Chapter 10: States and Markets in the World Economy


Economic nationalism
This school of thought does not think the invisible hand of the economy will result in the best economic outcome for a developing state. The state should guide and develop the market by nurturing key industries, building banks, and planning institutions that will streamline future economic growth. These capitalists do believe international trade can be beneficial, but only under certain conditions. Of principal concern are relative gains, where potential adversaries may disproportionately gain more from certain economic relations.


Your staff sends a memo to the President detailing your decision, highlighting your desire to have the state develop a capitalist economy. The memo outlines your plans to protect infant industries, build banks, and plan institutions that will streamline future economic growth. The President responds and asks: what will you do with regards to global economic integration in the short term?

What do you do now?

Join international institutionsThis approach entails joining the World Trade Organization, the International Monetary Fund, the United Nations, and regional free-trade organizations. These organizations will integrate your domestic industries into the broader world economy for better or worse. Joining these organizations will also promote linkages with other capitalist countries and potential allies.
Do not join international institutionsFor the time being, Chechen industries will be allowed to develop without exposure to global economic competition (and global resources/firm alliances). As a result, Chechnya will not develop closer ties with other capitalist countries because they desire an open world economy.