Economic Aspect of International Relations

Unit 9.1: Economic Interdependence

 LEARNING OUTCOMES

Concept of Economic Inter- Concept of International Concept of Economic

dependence with Causes
Economic Liberalism Power and Its
political Economy
importance in IR
 Why economy is more important ?
• Economics is more important today than it has ever been.

• Foreign policy is increasingly driven by commercial considerations.

• Economic strength gives incomparably more political influence than military strength.
•
• The conquest of markets is now much more important than the conquest of territory.

• Growing economic interdependence is rapidly reducing the chances of war. The informa-
tion revolution is creating a borderless world that gives importance to Economic Interde-
pendence.
 What Is Economic Interdependence?
• Economic interdependence is a system by which many companies are economically depen-
dent
upon each other. On a macroeconomic level, this can involve many countries being economically
dependent upon each other as well. This interdependence is a product of labor specialization.
• Labor specialization means that when specified products are produced in one nation, jobs
become more specialized and economic interdependence is bound to form.
• When specialization happens, companies must become part of a trading network, and they
depend upon each other to supply products that they cannot produce themselves.
• One by-product of economic interdependence is globalization.
• This is where each nation and their economies are dependent on other nations for products
and
goods. For example, the United States today depends on China to provide it with many goods.
 Examples of Economic Interdependence
Economic interdependence is primarily a phenomenon involving a nation with an advance
economy. In a nation that has multiple industries and manufacturers, such as the United States,
not all companies can produce all the inputs that they need to make the products they sell.
Therefore, each industry must rely on other industries to make their components.
For example, the auto industry relies on the steel industry and the computer industry to make
many of the components found in its cars.

Another example is Wal-Mart, the largest chain store in the world. Wal-Mart relies upon
hundreds of other companies and manufacturers for goods to sell in its stores. The suppliers also
rely on Wal-Mart to sell their goods; it's a co-dependent relationship in which each company
relies on the other for goods, services, and sales.
 Causes of Economic Interdependence
• The primary cause for economic interdependence is industrialization and the advancement of
a nation's economy. First, economic interdependence occurs within the nation shortly after
industrialization, as the economy advances. Then, interdependence takes place with other
nations that have industries not found in the home nation. An example would be the creation of
the auto industry in America. As it developed it became reliant upon Southeast Asian nations to
provide rubber to make tires for cars since rubber was not produced in America.

• As a nation advances it also transitions from a manufacturing-based economy to a service-

based economy; therefore, it needs to rely on other nations for manufactured goods. This is
the case with the United States and its reliance on other nations for manufactured goods such
as electronics, clothing, and, in some cases, food.
 References

• The Economic Factor in International Relations: A Brief Introduction by Spyros Economides & Peter Wil-
son, (London: I.B.Tauris Publishers).

• http://bbs.binus.ac.id/ibm/2018/03/the-economic-liberal-perspective/
• https://www.youtube.com/watch?v=cJRQkwMyup8