Complex Interdependence; friends or foes?
“In brief, political economy in this study means the reciprocal and dynamic interaction in international relations of the pursuit of wealth and the pursuit of power.”[1]
The
economic and subsequent political rise of China has already begun to alter the
manner in which internal and external political policies are being made within
the U.S.A. and other western nations. Political scientist Robert Keohane was
among the first to coin the term complex interdependence in order to explain the
transforming state of international relations within the increasingly
globalised political economy. The rise of non-state actors such as
corporations, non-governmental organisations and other conglomerates continue to
change the face of the international system in creating a multifaceted environment
in which factors such as trade balances, fiat currencies, and the reduction of
tariffs on trade have become principal to economic and political well being.
With the
demise of the Bretton Woods system in 1971, the US dollar began to replace gold
as the reserve peg and thus the accumulative stockpiling of the greenback
commenced. Today, China lacking any reserve currency alternative and vehemently
attempting to offset the appreciation of the Renminbi, maintains their immense
reserves of the greenback whilst also purchasing U.S. government treasury
bills, ironically (or not) funding their largest export market’s trade deficit
and exponentially growing public and federal debt. The cohesive nature of the
international financial system has created a system in which economic
interdependence has become analogous with political cooperation among states as
seen with China and the United States. If one or the other decides against the
current status quo, changes will affect both sides regardless of who is the
mightier. A cutback in T-bill purchases from China would see the U.S. unable to
fund it’s debt and rates would rise causing a contraction in credit markets and
ultimately, the economy as a whole. This in turn would affect demand for
China’s products and a recession would thus cross international borders. As seen
with the global financial crisis in 2008 and the subsequent Eurozone crisis,
the deepening of economic interdependence has linked states politically under
the global financial umbrella.
Conversely,
the open nature of globalised world markets has created a business environment
in which corporations have been able to become borderless, and in some cases,
wield more economic strength than already wealthy western states. Furthermore, with the growth of such multinational corporations and their accompanying
lobbying power, it becomes clear that with respect to contentions of the
liberal perspective of international relations, the complex nature of the
system outweighs the simplistic assumptions of realist perspectives. Clearly
states place within the international system have had their place eroded at the
expense of international organisations and conglomerates who find themselves
able to influence trade deals and internal politics in which they may
influence. For instance, the auto-pact, a controversial trade agreement signed
by the U.S. and Canada in 1965, while eliminating barriers to trade and
(generally accepted to have) lowered final costs to consumers created a
dichotomy with respect to blue collar jobs which remained in Canada and white
collar corporate jobs such as research and development and management positions
which saw its relocation to the United States. Neoliberal Institutionalism thus provides an accurate scope in which to view
this particular relationship, the influence multinational corporations contained as their bargaining chip, as well as other situations similar to it across the current political
landscape.
Contrary
to realism’s take of the international system, neoliberal institutionalism
highlights the ever increasing importance of economic and subsequent political
integration and the manner in which this complex system is eliminating the
scope of international anarchy. Decades ago, the rise of China would most
likely be perceived as a much greater threat than it is today, and largely
thanks to the fact that USA’s prosperity remains directly linked to that of
China’s and vice versa. I find this approach to be a much more realistic
interpretation of current international relations due to the fact that the
complex system as described by Robert Keohane more accurately predicts the end
goal of states and thus the method in which they find themselves interconnected
within the pursuit of such goals. Economic prosperity and political freedom
remain directly linked and the quest for both involve increased interdependence
within states in order to achieve their competitive advantage, and consequent
growth. It is important however to make the distinction between cooperation and
harmony in this scenario. Robert Keohane accurately discerns this in his
theory, while states will most likely never be fully cooperative in their lust
for power and dominance, shared goals and the potential that economic
integration offers has become paramount to political decisions within states. For
this reason, I believe the international system to not be as unstable as realists
perceive, and thus this stability can be attributed to the ever increasing
levels of economic cooperation, and the growth of international bodies and the
influence they excrete.
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