ECONOMIES OF SCALE, COMPETITION, AND EUROPEAN INTEGRATION.

The advocates of economic integration in Western Europe regard it as a panacea for many of the continent's economic ills. It is expected to work its beneficial effects through increased competition, more planning on a larger scale, and the creation of a European bureaucracy, expected to be less inefficient and less amenable to the pressure of sectional interests than some of the national bureaucracies it would replace. Since the last two factors raises far more political than economic questions, author only deals with the implications of the first, increased competition. This is generally expected to have more profound effects on the nature and direction of investment than on the utilization of existing equipment. The low labor productivity of European manufacturing industry is believed largely to be due to the use of obsolete and inefficient manufacturing equipment; and there is a strong feeling that integration would improve this situation. This article suggests that it should be possible to set up a system of intra-European exchange relations more flexible than a common currency and yet capable of offering businessmen adequate guarantees to encourage their catering to an all-European market and planning their investments accordingly.