Economic Interdependence

Sergio A. Lopez

Professor Muck

PSC 220

7 October 2015

Economic Interdependence

            International politics is like a living body; it is always changing and that there are many different variables and components that can alter its mood. Nations from around the world often find themselves at odds with former allies, or strengthening relations with governments who used to be considered a threat. It is much more common now, however, for political disputes between nations to be resolved using non-violent practices of conflict resolution. A factor that helps explain the modern agenda of non-violent conflict resolution between states—one that may arguably hold more significance or otherwise more prominent relevance than other factors—is the current status of economic interdependence between members of the international community.

            It has become very profitable for a majority of large firms to seek profits both domestically and overseas. This could include a variety of different actions by companies, such as selling products and services to consumers overseas, developing or manufacturing overseas, or even constructing corporate headquarters overseas as to establish themselves in the international market with long-term goals. The way that these companies embed themselves into the economy of nations other than their origin allows businesses access to the global market. Recently, this has become a common characteristic of the world’s most profitable businesses. For this reason, it has become increasingly difficult for nations to engage in conflict with other states.

            In the United States, large businesses make sure that the government is aware of their dependence on international markets. They utilize the strategy of lobbying to try and persuade Congress and other legislative bodies to pass laws that benefit their style of business, as well as to oppose the drafting or passing of laws that would otherwise hinder their current business endeavors. It is important for countries that have embraced free-trade to promote the well-being of their own economy, even if it means more carefully taking into consideration the well-being of other nations’ economies. This can prove to be difficult in times of crisis or discontentment with foreign nations, as this kind of mindset may limit the type of economic sanctions that a government will consider. If, for example, the United States were forced to place economic sanctions on Russia over recent uneasiness in the Syria, it would still avoid passing sanctions that would be extremely harmful to its companies that depend on profits made with trading with Russia. The United States has, in the past, raised taxes (or tariffs) to extraordinary levels for businesses importing or exporting goods in times of disagreement with other nations. This type of motion may have worked then, however modern companies are far more dependent on foreign trade that imposing similarly high tariffs on imported and exported goods could prove devastating for American businesses. The failure of companies that rely heavily on overseas profits, then, would likely be a negative blow for the American economy.

            Further, aside from simply placing sanctions on other nations, engaging in military conflict would potentially halt all trade between the opposing parties. There are many companies that manufacture their goods elsewhere, mainly to decrease the fixed costs of operating their businesses. Military conflict between their domestic state and the foreign state in which their products are manufactured could result in companies going out of business, which would ultimately hurt the economies of both parties. For this reason, it does not seem rational for states to go to war when their two economies are so interdependent. This serves as a deterrent for policy makers who might otherwise opt to declare war.

            The modern economies of developed states have become so interwoven that it would prove detrimental for those states to seek military or violent dispute resolutions on political matters. The global economic network that continues to expand and attract momentum has become the ultimate deterrent for states in pursuing foreign affairs or motions that would result in conflict with other members of the international community. For these reasons, countries seeking peace should promote the development of their own domestic businesses and encourage those entities to expand their trade and profits and participate in the growing international market.