance the gold reserves are discussed in detail, and these have nowadays lost much of their importance. Much attention is also paid to the exchange rates, although these no longer exist, at least in the euro zone. And Tinbergen still ponders over ways to stabilize the prices of raw materials.
On the other hand, many themes in the book are surprisingly topical. For instance, Tinbergen stresses again and again, that in the long run the balance of payments of each state must be equilibrated. The euro zone got stuck, because the member states do not satisfy this requirement. Tinbergen foresees this, and believes that an economic union must be supplemented by a political union. And according to Tinbergen the full employment is still a natural and primary policy target. The price stability must also be guaranteed as good as possible. In principle the decentralization of the economic policy gives the most freedom. Yet sometimes international coordination is necessary in order to prevent, that states compete in an unfair manner.
For instance, protecting the domestic market is cheating, as well as permanently undervaluing the national currency. Central interventions are inevitable, when structural instabilities exist. Thus a policy directed at full employment will benefit from a coordinated international approach. Unfortunately, here nationalistic sentiments are sometimes an obstacle4. Yet, at the time there was already a basis, thanks to the agreements of Bretton Woods. Tinbergen believes that concrete international institutes are needed for six areas or policy functions (see p.145): supervision on trade restrictions, regulation of the markets for raw materials, guarantees for currency conversions, coordination of the economic equilibrium, the supply of investment capital, and the regulation of migration.
Tinbergen can conclude with some satisfaction, that several of these institutes have been founded. Perhaps the most important one is the International Monetary Fund. Besides, there are many organizations of the United Nations, although one may question their effectiveness. Moreover, the present-day reader can be pleased with the World Trade Organization, and with the European growth- and stability-pact. Here it again turns out, that International economic integration has withstood the ravages of time. This is mainly due to the sensible approach of Tinbergen. Just sometimes he is briefly dreaming. For instance, on p.140 he suggests that the rich states can express their solidarity by yearly investing a few percent of their income in the developing states. The global justice can not be realized in no time.
At the end of the book appendices are added, which present two economic models. Those who want, can use them to calculate the global trade. In the first model Tinbergen wants to illustrate, that thanks to the free trade all states can reach their maximal welfare. Import restrictions or import tariffs will always negatively affect one or more of the trading partners. And in such a situation these will obviously retaliate with similar measures. In the second model, Tinbergen analyzes how the exchange relations between two states are formed. The contents in these appendices is difficult matter for people without economic knowledge. However, that is not necessarily an obstacle for reading International economic integration, since the appendices are not essential for obtaining good insights. They are more a bonus for the true lovers. They crown all.