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Whither interdependence?

Published online by Cambridge University Press:  22 May 2009

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The definition and direction of interdependence remain unclear. As a corrective, interdependence can be defined as the direct and positive linkage of the interests of states where a change in the position of one state affects the position of others and in the same direction. Interdependence, then, is measured both by the flow of goods between states—horizontal interdependence, and the equalization of factor prices among states-vertical interdependence. Horizontal and vertical interdependence measured across six industrialized states from 1890–1975 reveal some important changes in the interdependence among these states. Fairly significant before World War I, interdependence declined markedly in the interwar period. Following World War II, interdependence seemed to increase once again, but since 1958 the measures appear much more mixed. The data seem to support a detachment of individual national policies from the general trend toward interdependence. This detachment may alter the trend, reducing the positive and direct relationship among industrial economies.

Copyright © The IO Foundation 1977

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1 The original contentions were those of Raymond Vernon and Charles Kindleberger. For a revised view see Bergsten, C. Fred, “Economic Tensions: America v. the Third World” in Rosecrance, R., ed., America as an Ordinary Country: U. S. Foreign Policy and the Future (Ithaca, N. Y., 1976Google Scholar) and the same author, Let's Avoid a Trade War,” Foreign Policy No. 23 (Summer 1976)Google Scholar.

2 See the definition offered by Morse, Edward in “Transnational Economic Processes” in Koehane, R. and Nye, J. Jr, Transnationalism in World Politics (Cambridge, Mass., 1972)Google Scholar.

3 This is not true of Kenneth Waltz. See his “The Myth of Interdependence” in Kindleberger, C., ed., The International Corporation (Cambridge, Mass., 1970)Google Scholar.

4 It is striking that the literature has made little or no mention of the difference between situations in which interdependence means movement in the same direction and when it means movement in opposed directions. If complete interdependence in the former sense were achieved, nations would have no incentive to seek advantage at the expense of each other.

5 For a summary of argument and current horizontal data see Katzenstein, Peter, “International Interdependence: Some Long-Term Trends and Recent Changes,” International Organization Vol. 29, No. 4 (Autumn 1975): 1024–34CrossRefGoogle Scholar.

6 See Inkeles, Alex, “The Emerging Social Structure of the World,” World Politics Vol. 27 (07 1975): 477–86CrossRefGoogle Scholar.

7 E. Haas argues that this is what, by and large, the United States has done. See his Tangle of Hopes (Englewood Cliffs, N. J., 1969), pp. 130–31Google Scholar. His argument, however, was completed before the dynamic actions of the United States in August 1971.

8 See particularly Tollison, R. and Willett, T., “International Integration and the Interdependence of Economic Variables,” International Organization (Spring 1973)Google Scholar, Cooper, Richard N., The Economics of Interdependence (New York, 1968)Google Scholar, Chapter 1, and Belassa, Bela, The Theory of Economic Integration (Homewood, 111., 1961), passimGoogle Scholar.

9 The former defines the long-term or secular trend in vertical data while the latter affords a measure of the cyclical or short-term variation. High interdependence should be reflected in high correlations on both measures.

10 Waltz argues that interdependence only exists if nations are vulnerable to any interruption in relations. The interdependent relation is one that is costly to break.

11 The key work here is Deutsch, K. and Eckstein, A., “National Industrialization and the Declining Share of the International Economic Sector: 1850–1959,” World Politics Vol. 13 (01 1961): 267–99CrossRefGoogle Scholar.

12 Both Morse and Cooper, cited above, incline to this view.

13 This thesis was offered particularly by Robert Gilpin in “The Politics of Transational Economic Relations” in Keohane and Nye. It has been subjected to partial test in Krasner, S., “State Power and the Structure of International Trade,” World Politics Vol. 28, No. 3 (04 1976): 314–47CrossRefGoogle Scholar.

14 In what follows we first investigate the degree of interdependence of US regional markets and then compare that with interdependence between national markets. For an analogous treatment of domestic and international data see Deutsch, K. W., “Shifts in the Balance of Communication Flows: A Problem of Measurement in International Relations,” Public Opinion Quarterly, Vol. 20, No. 1 (1956): 143–60CrossRefGoogle Scholar.

15 For an essential comparison between international and interregional effects see Ohlin, B., Interregional and International Trade (Cambridge, Mass., 1933)Google Scholar.

16 See particularly Deutsch, and Eckstein, , and Kuznets, Waltz. S. in Modern Economic Growth (New Haven, Conn., 1966Google Scholar) argues that small economies are more dependent upon foreign trade than large. The growth of trade among such economies in the nineteenth century was truly striking. (See pp. 302–10.)

17 See Hawkins, Robert G., “Intra-EEC Capital Movements and Domestic Financial Markets,” National Bureau of Economic Research, Conference Series No. 24, International Mobility and Movement of Capital (New York, 1972), pp. 5177Google Scholar.

18 See Yeager, Leland B., International Monetary Relations (New York, 1966), p. 274Google Scholar.

19 Katzenstein, Peter, “International Interdependence: Some Long-Term Trends and Recent Changes,” International Organization Vol. 29, No. 4 (Autumn 1975): 1021–34CrossRefGoogle Scholar.

21 See inter alia Young, Oran, “Interdependences in World Politics,” International Journal Vol. 24 (Autumn 1969)CrossRefGoogle Scholar, Morse, E., “The Politics of Interdependence,” International Organization Vol. 23 and R. Cooper, op. citGoogle Scholar.

22 See Rosecrance, R. and Stein, A., “Interdependence: Myth 01 Reality?,” World Politics Vol. 26 (10 1973): 127CrossRefGoogle Scholar.

23 Recent investment in Europe is one example. While Europe, Oceania, and Africa constituted only about 1.8 percent of long-term direct investment made by Japan between 1951–59, Europe alone comprised 20.1 percent of the Japanese total in 1973. The European share of US direct investment was 14.7 percent in 1950, but had risen to 32.6 percent by 1972. In 1958 only 8 percent of British earning on direct investment came from Europe, but by 1971 the total was 17.7 percent. France and Germany were even more strongly committed to Europe. France had 16.8 percent of its long-term investments in the EEC in 1962; ten years later the total had grown to nearly 25 percent. In 1961 Germany invested 38.6 percent of its long-term funds in Europe; by 1970 the total was nearly 57 percent.

4 See Morse, E., Foreign Policy and Interdependence in Gaullist France (Princeton, 1973)Google Scholar.

25 Such divergence is unlikely to be stable. If price indices converge while changes move in opposite directions, the relationship of price indices themselves would eventually be affected.

26 Stephen Krasner in “State Power and the Structure of International Trade” reaches similar conclusions. He measures the openness of the international trading structure by low tariffs and high ratios of trade to GNP; relative state power is estimated using ratios of economic size, per capita income and share of world trade. Openness tends to persist even after power ratios have begun to decline.

27 New speculation along these lines is reported in Dale, Edwin Jr, “A New Theory: Inflation Triggers Recession,” New York Times, 07 18, 1976Google Scholar.