How do trading blocs affect balance of payments, economic integration, demise of Socialist systems?

Answer 1

Marx prophesied that capitalism "would collapse under the weight of its own internal contradictions". It didn't, but socialism did. The demise of "Socialist systems" in E Europe may have been due to a small extent to the attraction of the West, with people leaking out through Berlin before 1961, from Hungary in 1956 and Czechoslovakia in 1968, etc, but was mainly because money was going into the military and people were discontent. Gorbachov rose through the ranks of the Communist Party and then overturned it when he reached the top. If you believe in manifest destiny, then there is a prime example. The other huge example in my lifetime is De Klerk. In China, socialism was overturned by capitalism because the communist leadership recognised in and since 1978 that capitalism was the ay to prosperity for the Chinese people.

The magnet of the EU (the world's only really major "trading bloc") though has probably been a great help to the ex-conquered lands west of Russia to keep on the capitalist road after the withdrawal of Russian tropps in the face of the inevitable suffering of transition. Imagine what their world might have been like without it! A re-run of the 1890s to 1913?? ie chaos and lots of petty wars with tendencies towards dictatorship.

The EU has caused a lot of economic integration. The single market is for real.

The balance of payments is now only measurable with the outside world, intra-EU trade has become dominant for most EU countries but irrelevant for policy.

Answer 2

Trading blocs create trade diversion and negatively impact on trade creation. This skews the balance of payments in favor of trade bloc members, promote economic integration within a bloc.

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