WHAT IS ECONOMIC INTERDEPENDENCE? - CULTURE VOCABULARY - 2025

The economic interdependence refers to the situation where some countries generated a relationship of mutual dependence for the production of those goods and services their people need. For example, China and the United States are economically interdependent, since both need each other's products to develop.

This situation is a consequence of the division of labor. This means that as the work is divided and specialized, the relationship with other countries becomes more necessary in order to satisfy the needs.

On the one hand, countries focused on industry require raw materials for the manufacture of goods. That is why in those cases in which the country itself does not produce the necessary resources, it is essential to buy them from other nations.

On the other hand, countries focused on the exploitation of raw materials must buy from other nations all those manufactured products that they cannot manufacture.

This is how interdependence relationships are generated where some countries depend on others: industrialized countries depend on the exploiters of raw materials and vice versa.

However, these relationships of interdependence are not necessarily balanced. On the contrary, in most cases, raw materials are sold at a very low price and manufactures at a much higher price.

This leads to economic interdependence representing unequal benefits. That is why, in general, countries that produce raw materials have less economic development and greater inequality than countries that are dedicated to the export of goods and services.

Causes of economic interdependence

Economic interdependence is due to the development of the industry, as well as to economic and population growth.

Before the development of industrial society, each community was self-sufficient. This means that all people had their basic needs covered only with the local production of primary and secondary goods.

However, as a country's industry grows and its population increases, new products become required. This need leads them to generate relationships of interdependence with other countries.

In some nations the economy is based on the exploitation of raw materials. Therefore, they develop relationships of interdependence with those countries that buy these resources and later become their suppliers of manufactured products.

In other countries the economy is based on industry. Therefore, they develop relationships of interdependence with countries that exploit raw materials and with those that buy manufactured products.

For example, the growth of the automotive industry in the United States had implications in some Southeast Asian countries that became rubber suppliers, thus generating a dependency relationship.

As the development of the industry increases, the relationships are diversifying or strengthening. In this process, industrialized countries look for new suppliers and develop important economic relationships with countries that produce raw materials.

On the other hand, as technological development has advanced, industrialized countries have become service providers.

Therefore, the production of manufactured goods has been transferred to other countries, also transforming the relationships of interdependence.

Economic interdependence and globalization

The development of globalization is closely related to economic interdependence.

In current economic dynamics, the manufacture of a single product can cross different countries. Raw materials are produced in one, research in another, assembly in another, and commercialization in many others.

However, what determines economic interdependence is not only the possibility of exchange. The globalized consumption dynamics have also been determining factors, which have led all the countries of the world to have new and similar needs.

Information technologies are a great example of this: a new global consumption habit that mobilizes economic dynamics across the planet.

A phenomenon in which all countries become consumers not only of products, but also of services that are produced exclusively by a small number of business groups.

Thousands of people buy services over the internet every day. Services that do not pay customs taxes, services that make money flow from one side of the borders to the other without control or intervention by national authorities.

positive effects

The effects of economic interdependence are different for each country according to what it produces and what it consumes.

However, in general, it can be said that the more advanced countries perceive greater benefits from economic interdependence with less developed countries.

This is because less developed countries tend to offer their products at a lower cost, which results in lower profits and consequently, less income for workers and less economic development for the country.

However, it can be affirmed that any relationship of interdependence contributes to the economic development of any country. This works for both developed and developing countries.

Even in less developed countries, the existence of a stable buyer of a given product guarantees a certain economic stability.

Negative effects

Economic interdependence also implies negative effects for all countries that participate in the relationship.

In the first place, the sovereignty of countries is endangered as the purchasing companies acquire greater political power. This means that national autonomy is reduced in order to satisfy the wishes of the economic groups that have a stake in the country's economy.

On the other hand, situations also arise in which problems that affect local production begin to be considered as global security problems.

This leads to the creation of supranational bodies and treaties interested in standardizing the social and commercial norms of the countries in order to guarantee the economic stability of the countries that have interdependence.

In this sense, we must take into account the economic and social conditions of all countries are different.

Therefore, these international treaties do not occur in conditions of equity and end up causing greater dependence on the part of the less developed countries and greater benefits for the industrialized countries.

References

1. Corral, S. (SF). Globalization and world interdependence. Recovered from: eumed.net
2. Crescenzi, M. (SF). Economic Interdependence and Conflict in World Politics. Recovered from: unc.edu
3. Morales, D. (2013). National and International Political Situation. Recovered from: coyunturapoliticamx.wordpress.com
4. Social studies for kids. (SF). Basic Economics: Interdependence. Recovered from: socialstudiesforkids.com
5. Study.com. (SF). Economic Interdependence: Definition, Causes & Effects. Recovered from: study.com.