Since mid-1982 the existence of a “debt crisis” has been almost universally acknowledged; many would argue that the crisis had existed unrecognized for much longer, despite alarms sounded regularly over the preceding decade. The definition of the crisis in the Northern industrial countries was remarkably uniform: the onset of widespread difficulties in servicing the mountain of developing country debt threatened the stability of the international financial system. The nightmare in the North was an episode of onrushing financial collapse in the mold of those described so vividly by Charles Kindleberger—a default by a major debtor country (or domino defaults by debtors large and small), followed by the failure of a major bank or banks, a collapse of confidence in the financial system, and ultimately a sharp contraction of economic activity and international trade. The model was that of a panic; the fear, that the financial system, which had appeared so robust in dealing with successive shocks in the 1970s, might prove less so in the harsher circumstances of the 1980s.

The literature on hegemonic stability commonly assumes that American hegemony has drastically declined in recent years. Is that assumption justified? If one distinguishes between power base and control over outcomes, the American position regarding the latter, in particular, has not declined substantially, and especially not if one considers security goods as well as economic goods. The substantial continuity of outcomes in the post-World War II era stems in large measure from the degree to which the goods provided have been private goods that particularly benefit the United States rather than collective goods, as is widely assumed. These benefits, especially those from “cultural hegemony,” have helped the United States to sustain much control over outcomes.

Hegemonic stability theory has been advanced as an explanation of successful cooperation in the international system. The basis of this “hegemonic cooperation” is the leadership of the hegemonic state; its appeal rests on attractive implications about distribution. However, two distinct strands of the theory (“coercive” and “benevolent”) must be distinguished. These strands have different conceptions of hegemony and the role of hegemonic leaders and so have different implications. Both require us to assume that the underlying international issues are public goods and that the international system does not allow for collective action. The former assumption limits the theory's range of application while the likely failure of the latter means that the theory may be wrong even within this more limited range. Simple formal models demonstrate a conclusion completely at odds with hegemonic stability theory: the decline of a hegemonic power may actually lead to an outcome both collectively superior and distributively preferable than when the hegemon was at the apogee of its power. Thus hegemonic stability is, in fact, only a special case of international cooperation. Understanding cooperation in general requires less restrictive assumptions.

The structure of the Soviet bloc would appear to be ideal for the maximization of Soviet domestic and foreign interests. The actual ledger of Soviet gains and losses from control over Eastern Europe, however, reveals a different picture. Over the postwar period Eastern European contributions to Soviet national security, economic growth, and domestic stability have declined. This decline in the value of empire to the Soviets is a function of three factors. The first is growing regime-society tensions in Eastern Europe as a result of East Europe's dependence on the Soviet Union and the derivative structures of its Stalinist political economies. The second is the Soviet role within the bloc as a political and economic monopoly and monopsony. And the third is the unexpected costs, both to the Soviet Union and to Eastern Europe, that attended the bloc's reunion in the early 1970s with a global capitalist system in crisis.

The International Committee of the Red Cross (ICRC) has greatly expanded its activities on behalf of political prisoners since the Second World War. The ICRC's involvement with this issue has resulted from a series of incremental steps, taken over more than a hundred years, and it raises difficult legal, political, and moral questions. Is the ICRC, by operating in this highly sensitive area, endangering its special relationship with governments–a relationship that is vital for the performance of its more traditional functions in wartime? Should the organization be more open or less Swiss? Is it evading fundamental moral issues? The ICRC's success in achieving its objectives also raises questions as to why states have permitted a nongovernmental organization to intervene in their internal affairs and whether the ICRC provides a model that other nongovernmental organizations concerned with human rights might seek to emulate.

On Friday, 13 August 1982, Finance Minster Jesus Silva Herzog of Mexico made a series of visits to the International Monetary Fund, the Federal Reserve, and the U.S. Treasury. His message to each was the same: Mexico could no longer continue to service its debt. Thus began a dramatic weekend of negotiations that marked the end of the preceding decade's buoyant expansion of developing country debt and the start of a still continuing response to the sudden collapse.

Governments must choose between general policies and individual negotiations to reach agreements with foreign investors. General policy leaves nothing to be negotiated. But once negotiation is selected, governments face difficult choices over how to conduct ne otiations. No single choice of organizational structure or administrative process is optimal for all countries or for all industries. Each organizational choice carries a range of economic and political costs and benefits that are valued differently by the domestic and foreign interests affected by the negotiation's outcome. Interviews with government officials in four Asian countries and corporate executives in four industries, all involved in international business negotiations between 1978 and 1982, demonstrate that different governments should and do choose different approaches to negotiating with foreign firms. Even single countries use different approaches at different times and with different industries. Moreover, the managerial choices of structure and process are not random. Rather, they are influenced by a government's general strategy toward foreign investment, the “political salience” of a given investment, and the degree of competition among countries for a specific investment. Ultimately, a government's management of international business negotiations shapes its effectiveness in negotiating with foreign firms and in competing for foreign investment.

Much unwarranted gloom and doom has been written of late about the new protectionism. It has been widely held to be a major hindrance to Third World development, an obstacle in the path of world economic recovery, and even a threat to good international relations. The facts about trade in recent years suggest a different story–and the need to look far more critically at some of the myths propounded by liberal economists. For it was not protectionism that was responsible for starting the depression of the 1980s any more than that of the 1930s. Then, as now, it was financial uncertainty and the consequent shrinkage of credit that slowed both growth and trade. Nor is protectionism a serious menace. Not only has it failed to stop the flood of industrial exports from Asian countries, there afe good reasons of state and corporate self-interest why it need not be feared in the future. Far from being a threat to the international economic order, as IMF and GATT ideologues would have us believe, bilateral trading agreements between states and corporations are sustaining continued growth in trade despite financial disorder.

Variations in domestic contention on foreign policy, particularly variations of a cyclical nature within the United States, have been often identified but not explained. Changes in international interactions on global issues affect domestic contention. Such external events as the rise of new global issues, the emergence of crises, moves toward accommodation and resolution, war, and foreign-policy failure are related to the diverse forms that domestic contention can take. U.S. domestic contention, both in the recent past and in the short-term future, illustrates particularly well how hard-liners and accommodationists battle over the lessons of history.

The debt crisis riveted attention on political issues at the international level. Groups of states clash, and the North-South divisions are very noticeable. As conflict and cooperation among governments, banks, and multilateral agencies make headlines, three blocs appear to contend: the banks, the debtor governments, and the creditor governments. These are the obvious players in the workouts, and it is important to understand the conventions that bind them.

The political challenge to the post-World War II order in shipping has been issued in the context of the North-South debate, but American power and interest are central to current developments. In the bulk and tanker sector the United States retains a strong interest in stability and successfully defends the existing order. In the liner sector, on the other hand, the United States has participated in recent assaults on the postwar order, producing great tension between Europe and America. There is a strong correlation between this growing maritime conflict and the political processes anticipated by the general theory of hegemonic stability. But “hegemony” and “power” are distinct concepts. Instability in international shipping arises neither from America's loss of power in shipping nor from challenges from Europe and the Third World. Rather, instability reflects American attempts to establish a closer identity between the existing regime and short-term national interest.

Japan's economy keeps changing too fast, its economic policies are too active and independent, and its domestic structures seemingly deviate too much from Western patterns to conform to theories that rely on general equilibrium in mature economies. Static economics, including recent monetarist, supply-side, and rational expectations models, some aspects of dynamic and development economics, and most of the neoliberal current in international relations theory are seriously challenged. On the other hand, the mercantilist paradigm, theories focusing on the role of the state, and analyses exclusively adopting the subsystemic level of international relations theory have substantial problems with the ample evidence of adaptation to external factors, the dynamism and Schumpeterian qualities of Japanese private enterprises and the far-reaching liberalization of Japan's foreign-exchange and foreign-trade control regime. As the only OECD member to have pursued “anticipatory adjustment” on the macrolevel and as the obvious model for the OECD category of “positive adjustment,” Japan presents a case of universal relevance. It suggests propositions linking targets and instruments of quantitative and qualitative policies, as well as processes of internalization of global factors and externalization of domestic factors. It provides material for revising, extending, and integrating international relations theory and the theory of economic policy.

The Economic Community of West African States (ECOWAS), the most recent effort at regional integration in the Third World, is the first potential success for such endeavors among less developed countries (LDCs). Deficient in some of the neofunctional variables of regional integration, ECOWAS differs from similar LDC groupings. Its formation was the result of high-level political support. The terms and provisions of its treaty create a harmonious political environment for cooperation, and the community has so far been free of the conflicts that destroyed several similar LDC ventures. A quasi-supranational secretariat serves as a vanguard of integration by insulating technical issues from the politics of national interest. Nigeria, the major subregional actor, endeavors to make side payments (despite its economic difficulties), and a more conducive international environment has accompanied the changed attitude of France, the principal extraregional actor, from opposition to support. Despite some contrary forces, ECOWAS may become the Third World's first success in integration.

For Latin American governments, mediating between their national societies and the international economy, the contemporary debt issue poses some excruciating dilemmas. On the one side, these governments are under intense pressure to arrive at satisfactory formulas for settling their debts–satisfactory, that is, to the banks and creditor agencies that control access to international financial markets. Loss of such access would threaten vital capital and trade flows, and for this reason virtually every Latin American government has so far placed a high priority on meeting its external obligations. But governmental elites, if they are to remain in power, must also answer to (or repress) their own populations. And the price to be paid for external help with “liquidity problems” has typically involved politically dangerous stabilization measures (devaluations, wage and credit restrictions, and fiscal deficit reductions)–measures that often arouse the strong opposition of major social forces.

The foreign-policy behavior of weak states, conventional wisdom holds, is largely determined by a process of bargaining with a dominant state. Compliance with the dominant state's preferences is viewed as necessary to the maintenance of economic exchange relations that benefit the weak state. Evidence for such a theory has been found in cross-sectional correlations of aid and trade with UN voting. However, such empirical studies have ignored alternative explanations, overlooked elements of the statistical record, and failed to examine the logic of the bargaining model. The assumptions of the bargaining model are vulnerable to criticism; an alternative model emphasizes multiple constraints on the behavior of both the strong and the weak nation in an asymmetrical dyad. Reanalysis of the data uncovers strong evidence of an explanation for foreign-policy continuity rooted in dependency. Dependency permeates and transforms the political system of dependent nations, thus bringing about constrained consensus rather than compliance. Furthermore, the data provide strong evidence for an explanation of foreign-policy change in both nations that centers on regime change, not on bargaining with an external actor.

Economic development requires choices among a broad spectrum of alternative strategies and, as the recent experience of Mexico suggests, those choices are not easy. A complex politics is involved in the transition from one development strategy to another. The international political economy and domestic social coalitions both influence the costs and benefits associated with various development policies; they rule out some choices, but numerous options still remain. How can one explain actual outcomes? Observers may significantly increase their ability to explain outcomes by incorporating a statist component into their analyses. Within the very broad parameters set by the international political economy the state influences (but does not determine) the creation and the demands of the social coalition itself. In addition, the state may use policy instruments and advantages from the domestic and international arenas to implement policy even in the face of domestic opposition. The structure of the domestic political economy determines the space within which the statist perspective contributes to explanatory power. Eventually, it is in a historically based ideology that the chief explanation for the state's choice of policy and the construction of particular domestic coalitions is to be found.

A modified interest-group model links movements in tariffs to changes in the level of economic activity within nations. This model is introduced and tested for tariff behavior in the 19th and early 20th centuries in three nations: the United States, Great Britain, and Germany. Empirical analysis lends strong support to the model's central thesis, that tariffs are sensitive to movements within a business cycle. Tariff changes occurring in the three nations, with the exception of British tariff increases, generally conform to the expectations of the model. Furthermore, business-cycle sensitivity provides an explanation of the behavior of tariffs superior to two prominent alternatives, those based on ideology and on hegemonic stability.

The international debt crisis has forced painful economic adjustments on the developing world. In the short run it has forced governments to seek to correct payments imbalances through stabilization programs, usually undertaken with conditional assistance from the International Monetary Fund (IMF). The crisis has also revealed deeper weaknesses in many Third World economies, weaknesses demanding more basic reforms in the structure of incentives, prices, and investment.

The global debt problem influences the foreign-policy capabilities of the United States through its impact on the government's “linkage strategies” in foreign affairs. In some circumstances policy makers are forced to make connections between different policy instruments or issues that might not otherwise have been felt necessary; in others, opportunities for connections are created that might not otherwise have been felt possible. The Polish debt crisis of 1981–82, the Latin American debt crisis of 1982–83, and the IMF quota increase in 1983 are suggestive in this regard. Linkage strategies bred by the debt issue are more apt to be successful when the interest shared by the United States with other countries in avoiding default is reinforced by other shared economic or political interests. They will also be more successful to the extent that the government can supplement its own power resources by relating bank decisions to foreign-policy considerations. Power in such situations, however, is a wasting asset, even when employed indirectly through the intermediation of the IMF.

Empirical studies of interdependence have mainly focused on whether interdependence has been increasing or declining on a world scale. In this research note I examine the nature of economic interdependence in the less developed countries (LDCs). The main question that I address is whether LDCs are more economically dependent, in the sense of being more deeply involved in economic interdependence relationships, than developed countries (DCs). Richard Cooper and Edward Morse have argued that economic interdependence is associated with increased industrialization and modernization—implying that LDCs are less involved than DCs in interdependence relationships. Empirical evidence presented here suggests that LDCs are, in fact, more dependent than DCs.