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Survival
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Power and interdependence

Robert O. Keohane & Joseph S. Nye Jr
a a a

The Center for International Affairs, Harvard University,

Available online: 03 Mar 2008

To cite this article: Robert O. Keohane & Joseph S. Nye Jr (1973): Power and interdependence, Survival, 15:4, 158-165 To link to this article: http://dx.doi.org/10.1080/00396337308441409

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Power and Interdependence

R O B E R T O. K E O H A N E A N D J O S E P H S. NYE, J R We are today witnessing the increasing politicization of international economic affairs. To some extent, this seems to be the result of secular trends towards more governmental intervention in the economy, with important implications for international as well as domestic politics. It is also, however, a product of other long-term changes that have affected the political relationships between states, the effective means at their disposal and other aspects of their politicoeconomic milieu. Trans-national economic relations, for instance, as symbolized by the multinational enterprise acting as investor, trader, employer in several countries and monetary speculator, create important and frequently novel problems for governments. This politicization of economic issues is reflected in the agendas of summit meetings among leaders in the United States, Europe, and Japan; in the increased prominence of the US Treasury over recent years; in the attention paid to economic issues by newspapers and journals dealing with foreign affairs; and in the difficulties in reaching agreement on monetary, trade or investment issues among the parties involved. Where once it was possible for political scientists to use the term 'high politics' to refer simultaneously to security policy and to important matters dealt with at high levels, the increasing attention to economic questions and the close relationships between these issues and traditional political questions make the term confusing at best, and seriously misleading at worst. 1 De Gaulle's delightfully anachronistic view that Tintendance suivra' should be remembered in connection with the fact that it was partly the baggage train that ultimately did him in. Force and Economic Power For the past three decades political scientists have generally emphasized the role of force, particularly organized military force, in international politics. Force dominates other means of power in the sense that, if there are no constraints on one's choice of instruments (a hypothetical situation only approximated in the two world wars of the century), then the state or states with superior military force will prevail. Thus American economic sanctions against Japan in 1940-41 could be countered by Japanese military a c t i o n - a military challenge the United States had to answer in military terms. If the security dilemma for all states were extremely acute, military force and its supporting components (which, of course, include a large economic element) would clearly be the dominant source of power. Survival is the primary goal of all states, and in the most adverse situations force is ultimately necessary to guarantee survival; hence military force is always a component of national power. But insofar as the perceived margin of safety for states widens, other goals become important; 2 and there is no guarantee that military force will be an appropriate tool for achieving these goals. Furthermore, as the nature of military force and the consequences of its use change, it has become less efficacious even for achieving the goals it formerly served. The disproportionate destructiveness of nuclear weapons limits the utility of this type of force for achieving positive goals, as opposed to providing deterrence. In addition, prevailing norms and the costliness of ruling alien populations that have become socially mobilized for resistance increase the cost of using conventional force.3 As these changes in
1

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'Economic issues are high politics for the governments

Robert O. Keohane and Professor Joseph S. Nye, Jr are with the Center for International Affairs, Harvard University. The article is an extract from a longer paper prepared for a book edited by C. Fred Bergsten entitled The Future of the International Economic Order: An Agenda for Research (Lexington, Mass: Lexington Books, D.C. Heath and Company, forthcoming). Reprinted by permission.

involved.' (Testimony of Francis Bator, House of Representatives, Committee on Foreign Affairs, Sub-Committee on Foreign Economic Policy, 25 July 1972.) 2 Arnold Wolfers, Discord and Collaboration: Essays on International Politics (Baltimore: Johns Hopkins, 1962). 3 Stanley Hoffmann, Gulliver's Troubles, or the Setting of American Foreign Policy (New York: McGraw-Hill, 1968), ch. 2.

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goals and the nature of force take place, the roles of other instruments of power and influence tend to increase. Force is of negligible importance in relationships between the non-nuclear developed countries-for instance, between Germany and Japan, Italy and Holland, or New Zealand and the United Kingdom. Yet such states are often very interested in influencing each other's policies, and, if force is not a useful tool of policy, other instruments are sought. Patterns of world politics are therefore emerging that are quite different from those typical of the first twenty-five years after World War II. Intense relationships of mutual influence are developing in which force is ruled out as an instrument of policy - and these are not limited to common markets or members of a politico-military bloc. For other actors in world politics, on the other hand, non-nuclear force remains applicable for achieving some foreign policy aims. Small and medium-sized powers may employ force against enemies, as one can observe on the Indian sub-continent and in the Middle East, and certain transnational groups, such as the Palestinian movements, also rely on force to achieve their goals. The super-powers, of course, have also used force to control situations about which their leaders were concerned. In some cases, such as the American intervention in the Dominican Republic in 1965 and the Soviet intervention in Czechoslovakia three years later, the use of force was effective, at least in the short run; in other, like the American intervention in IndoChina, the policy of force led to disastrous results. Each super-power has also used the threat of force to deter attacks by the other super-power on itself or its allies. Yet, even for the super-powers, the use or threat of force has been a declining asset in recent years. As the efficacy of force has declined, the threats to state autonomy have also shifted, from the security area - in which the threat is defined largely in terms of territorial integrity - to the economic area. Governments' policies increasingly impinge on one another, as sensitivities increase as a result of the collapse of the natural barriers that used to insulate economies from one another. 4 Thus the purpose of exercising power

may be not so much to prevent another state taking military action as to prevent it shifting the costs of its own domestic policy actions on to one's own state-for instance, through trade restrictions, maintenance of an under-valued exchange rate, or non-tariff barriers of one kind or another. Economic sources of power, which are easier to apply gradually and increasingly than threats of force and which are less offensive to national prestige and dignity, are often the handiest means of dealing with other states' policies that impose significant costs on one's own state.

Linkage and Interdependence Yet we must go beyond the relative increase in efficacy of economic, as opposed to military, sources of power to look at the interaction between the two - for it is here that some of the most important foreign policy tensions of the contemporary world threaten to arise. Since each super-power protects its allies against the threat of attack or political pressure from the other super-power, the importance of its nuclear weapons for deterrence is a valuable asset which can be used by alliance leaders in their own bargaining with their alliance partners on other issues. Insofar as the leaders of one state see their country as less dependent than the other partners in a military alliance, it may be tempted to use its lesser dependence in the military field to gain economic advantages. The United States has behaved in this way on the issue of troop levels in Europe, sometimes through calculated executive actions, sometimes through Congressional initiatives contrary to executive preference, and the tacit linking of the reversion of Okinawa with a textile agreement is a sign of similar activity in American relations with Japan, now that the US feels less dependent upon Japanese bases for the defence of South-East Asia. Such inter-issue 'linkages', however, can carry heavy costs in that they create uncertainty or resentment that lead allies to reorient their fundamental policies. The linking of economic and security issues is both powerful and dangerous, since it represents a linking of economic processes with the political structure that underlies them. It may be true in the short run that the militarily dependent state has no 4 See Richard Cooper, 'Economic Interdependence and Foreign Policy in the Seventies,' in World Politics, alternatives, but in the longer term repeated structural linkages may create an incentive for January 1972. 159

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militarily dependent but potentially powerful states to change the structure, particularly if a sense of national dignity is an important motivation (as is the case with Japan). The basic point here is that linkage strategies generate counter-strategies, the focus of which may be military, as suggested above, or economic. As economic interdependence grows, so do political levers. For instance, the growth of American direct investment abroad increases the range of strategies open to other states, since they may, implicitly or explicitly, be able effectively to threaten, to nationalize Americanowned assets. As the relationship between Russia and France before World War I illustrates, debts may give influence to debtors as well as to creditors.5 In some situations, though, American investments could serve to increase US government influence, particularly if a conscious decision were made to manipulate them for political purposes. This would further broaden the scope of political-economic linkages, and their potential danger. Insofar as there is less than perfect congruity between the relative economic and political power of states involved in close and complex relationships, structural linkages between security and economic areas are probably inevitable. In a period of transition, such as the present, they are likely to become particularly pronounced. The extent to which they are employed infrequently and judiciously, only on important issues and in the service of reasonable demands, will determine the extent to which they are useful rather than destructive as tools of diplomacy. One of the implications of the preceding analysis is that 'power' cannot be considered a homogeneous, highly interchangeable commodity on the analogy of money in an integrated economic system. To a considerable extent, although not entirely, sources of power are specific to issue areas, are thus diverse, and so must be charted area by area. A parsimonious way of conceptualizing these diverse sources of power is by regarding power as deriving from asymmetrical interdependence between states in such an area of interaction. Where states are asymmetrically interdependent, the less dependent may be able to manipulate the relationship to achieve its
5 See Herbert Feis, Europe: The World's Banker (New Haven: Yale University Press, 1930). 160

goals, not only in the area of the issue but in the form of side-payments in other issue areas as well. In the contemporary world many relationships of interdependence between developed states (and between developed and some less developed states, like the oil-producing countries) tend to conflict with, rather than complement each other. Thus in the 1960s American power, derived from European dependence on American military protection, was to some extent counterbalanced by European power derived from American balance of payments difficulties. To state the issue in this way, however, is too simple, since two conceptually distinct, but related, definitions of interdependence must be clarified. The first defines interdependence as mutual sensitivity: i.e., the extent to which change in one state affects change in others. This definition is appropriate at the process level, since it assumes the existence of a structure of relations within which actors are sensitive to others to a variety of degrees. Thus, given the structure of international monetary relations existing until 15 August 1971 and the assumptions that this structure carried with it, the United States was dependent on European decisions to continue to hold dollars without demanding that they be exchanged into gold. The other definition of interdependence rests on relative vulnerability: i.e., on the relative cost of alternatives for the parties, the less dependent state is the one which possesses relatively lower costs from the termination or drastic alteration of the relationship. This definition is appropriate at the structural level, and points to the role of great powers as the 'definers of the ceteris paribus clause'. In game theory terms they have the ability to restructure the payoff matrix.6 American dependence in the monetary issue area was redressed in August 1971 when the United States changed the rules of the game, thus negating the ceteris paribus clause. Thus before August 1971 the United States, as a deficit country, was more dependent at the process level than many European states, but it remained less dependent at the structural level, since, unlike other states in the system, it could act
6 An exception was de Gaulle's use of monetary policy as a diplomatic instrument to weaken US influence. See Edward Kolodziej, 'French Monetary Policy in the Sixties: Background Notes to the Current Monetary Crisis,' in World Affairs, Summer 1972.

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unilaterally to change the nature of the system itself, rather than merely some of the relationships within it. Patterns of sensitivity interdependence are not necessarily congruent with patterns of vulnerability interdependence. A New Balance of Power This discussion of the sources of power in the current international system may help us to evaluate recent characterizations of the current era as one of a 'new balance of power' among the major actors. It is evident from traditional political analysis that this terminology is at best loose, since bipolarity continues to exist in the nuclear deterrence aspects of the security issuearea. Only the United States and the Soviet Union have invulnerable deterrent forces with credible second strike capabilities, and, given the necessary political cohesion and level of expenditure to develop such a force, this will probably continue to be true for at least another decade. The United States and Soviet Union together account for nearly half of world GNP and some 70 per cent of world military expenditure.7 Thus in military terms, as Brzezinski has recently pointed out, 'we have something which might be called a z\ powers world, although certainly not a stable balance'.8 Alternatively, the world can be seen in terms of two triangles - a military triangle involving the United States, Russia, and China; and an economic triangle involving the United States, Europe, and Japan. Two triangles do not form a pentagon, and this imagery is less misleading than images of a fivepower balance. Yet even these triangles do not properly encompass political reality. Power at the nonstrategic level is much more dispersed than at the strategic level. Given existing alliance arrangements, political influence is more widely dispersed than economic power resources. As a coalition-leading state, the United States developed a strategy and an accompanying ideology of anti-Communism in the years after 1947 that made her susceptible to the appeals and blandishments of its allies.9 In our terms as deveGeorge Modelski, Principles of World Politics (New York: Free Press, 1972), p. 134. 8 Zbigniew Brzezinski, 'The Balance of Power Delusion,' in Foreign Policy, Summer 1972. 9 See Robert O. Keohane, 'The Big Influence of Small Allies,' in Foreign Policy, Spring 1971.
7

loped above, the development of alliance systems created networks of interdependence that were not wholly asymmetrical: the United States depended on her small allies for the attainment of her purpose as well as vice versa. Fragmentation of policy, and the consequent squandering of potential power resources, may result from the size and diffuseness of attention of a great power: small states can often focus their attention on the United States government more effectively than the latter, with its many concerns and diffuse organizational structure, can do in return. Finally, great powers need to be concerned more than small states about the effects of their actions on the system as a whole. Insofar as this is true, it serves as a constraint on the exercise of power. United States dealings with Canada, for instance, have generally reflected a desire not to destabilize the structure of relationships that exists by pushing an advantage in a specific issue-area too hard.10 These arguments suggest that if there is a new balance of power it does not imply, as did classical balance of power politics, subordination of small powers to great ones in a rather strict hierarchy. But if we focus on economic relations, particularly in the United States-Europe-Japan 'triangle', the balance of power analogy seems even less applicable. The recent relative increase in the importance of economic power - far from heralding a return to balance of power politics actually indicates a rather different phenomenon. On economic issues, while governments are to some extent motivated by status and power considerations, they are also strongly influenced by domestic demands for resources, which focus primarily on absolute gains as reflected in national income and employment, rather than on gains relative to other countries. Governments may compete economically and take pleasure in doing better than their counterparts, and to some extent economic performance abroad affects domestic economic demands. But by and large, the public and electoral pressures are for prosperity as measured by national criteria. These criteria vary from country to country, as is clear form the different tolerances of the German and English publics for inflation, or the United
10 See K. J. Holsti, 'Canada and the United States,' in Steven Spiegel and Kenneth N. Waltz (eds.), Conflict in World Politics (Cambridge, Mass.: Winthrop, 1971).

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States and most major European countries for unemployment. Where this is the case, it is even more true that 'doing better than the past' is more important to governments than 'doing better than other countries' in economic activities. Relative gains in economic power come largely as by-products of successful national performance undertaken to satisfy domestic requirements. This is quite the opposite of the traditional military-political model of the balance of power, in which absolute gains in military power are sought not at all for themselves, but entirely for the relative advantage they may confer vis-a-vis one's potential opponents. The economic game is therefore much farther than the strategic game from a 'zero-sum' model in which gains and losses cancel each other out. Thus a chief prediction of classical balance of power theory that states will act to protect themselves by limiting the capabilities of strong states or coalitions11 - will not necessarily hold where this objective conflicts with the goal of a substantial gain in wealth or employment. The political pressures domestically will certainly push governments towards a willingness to sacrifice relative power, if necessary, for the sake of real economic gains that can be translated into jobs, incomes and votes. Thus, although Europe and Japan may not be unhappy to see American economic power reduced, they are hardly likely to take steps to achieve that goal if that would lead to significant declines in their own prosperity. Conversely, I. F. Stone's characterization of the American policy of rapprochement with 'China as a counterweight to Japan, and . . . Russia as a counterweight to Europe' as part of 'the old balance of power game', is mistaken - because it fails to perceive the positive-sum aspects of the rise in European and Japanese economic strength.12 The metaphor of a balance-of-power among strong economic powers is therefore potentially quite misleading if it implies anything more than the obvious: that the distribution of economic power is no longer hegemonial, with the United States in a dominant position, and that, in the absence
11 Morton Kaplan, System and Process in International Politics (New York: Wiley, 1957), p. 23. 12 I. F. Stone, 'The Flowering of Henry Kissinger,' in New York Review of Books, 2 November 1972, p. 26.

of other costs, states will act to improve their relative power positions. New Actors and Issues These shifts in the relative importance of military and economic power are paralleled by an increasing complexity of actors and issues in world politics. From the perspective of this essay, four elements stand out: the increasing diversity of types of actors, particularly non-state actors, in world politics; the broadened agenda of foreign policy as a result of increased sensitivity of societies to one another in areas formerly considered purely domestic; the increasing difficulties faced by states in maintaining policy coherence; and the increasing possibilities for linkages between various types of issues. If we simply count the number of states with competitive political systems, as opposed to authoritarian or mass mobilization systems, we find a relative decline in the former over the past two decades. It could therefore be argued that there is a greater diversity of types of states in the contemporary system than in the past. 13 Yet there is a remarkable degree of political homogeneity among the major trading and investing nations, all of them having competitive political systems (with the single exception of the Soviet Union, if it is included as a major trading state). Yet homogeneity among states could be misleading. Recent years have also seen the rise of new actors in world politics, both trans-national and intergovernmental, with a bewildering variety of characteristics. Multi-national enterprises and trans-national guerrilla movements both complicate the patterns of interaction among states and pose problems for foreign policy, whether these have to do with complex effects of direct foreign investment or Olympic hostages in Munich. Intergovernmental organizations, like the EEC Commission, or the secretariats of organizations, such as the IMF, the World Bank, GATT, OECD, or UNCTAD, have developed a certain degree of autonomy, however precarious, and an ability to exercise leadership on important politico-economic issues. Outcomes in an issue-area such as international
13 Robert Cox and Harold Jacobson (eds.), The Anatomy of Influence (New Haven: Yale University Press, 1973), Appendix C.

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monetary policy, for instance, cannot be understood solely as the result of state action and interaction: the behaviour of multi-national enterprises and multi-national banks, the activities of international civil servants and the effects on national policies of institutionalized forums for discussion must also be taken into account. These actors are not likely to surpass the major states in importance during the next decade, although some of them already have greater resources at their disposal, and greater impact on outcomes in key issue-areas, than a number of members of the United Nations. Yet the new actors will coexist with states and their importance will be felt by states. Though they lack the legitimacy and the ultimate recourse to the territorial police power or international exercise of force that remain significant resources of states, and though states will generally continue to prevail over the new actors in cases of open clashes, the costs to governments of such victories can be expected to rise, and the influence of the new actors will be felt as an important constraint on state policies. One of the important effects of the new actors in world politics is their role as transmission belts that transmit policy sensitivities across national boundaries. As the decision domains of corporations, banks and (to a lesser extent) trade unions transcend national boundaries, a wide range of domestic policies come to impinge upon each other, and these effects are reinforced by trans-national communications, which occur even in the absence of organizations. This growing policy sensitivity means that foreign economic policies touch a wider range of domestic economic activity than has been true in the past twenty-five years, thus blurring the lines between domestic and foreign policy and increasing the number of issues relevant to foreign policy. As the agenda broadens, policy-makers are faced with an increase in the number of their objectives - and frequently in the contradictions between the achievement of one objective and the attainment of others. A natural response is to increase the number of bureaucratic instruments to match the increased number of objectives; however, bureaucracy is an instrument that involves high costs of co-ordination, particularly in terms of the scarce resources of top policy-makers' attention. When there are power-

ful simplifying myths that help top policymakers maintain the hierarchy of collective over particular interests, the bureaucratic instrument is part of the solution. When such myths are absent and the sense of overriding purpose breaks down, normal compartmentalized bureaucratic behaviour often adds to the problem. Moreover, bureaucratic sub-units may become competitors for influence rather than instrument of a co-ordinated strategy. Policy Co-ordination Faced with a broader policy agenda and a more varied set of actors, major Western powers have found great difficulty in maintaining a capacity for sustained, consistent action on a range of issues. This is particularly true for the United States, but there are indications of similar, though generally not so acute, difficulties for governments of other large states. The difficulties experienced in maintaining coherence can partly be traced to the increasing difficulty of maintaining the traditional hierarchy of goals under pressure, firstly, from changes in the issues on the agenda and, secondly, from improvements in communications and transportation technology that permit greater contact between governments at the level of bureaucratic sub-units rather than at the top of the pyramid. When a state is treated as a unit it has been common to admit the existence of various domestic interests but to assume their ultimate subordination in a hierarchy of 'national interests' with national security in the paramount position. When security does not appear to be threatened, but other objectives are in question, it becomes harder for foreign policy-makers to maintain the predominance of security goals - as witness, for instance, the changing pattern of politics on trade issues in the United States from the Kennedy Round to the August 1971 surcharge.14 With the disappearance of an overriding security threat the ambiguous but powerful symbol of national security declines.15 The symbol once tarnished, if not completely obliterated, various interests can compete to control various aspects of foreign policy, and the hierarchy is
14

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Harold

Malmgren, International

Economic

Peace-

keeping in Phase II (New York: Quadrangle Books, for the Atlantic Council of the United States, 1972). 15 Arnold Wolfers, op. cit.

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likely to break down; economic goals are, after all, to a considerable extent capable of being disaggregated and appropriated by particular individuals. By and large, force is applied to aggregate units, but asymmetrical interdependences in economic areas are experienced quite differently by different social units. Thus, in the absence of serious and immediate concern over security, this differential experience of the impact of interdependence will lead trade unionists in a declining industry or marginal farmers in the EEC to use what political power they have to challenge the assumed 'normal' hierarchy of national goals. This challenge from within may be coupled with a challenge from the outside. Diminished costs of travel and communication provide greater opportunities for trans-national activities and the development of interests and perceptions of interest that transcend the boundaries of government or nation-state. Trans-national actors such as oil companies and automobile firms may lobby in a variety of capitals, attempting to build trans-national coalitions in defence of their interests; secretariats of international organizations may attempt similar strategies for different purposes.16 Government bureaucrats and officials may also come together, realize the extent of their common interests, and develop tacit coalitions for the pursuit of those interestswhether those be in areas of defence, agriculture, or weather forecasting.17 International contacts between officials may create common perceptions and approaches within particular functional bureaucracies in different states - though the perspective of one set of bureaus may conflict with that of another, and at the national level this can lead to inter-bureaucratic conflict and policy incoherence. Linkage Strategies One of the major effects of the particular structure of economic activities in the twenty-five years after World War II was the relative isolation of day-to-day international economic activity from other foreign policy concerns. Cooper characterizes this as a 'two-track' or

16 Robert Cox, 'The Executive Head,' in International Organization, Spring 1969. 18 17 Richard Cooper, 'Trade Policy is Foreign Policy,' in For examples, see Robert O. Keohane and Joseph S. Nye, Jr (eds), Transnational Relations and World Politics Foreign Policy, Winter 1972-73. 19 Malmgren, op. cit. (Cambridge, Mass.: Harvard University Press, 1972).

even a 'multi-track' system (since commercial policy was often separated from financial policy), and argues that deliberate restriction of the agenda of bargaining among countries was helpful in achieving co-operative and mutually beneficial relations in the economic field.18 In one of the apparent paradoxes that abound in social life, this separation seems to have been largely the result of the hierarchy of goals discussed above: economic issues were kept relatively low on the policy totem pole and in the bureaucracy, and the separation of 'high' from 'low' politics was thus relatively easy to achieve.19 The current transition period in world politicoeconomic affairs has created a fluidity and complexity (as well as a sense of frustration) that are conducive to linkage strategies, particularly by the United States. Thus, when the attention of a top American executive official is attracted to a set of problems, or when Congressional leaders focus on them, linkage strategies come quickly to mind. The American linkage of monetary matters with a defence presence in Europe, or American demands in 1971 for Japanese measures to improve the American balance of payments, are cases in point. Not only will states be tempted to make such linkages, but so also will relatively strong national subunits that are in a relatively poor position in a particular relationship of interdependence - for instance, the US Department of Agriculture vis-a-vis the EEC. On a general level, our argument is that linkages among issues should be explained largely in terms of incongruities in the systems involved: that is, insofar as outcomes on an issue taken in isolation are different from expected outcomes if it is linked to another question, linkages should be expected. Two secular trends described in this paper promote this: increasing numbers of issues (which makes more linkages possible), and the existence of a variety of more or less asymmetrical relations of interdependence among states. On the other hand, insofar as large states are characterized by bureaucratic fragmentation and policy incoherence, they may have difficulty taking advantage of a situation's inherent

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potential for linkage; and insofar as various sources of power cannot be used effectively on some kinds of issues, the possibilities for issuelinkage are limited. On the whole, it appears to us that the net effect of the secular trends favours increasing linkages. It is more difficult to be sure of this, however, than to be confident that the complexity and flux of the present will mean that for the next decade strategies of issue-linkage will play an extremely important role in world politics, in contrast to the situation up to 1970. The Leadership Lag The maintenance of structure requires leadership, and leadership involves the willingness of a state or states to forego short-term gains in day-to-day allocative bargaining when this is necessary to preserve the structure. These investments in structure may be supplied (a) when a state is preponderant in an issue and sees itself as a major consumer of the benefits produced by the structure over the long run, or (b) when a large state with broad objectives sees itself as compensated for sacrifices in one issue-area with benefits over a broad range of issues.20 The United States filled this leadership role in the postwar period, but more recently its leadership has begun to ebb. To some extent this is a function of domestic politics, partly stimulated by high rates of unemployment and by the introspective attitudes engendered by the Vietnam War. But it is also a result of such international political trends as the relative decline in American power and the increased
20 To some extent, the problems of leadership are problems of any collective good, though the case does not entirely meet the assumptions of the theory.

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power of Europe and Japan, and the weakening of the hierarchy of goals. Kindleberger has underlined the destabilizing features of a period of changing leadership by drawing the analogy of the transition from British to American leadership in trade and monetary affairs earlier in the century. The US assumed de facto preponderance after 1918, but was unwilling to pay the costs of leadership until the 1930s and 1940s21; similarly, the EEC holds a greater share of world trade today than the United States, yet it may be some time before it is internally capable of taking the leadership. Such periods of leadership lag create politicization because problems of day-to-day bargaining are not insulated from questions of structural change; no actor is willing to pay the costs necessary to satisfy specific demands in order to maintain confidence in the legitimacy of the system as a whole. Even if leadership is forthcoming its thrust, at such periods, is likely to be directed towards proposals for reform of the structure itself. Such structural questions cannot be isolated from larger security and foreign policy concerns. We are now in a period in which other states still look to the United States for leadership, because of the inchoate state of policy coordination in the European Community and the lack of self-confidence on the part of the Japanese, who have moved to the fore-front as an economic power so recently. This American leadership is currently directed toward changing the present structure of monetary and trade relations. Thus in the next decade, or until structural alterations are completed, international economic activity is bound to claim a high degree of political attention.
Charles Kindleberger, Power and Money (New York: Basic Books, 1970).
21

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