Governing Structures in Economic Integration: The Single-State Option and the Case of Russia

Abstract

Bringing together two branches of New Institutional Economics (principal-agent theory and Williamson's hierarchies), along with the empires literature, I argue that regional economic integration can occur through a variety of governance structures: intergovernmental, supranational, and single-state. The integration literature has focused on the first two (Mattli, Moravcsik, among many others) but has ignored the third option. This paper first demonstrates the types of integration, focusing on depth and the decision-maker as the primary differentiating characteristics, and then briefly notes some single-state structures, including Prussia's Zollverein and Vereinsthaler, the South African Customs Union (until 2002), and Ecuador's dollarization. Extant analyses have lumped these together with supranational structures, ignoring the differing logic that drives each type of relationship. The paper then analyzes Russia's approach to regional integration. Russia originally pursued a supranational structure in the form of the CIS. Within a few years, however, it abandoned this effort, moving to a single-state structure with itself as the head of hierarchical arrangements that include a monetary union, a free trade area, a customs union, and ultimately an economic union called the Eurasian Economic Community. Russia's choice was driven first by Yeltsin's commitment to Western institutions. When the economy crashed and the West failed to produce large grants, the Russian people and their rulers lost interest in the Western focus, opting for a Eurasian focus. Under this new approach, Russia's dominance of the region was encouraged and then applauded, demonstrating the state's superpower position. Yeltin's and then Putin's choice of a single-state governing structure logically fits with this domestic demand to demonstrate dominance. In addition, Putin's authoritarian style is consistent with this governing structure, suggesting that other authoritarian regimes, most notably China, may well pursue a single-state structure in regional integration.