Polanyi’s central insight is that markets are “always embedded” (Block, 2003a). Markets are also everywhere embedded. With this as a point of departure, and in the context of the economic crisis that began in 2008, the central questions for positive and normative analysis become how and where markets are embedded. In this essay we consider what lessons might be drawn for the “re-” embedding of markets through the lens of regional integration. We begin by offering a conceptualization of regional integration as a particular form of embeddedness. We then present evidence on the regionalization of markets, using data on international trade for 1948-2008. Next, we review some consequences of regional integration for income inequality and the welfare state in Europe, with the aim of demonstrating that some of the recent “dis-embedding” of markets is due to regional actions. Finally, we offer three scenarios for the future of market reembedding in Europe. Our most general thesis is that regional integration presents particular opportunities for, and challenges to, the visions for market reembedding that are discussed in this volume and elsewhere. Regional integration can be conceptualized as the formation of transnational political economies through the increasing density of international market exchange and the development of international political institutions within geographically bounded, politically negotiated, and historically specific transnational regions. Most generally, attention to regional integration suggests that we should consider scale and scope in developing approaches to market embeddedness. Regional integration is a near-global phenomenon, with formal intergovernmental organizations pursuing integration in Africa (e.g., the African Union), Asia (e.g., the Association of Southeast Asian Nations), Europe (e.g., the European Union), Latin America (e.g., the Central American Common Market and MERCOSUR), and North America (e.g., the North American Free Trade Agreement). Indeed, Zhou (2010) demonstrates that the effects of cultural similarity and geographical proximity on trade are growing, as a general matter, in the international trade network. Thus, markets are realized differently in different regions. In much the same way as the world-systems/dependency approach to economic development highlighted the broader context of relations among nation states in the world system, attention to the regional political-economic context can yield insights into the
sociology of markets by adding a scale of social relations. Indeed, regional integration can itself be conceptualized as a form of embeddedness distinct from urban, national, and global embeddedness. Markets are embedded in social relations that take place at the regional scale. Arguably, there are consequential social relations at the regional level that contribute to contemporary political and economic changes. Moreover, in some regions, regional integration is an increasingly consequential form of embeddedness. The European market is just such a case. The European Union has broadened its scale and expanded its scope dramatically since its founding as the European Economic Community in 1957. As of 2011, the E.U. has grown from six to 27 member states, with a population of more than 500 million European citizens. Several member states now use the common Euro currency, and the E.U. has developed a governance structure that includes the Council of Ministers, European Commission, European Parliament, and European Court of Justice. Indeed, European integration now occupies a large proportion of the total volume of legislation in many E.U. countries, especially the newer members, as national legislators work to bring their legal regimes into compliance with the body of E.U. law, the acquis communautaire. The E.U. is also pursuing a European Constitution. The expansion and institutionalization of the European Union has shifted the scale of social relations in Europe, by establishing frameworks for regional social orders that structure fields of interaction (Fligstein, 2008). Our argument is that this regional integration has had important consequences for income inequality and European welfare states in a way that differs from global embeddedness (Beckfield, 2005 and 2006). In disentangling regional integration from globalization, the embeddedness concept helps by drawing attention to the specification of social relations. The key difference between the two forms is scale: globalization is the increasing density of intercontinental forms of interaction, whereas regionalization is the increasing density of forms of cross-national interaction that are nonetheless bounded within particular places. It can be argued that regional integration and globalization can be mutually exclusive, reinforcing, or orthogonal. Market interaction can be embedded in social relations at several different scales simultaneously. A challenge for research, and for activists who would like to see new forms of embeddedness, is to consider how regional embedding is accomplished across regions and over time. Consider the European market. A straightforward way of measuring the regional integration of (product) markets is to consider the intra-regional trade share, or what proportion of exports is directed toward the regional economy. Using data from the Direction of Trade Statistics and International Financial Statistics from the International Monetary Fund (IMF, 2010a and 2010b), Figure 7.1 shows that, from 1948 through 2008, exports in the European region have grown more regionalized (where “Europe” is defined as the United Nations’ macro-region). The pace of regionalization has slowed in the last decade, but this may be a ceiling effect, as more than 75 per cent of exports from European nations are now directed toward other nations in the European region. We note
that similar trends hold for the E.U.-15, as well as the E.U.-27; these results are available from the authors upon request. Of course, the extent of regionalization of other markets – including labour markets – is an open empirical question. The trade data are suggestive of the growing regionalization of European markets, but we view our analysis as just a first step toward assessing regional integration. The growing regionalization of trade in Europe is significant in itself, considering that trade in open markets can, under strong assumptions, substitute for factor mobility. Regionalization is not limited to Europe. Below, we use the same data sources and the same analytical techniques to evaluate the regionalization of international trade in North America, Asia, Africa, Latin America, and Oceania. As above, we vary the definition of region by using both the largely geographical boundaries provided by the United Nations’ “macro-regions”, and the political boundaries defined by membership in prominent intergovernmental organizations (NAFTA, ASEAN, and MERCOSUR). Figure 7.2 shows that the trend in North America is toward deeper regional integration, with a peak in 2002 of more than 57 per cent of North American exports directed within the boundaries defined by NAFTA. This peak capped a wave of integration that accelerated after the NAFTA took effect in 1994, and although there has been a decline since 2002, the long-term trend is clearly
toward more regional integration (and less globalization, if globalization is defined as inter-continental trade). Figure 7.3 shows a steady increase in the regionalization of Asian trade since 1959, when the regional trade share reached a low of 26 per cent after a decade of decline. Currently, more than 50 per cent of exports from Asian nations are directed toward other Asian nations, after a decades-long steady upward trajectory. This trend is interesting in light of Northeast Asia’s “stunted regionalism” (Rozman, 2004). In contrast, Southeast Asia is relatively advanced in the formation of regional institutions, led by the Association of Southeast Asian Nations. Figure 7.4 shows evidence of increasing trade regionalization among the ASEAN nations: the intra-ASEAN trade share increases steadily throughout the period, to a recent peak of more than 26 per cent of exports. Following the institutionalist approach of Fligstein and Stone Sweet (2002), this increasing regionalization might represent an increasing demand for regional institutions to order markets, which suggests a political opportunity for influencing the quality of market embeddedness in the Asian region. Figure 7.5 shows evidence of regional disintegration in Africa through 1980, when the intra-African trade share reached a low of 3 per cent, followed by a sharp increase in regional economic integration through the end of the period.