SOURCES OF EXTERNAL DEPENDENCE IN THE ORGANIZATION FOR ECONOMIC COOPERATION AND DEVELOPMENT

The purpose of the study was to examine the reasons for the continued participation of industrial nations in the international political economy even though participation resulted in negative effects on the domestic political economy. The research hypothesis posited that domestic political and economic factors were substantially more important than international or systemic factors in explaining the level of trade dependence of industrial economies. To test the hypothesis, 13 variables--9 domestic and 5 systemic--were tested for their relationship to external trade dependence. In the first stage of the analysis the independent variables were tested for their correlation with the indexes for external dependence. At the second stage those independent variables that correlated with the dependent variable(s) were regressed on external dependence to evaluate their cumulative impact on the dependent variable. The domestic variables that contributed to the explanation of external dependence were the level of equity and government response to demands for social well-being. The systemic factors that contributed to explaining external dependence of the industrialized nations were international transportation and the impact of the less developed countries on the international economic system. These findings suggest that governments in democratic societies are limited in their policy choices to contain external dependence and its impact on domestic institutions. The contribution of international transportation to external dependence implies that governments cannot influence technological impacts at the international level. The impact of the less developed countries on external dependence is less clear because the exports of these countries actually declined during the time period in the analysis. The relationship of domestic variables to external dependence suggests that the democratization of the domestic political economy may enhance external dependence. Progressive government policies that seek to enhance equity and temper social risk may actually increase external dependence. However because such policies are popular with the electorate, limiting their scope to reduce external dependence is unlikely in democratic societies.