Political Interdependence Research Paper

1. Interdependence As Sensitivity And As Vulnerability

In the field of international relations, it is common to distinguish between sensitivity interdependence— which corresponds to the first meaning described above—and vulnerability interdependence—which corresponds to the second meaning (Baldwin 1980). The key difference between sensitivity and vulnerability interdependence hinges on the costs that countries would bear if relations between them were disrupted. If, for example, changes in economic conditions in one country have a speedy and marked influence on another country, then there is a high degree of sensitivity interdependence between them. If these countries also would find it quite costly to sever their relationship, then the extent of vulnerability interdependence between them is high as well. But sensitivity and vulnerability interdependence often do not move in lockstep. Frequently, there are extensive economic connections between states, yielding a high level of sensitivity interdependence. However, they would not find it especially costly to replace these connections—either by expanding economic interactions with third parties or making domestic economic adjustments—so the level of vulnerability interdependence is relatively low.

2. The Measurement Of Interdependence

Interdependence has been measured in various ways, most of which are linked to the volume of interstate transactions. Among these transactions are tourism and travel, mail, and immigration. Some of the earliest work on interdependence, for example, measured its growth by assessing whether domestic transactions and communications were rising at a more rapid pace than foreign transactions and communications (Deutsch and Eckstein 1961). More typically, however, the extent of interdependence is gauged by the volume of economic exchange between states.

One particularly popular measure of economic interdependence is the ratio of international trade flows to national income. Some studies have assessed the extent of interdependence throughout the international system using the ratio of total global trade to total global income. That the value of this ratio has increased dramatically since the conclusion of World War II is viewed widely as evidence that interdependence is on the rise. Studies of international relations, however, usually focus on interdependence between countries, rather than worldwide. Such analyses often measure interdependence by dividing the annual volume of trade between a pair of countries by the annual gross domestic product (GDP) of one state or the other.

Frequently it is argued that the ratio of bilateral trade to GDP is a good gauge of both sensitivity and vulnerability interdependence. This ratio does provide a useful measure of sensitivity interdependence, since it indicates the extent to which trade partners’ economies are intertwined. The argument that this ratio also furnishes an accurate indication of vulnerability interdependence rests on the claim that as commerce between a pair of countries makes up a larger portion of each country’s total economic output, it is increasingly costly for either partner to replace the trade conducted with its counterpart. But this claim has been the subject of heated debate, and some observers have pointed out that states that trade extensively may not find it very difficult to locate alternative markets in the event that economic relations between them deteriorate (see Baldwin 1980, Hirschman 1945 1980, Keohane and Nye 1977). As such, considerable care should be exercised in using the ratio of bilateral trade to GDP as a measure of vulnerability interdependence. Unfortunately, however, developing more precise measures of vulnerability interdependence requires data that are not available for many countries and periods of time.

3. Determinants Of Interdependence

What accounts for the degree of interdependence between states? Economic and technological factors play important roles in this regard. A group of states vested with similar factor endowments, for example, tends to realize fewer gains from economic exchange than a group of states with very different endowments. All else being equal, both the extent of and the cost of disrupting economic exchange (and, hence, the degree of interdependence) are likely to be lower in the former than the latter group. In addition, economic growth can contribute to heightened interdependence by spurring the demand for goods and services, including those produced abroad. Furthermore, technological improvements have increased the ability to ship goods safely and quickly, and have reduced the costs of doing so, thereby promoting international economic exchange. Such improvements have also increased the ease and speed of moving financial assets between countries, again spurring the growth of interdependence (see Cooper 1968).

However, the extent of economic interdependence also depends on political factors. Particularly important are the international institutions established to regulate economic exchange. The General Agreement on Tariffs and Trade and its successor, the World Trade Organization, have helped slash trade barriers and promote the flow of commerce among participating states. So have various preferential trading arrangements (PTAs), like the European Economic Community, that were designed to foster economic integration. Many of these institutions have contributed to rising interdependence among memberstates (Jacobson 1984, Keohane and Nye 1977). In a related vein, some PTAs—including many of those formed by less developed countries during the 1960s and 1970s, and the Council for Mutual Economic Assistance—were established to reduce the economic and political dependence of members on third parties (Mansfield and Milner 1999).

Political–military relations also influence the extent of economic interdependence. Economic relations tend to be more open—and both sensitivity and vulnerability interdependence tend to be higher— between allies than between adversaries. The efficiency gains from open trade stimulate the growth of national income and rising income can be used to enhance states’ political–military capacity. Countries cannot ignore these political–military implications of foreign commerce without jeopardizing their well-being; and they can address these security implications by trading more freely with their political–military allies than with other states (see Gowa 1994). Open trade, in turn, promotes sensitivity interdependence and can heighten vulnerability interdependence too.

Political–military relations affect political, as well as economic, interdependence among states. Sensitivity interdependence tends to be high between both allies and adversaries, since a state’s political behavior is contingent on the behavior of both its closest friends and its foes. But whereas the level of vulnerability interdependence tends to be low between adversaries, it tends to be high between allies. Since allies typically rely on each other for military security, they face a high cost if their political relations deteriorate unless each of them can quickly and easily locate substitutes for the security furnished by the others.

4. Implications Of Interdependence

Having discussed some factors affecting the extent of interdependence, this research paper concludes by addressing some of its domestic and international implications. From a domestic standpoint, heightened interdependence can erode the effectiveness of a country’s economic policies and, hence, undermine its economic autonomy (see Cooper 1968). If, for example, private actors face relatively few impediments to shifting assets from one country to another and governments face substantial costs if these actors actually relocate assets, then governments are constrained in setting tax and regulatory policies that affect private actors. As such, various observers maintain that one implication of growing interdependence has been greater convergence in macroeconomic policies throughout the world.

Economic interdependence also influences international relations. In a pair of countries marked by substantial vulnerability interdependence, each country is vested with some power vis-a-vis the other, since each one has the capacity to damage the other by severing their economic relationship. Rarely, however, do such countries depend on their economic relationship to the same degree. The least dependent party is vested with a source of power vis-a-vis the more dependent party because the former can more easily bear the costs of disrupting or forgoing the relationship (Baldwin 1980, Hirschman 1945 1980).

Furthermore, it is argued widely that interdependence affects the likelihood of military conflict between states. Debated for centuries, at least three competing views can be identified on this topic. The first is that economic interdependence inhibits interstate hostilities, a claim that can be traced to biblical times, but that most frequently is associated with the nineteenth century Manchester liberals. Although there are various strands of this position, its advocates have stressed a number of core arguments. One is that by increasing contact and communication among individuals and governments, economic interdependence promotes cooperative political relations. Another is that economic exchange and conquest are substitute means of acquiring the resources needed to foster political security and economic growth. As economic interdependence rises, the incentives to obtain these resources through territorial expansion and foreign aggression decline. A third argument emphasizes that since war typically disrupts economic relations among the belligerents, heightened interdependence increases the costs associated with military conflict, thus deterring its onset.

However, the view that greater trade promotes peace has not gone unchallenged. Mercantilists and economic nationalists have long maintained that, as noted earlier, open commerce can undermine the national security of states by influencing interstate power relations. Because the gains from trade tend to be distributed asymmetrically and can be used to enhance states’ political–military capacity, those countries benefiting less from a commercial relationship may find their security jeopardized. Similarly, if trading partners depend on sustaining a commercial relationship to very different degrees, trade may do little to deter belligerence on the part of the less dependent state. Even if a set of states depends heavily and uniformly on trade with each other, such dependence could contribute to commercial disputes and thereby stimulate political antagonism. Furthermore, various observers have argued that the anarchic structure of the international system compels states to limit their economic dependence. As dependence rises, countries may have reason to engage in foreign expansion to manage or reduce it.

Finally, a wide variety of studies have concluded that international economic relations have no systematic bearing on political conflict. Many such studies argue that hostilities stem largely from variations in the distribution of political–military capabilities and that power relations underlie any apparent effect of economic exchange on military antagonism. Despite enduring and heated debates about the nature and strength of the relationship between economic interdependence and political conflict, systematic analyses of these issues have been relatively scarce (for more detailed treatments of the relationship between interdependence and political conflict, see Blanchard et al. 2000, Gasiorowski 1986, Stein 1993).

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