diplomatic/international history + IR

Interdependence only constrains national policy if leaders accept and agree to work within its limits. This view is consistent with the general liberal perspective that all wars are ultimately driven by unit-level phenomena such as misperceptions, authoritarianism, ideology, and internal social conflict. The idea that economic factors by themselves can push states to aggress-an argument consistent with neorealism and the alternative theory I will present below-is outside the realm of liberal thought, since it would imply that purely systemic forces can be responsible for war, largely regardless of unit-level phenomena.

In the next section, I bring together the liberal emphasis on benefits with the realist emphasis on costs to create a framework for understanding the true level of dependence a state faces. This section also seeks to correct the most significant Note as well that if states have already decided to be peaceful, then interdependence is not needed as a restraint. InternationalSecurity 16 error in both liberal and realist theories, namely, their lack of theoretical attention to the dynamics of state expectations for the future.

A Theory f Trade xpectations E o This section introduces the theory of trade expectations. This theory extends liberal and realist views regarding interdependence and war, by synthesizing their strengths while formulating a dynamic perspective on state decision-making that is at best only implicit in current approaches. The strength of liberalism lies in its consideration of how the benefits or gains from trade give states a material incentive to avoid war, even when they have unit-level predispositions to favor it.

The strength of realism is its recognition that states may be vulnerable to the potential costs of being cut off from trade on which they depend for wealth and ultimately security. Current theories, however, lack a way to fuse the benefits of trade and the costs of severed trade into one theoretical framework. More significantly, these theories lack an understanding of how rational decision-makers incorporate the future trading environment into their choice between peace and war.

Both liberalism and realism often refer to the future trading environment, particularly in empirical analyses. But in constructing a theoretical logic, the two camps consider the future only within their own ideological presuppositions. Liberals, assuming that states seek to maximize absolute welfare, maintain that situations of high trade should continue into the foreseeable future as long as states are rational; such actors have no reason to forsake the benefits from trade, especially if defection from the trading arrangement will only lead to retaliation.

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Realists, assuming states seek to maximize security, argue that concerns for relative power and autonomy will eventually push some states to sever trade ties at least in the absence of a hegemon. Hence, realists can insist that interdependence, again manifest as high trade at any moment in time, drives dependent states to initiate war now to escape potential vulnerability later. For the purposes of forging strong theories, however, trading patterns cannot be simply assumed a priori to match the stipulations of either liberalism or of realism. Trade levels fluctuate significantly over time, both for the system as a See Rosecrance, Rise of the TradingState, appendix.

EconomicInterdependence nd War 17 a whole and particularly between specific trading partners, as the last two centuries demonstrate. This is where the new theory makes its most significant departure. High interdependence can be peace-inducing, as liberals maintain, as long as states expect future trade levels to be high in the future: positive expectations for future trade will lead dependent states to assign a high expected value to a continuation of peaceful trade, making war the less appealing option.

Economic Interdependence Essay

If, however, a highly dependent state expects future trade to be low due to the policy decisions of the other side, then realists are likely to be correct: the state will attach a low or even negative expected value to continued peace without trade, making war an attractive alternative if its expected value is greater than peace. Moreover, since a negative expected value of trade implies a long-term decline in power, even if war is not profitable per se, it may be chosen as the lesser of two evils.

On the differences between comparative statics and dynamic analyses that incorporate the future, see Eugene Silberberg, The Structure of Economics, 2d ed. New York: McGraw-Hill, , chaps. That is, war is rational if it has either a higher net positive value or a lower net negative value. See Charles L.

Economic Interdependence Globalization And The Causes Of War Politics Essay

By connecting the trading environment to fears about relative decline, I draw upon the notion that declining states launch preventive wars to uphold their waning security. Elsewhere, I build a solely power-driven theory showing why states faced with deep and inevitable decline initiate major wars.

When a state trades, it specializes in and exports goods in which it enjoys a comparative advantage, while forgoing the production of other goods, which it then imports. This process of specialization, however, entails potentially large costs of adjustment if trade is subsequently cut off. This is especially so in the modern world if the state becomes dependent on foreign oil and certain raw materials.

If the specialization that trade entails, however, would mean the This is consistent with standard trade theory. See Richard E. Caves and Ronald W. Jones, World Tradeand Payments, 4th ed. Boston: Little Brown, , chaps. I thank Andrew Moravcsik for discussions on the potential benefits of trade. Rather, it must determine the overall expected value of trade and therefore the value of continued peace into the foreseeable future.

The benefits of trade and the costs of severed trade on their own say nothing about this expected value.

IR 1.12 Economic Interdependence theory in International Relations -- UPSC PREPARATION

Dynamic expectations of future trade must be brought in. If the state has positive expectations that the other will maintain free and open trade over the long term, then the expected value of trade will be close to the value of the benefits of trade. On the other hand, if the state, after having specialized, comes to expect that trade will be severed by the trading partner, then the expected value of trade may be highly negative, that is, close to the value of the costs of severed trade.

For any given expected value of war, we can predict that the lower the expectations of future trade, the lower the If B is able not only to sever bilateral trade, but also to blockade A to prevent third-party trading, then A effectively has no alternatives and is therefore dependent. This was the situation for Japan vis-a-vis the United States before regarding oil imports.

InternationalSecurity 20 expected value of trade, and therefore the more likely it is that war will be chosen. It is important to note that the expected value of trade will not be based on the level of trade at a particular moment in time, but upon the stream of expected trade levels into the future. It really does not matter that trade is high today: if state A knows that B will cut all trade tomorrow and shows no signs of being willing to restore it later, the expected value of trade would be negative.

Similarly, it does not matter if there is little or no trade at present: if state A is confident that B is committed to freer trade in the future, the expected value of trade would be positive. The fact that the expected value of trade can be negative even if present trade is high, due to low expectations for future trade, goes a long way towards resolving such manifest anomalies for liberal theory as German aggression in World War I.

Despite high levels of trade up to , German leaders had good reason to believe that the other great powers would undermine this trade into the future; hence, a war to secure control over raw materials and markets was required for the long-term security of the German nation. Since the expected value of trade can be positive even though present trade is low, due to high expectations for future trade, we can also understand such phenomena as the periods of detente in U.

While East-West trade was still relatively low during these times, the Soviet need for Western technology, combined with a growing belief that large increases in trade with the West would be forthcoming, gave the Soviets a high enough expected value of trade to convince them to be more accommodating in superpower relations.

The expected value of war, as a realist would emphasize, cannot be ascertained without considering the relative power balance. As one state moves from a position of relative inferiority in economic and military power to relative superiority, the expected value of war will move from negative to positive or even highly positive.

This proposition follows directly from the insights of deterrence theory: the larger the state in relative size, the higher the probability of winning a victory, while the lower the costs of fighting the war.


The U. See Alexander L. The Spartan leadership took Sparta into war against Athens in BC, for example, under no illusions that war would be a profitable venture. Where we would anticipate a low or negative expected value to the option of war, the expectations-of-future-trade variable should have a determinant effect on the likelihood of war.

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  5. If state A has positive expectations for future trade with B, and A and B are roughly equal in relative power, then state A will assign a high expected value to continued peaceful trade, will compare this to the low or negative expected value for invasion, and will choose peace as the rational strategy. But if state A is dependent and has negative expectations for future trade with B, then the expected value of trade will be very low or negative.

    If the expected value for trade is lower than the expected value for invasion, war becomes the rational choice, and this is so even when the expected value of invasion is itself negative: war becomes the lesser of two evils.

    Economic Interdependence and International Conflict

    Thucydides, The Peloponnesian War,trans. Rex Warner Harmondsworth: Penguin, , Book 1, lines When one state is very large and the other very small, it is harder to sort out the effects of interdependence from the effects of relative power, at least in actual cases of war. The expected value of war for the superior state is likely to be quite positive anyway, and thus will tend to overshadow the expected value of trade even when the state has positive expectations of future trade. Sign in Subscribe.

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    Subscribe Login Sign up. Foreign Policy. In This Review. Princeton University Press, , pp. More: Economics Security. As such, international conflict will decrease. He argued that the benefit derived from economic activities would have a spillover effect on the political activities. Domke argued that those involved in commerce will influence the decision makers of the state to seek peace and improves relationship with other nations.

    Moreover, liberals argued that the cost of fighting war is more costly than benefits. Within the liberal framework four variant arguments provides the explanation of liberalism. Robert Keohane identified three variants of liberalism applicable to the study of international relations , P. Arguing that all three are distinct but consistent with one another, he argued liberal interpretation of world politics rely upon each set of arguments. This version of liberalism argued that republics are more peaceful. These nations are based on freedom of individuals, the rule of law and the equality of citizens.

    They are less likely to go war as the consent of the citizens is required to decide for the actions. This version of economic liberalism are found in the writing of Adam Smith, Montesquieu etc. Another argument of commercial liberalism is that free trade and interdependence brings nations together and made recognized of the fact that their wealth and prosperity depended on one others.

    Commercial liberalism claim for open economy without or with. This version emphasized the rules governing patterns of exchange among countries for peace. Keohane argued that there is variation in results in promoting cooperation by international institutions due to human ingenuity and commitment.

    Human being has to construct cooperation based on recognition that independent governments hold both power resources and more legitimacy than any international organization. International organizations need to be created and in turn gradually, these institutions alter the interest motive for widening the cooperation. Institutions provide information, facilitate communication and furnish services that cannot be provided by the government.

    According to Keohane, trade does not necessarily leads to peace but rather provides incentives for peaceful than aggressive expansion. It depends on which rules and institutions and much more how institutions impacts on the commerce, how far institutions promote and guarantee openness. Furthermore, it also depends on the interest and power of the political structure involved. International institutions also help in minimizing the mistrust among the nations.