Pressure for Global Integration and Capability of Latecomer Countries

Abstract

Less developed and transitional economies are under increasing pressure to open up and conform to “global standards.” However, today's latecomers often lack basic conditions to generate market economies and compete effectively in the world economy. Commerce and industry are seriously underdeveloped and governments are incapable of assisting private activities or coping with external shocks. The gap between the required level of institutional preparedness and the dismal reality of today's latecomer countries has widened. As a result, many latecomers begin to integrate without adequate preparations and face severe macroeconomic and social crises.For illustration, Vietnam's inconsistent commitment to free trade and Central Asia's response to the Russian crisis are reviewed. To permit step-by-step integration, there should be multiple rules for globalization depending on initial conditions and policy capability.Furthermore, major exchange rates and international finance must be stabilized before encouraging the latecomers to participate in the world economy.