University of New Hampshire University of New Hampshire Scholars' Repository Doctoral Dissertations Student Scholarship Fall 1976 THE POLITICAL ECONOMY OF INTERNATIONAL ECONOMIC EXCHANGE AND DEVELOPMENT: A SYSTEMS APPROACH TO THE STRUCTURING OF THE INTERNATIONAL ECONOMIC SYSTEM THOMAS MARTIN BAUMGARTNER Follow this and additional works at: https://scholars.unh.edu/dissertation Recommended Citation BAUMGARTNER, THOMAS MARTIN, "THE POLITICAL ECONOMY OF INTERNATIONAL ECONOMIC EXCHANGE AND DEVELOPMENT: A SYSTEMS APPROACH TO THE STRUCTURING OF THE INTERNATIONAL ECONOMIC SYSTEM" (1976). Doctoral Dissertations. 1128. https://scholars.unh.edu/dissertation/1128 This Dissertation is brought to you for free and open access by the Student Scholarship at University of New Hampshire Scholars' Repository. It has been accepted for inclusion in Doctoral Dissertations by an authorized administrator of University of New Hampshire Scholars' Repository. 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Silver prints of "photographs" may be ordered at additional charge by writing the Order Department, givring the catalog number, title, author and specific pages you wish reproduced. 5. PLEASE NOTE: Some pages may have indistinct print. Filmed as received. University Microfilms International 300 North Zeeb Road Ann Arbor, Michigan 48106 USA St, John's Road, Tyler’s Green High Wycombe, Bucks, England HP10 8HR 77-3458 BAUMGARTNER, Thomas Martin, 1943- THE POLITICAL ECONOMY OF INTERNATIONAL ECONOMIC EXCHANGE AND DEVELOPMENT: A SYSTEMS APPROACH TO THE STRUCTURING OF THE INTERNATIONAL ECONOMIC SYSTEM. University of New Hampshire, Ph.D., 1976 Economics, general Xerox University Microfilms,Ann Arbor, Michigan 48106 © 1976 THOMAS MARTIN BAUMGARTNER ALL RIGHTS RESERVED THE POLITICAL ECONOMY OF INTERNATIONAL ECONOMIC EXCHANGE AND DEVELOPMENT A Systems Approach to the Structuring of the International Economic System by THOMAS BAUMGARTNER Lic.oec., Universitaet Zuerich, 1968 M.A. , University of New Hampshire, 1971 A THESIS Submitted to the University of New Hampshire In Partial Fulfillment of The Requirements for the Degree of Doctor of Philosophy Graduate School Department of Economics September, 1976 This thesis has been examined and approved. Thesis director, Kenneth Rothwell, Prof. of Economics ’A) '//i . ^ t George Betz, IMF-Adviser to the Bank of Indonesia Thomas Burns, Asso. Prof. of Sociology William Hosek, Asso. Prof. of Economics Heidemarie Sherman, Asst. Prof. of Economics im D a t F TABLE OF CONTENTS LIST OF ABBREVIATIONS .......................... v ABSTRACT ....................................... vi I. INTRODUCTION ................................... 1 II. THEORETICAL ASSUMPTIONS AND THE REAL SYSTEM OF INTERNATIONAL TRADE ....................... 19 1. The Heckscher-Ohlin Model and the Leontief Test ...................................... 20 2. Multi-Factor Models of Trade ............... 30 3. Trade and Trade Controls in an Imperfect and Dynamic Social System ................. 46 4. The Structure of Trade Controls and Trade Flows ..................................... 55 5* Summary .................................... 62 III. ELEMENTS OF A SYSTEMS APPROACH TO INTERNATIONAL EXCHANGE AND STRUCTURING ..................... 66 1. Actors and their Goals ..................... 67 2. Multi-Dimensional Valuables ................ 74 3. Systemic Ramifications of Economic Exchange .. J8 4. Unequal Exchange .......................... 84 5. The Structuring of the International Economic System ........................... 88 IV. INTERNAL RESTRUCTURING ......................... 94 1. The Fall in the Wheat Price, 1873-1896, and European Adjustments ...................... 95 2. Power and Group Interests as Determinants of Economic Systems Adaptation ............ 103 iii V. THE STRUCTURING OP EXTERNAL ECONOMIC EXCHANGE RELATIONS .................................... 117 1. Internal Structure as a Factor in External Structuring: The Establishment of an Unequal Exchange Relationship between England and Portugal ...................... 119 2. World Power and External Restructuring: The Bretton Woods Agreements .............. 133 VI. STRUCTURING AND RESTRUCTURING: DILEMMAS AND TURNING POINTS ............................... 149 1. The Dilemma between Domination and Development: The Case of Comecon .......... 151 A. Divide and Rule as a Strategy of Relational Control ..................... 151 B. Domination and Development in the Case of Comecon ........................ 154 2. A Turning Point for the International Economic System: The Oil Crisis ........... 160 A. Origins of the Power Reversal ............ 160 B. The Transformation of the International Economic System ........................ 166 VII. CONCLUSION ..................................... 179 BIBLIOGRAPHY ................................... 184 iv LIST OP ABBREVIATIONS Comecon Council for Mutual Economic Assistance (CMEA) DC Developed Countries EEC European Economic Community GATT General Agreement on Trade and Tariffs H-0 Heckscher-Ohlin model IBRD International Bank for Reconstruction and Development; the World Bank IES International Economic System IMF International Monetary Fund ITO International Trade Organization MNC Multinational Corporation NIEPO New International Economic and Political Order NTB Non-Tariff Barrier OAPEC Organization of Arab Petroleum Exporting Countries OECD Organization for Economic Cooperation and Development OPEC Organization of Petroleum Exporting Countries R&D Research and Development UDC Underdeveloped Countries; Less Developed Countries; Developing Countries UNCTAD United Nations Conference on Trade and Development v ABSTRACT THE POLITICAL ECONOMY OF INTERNATIONAL ECONOMIC EXCHANGE AND DEVELOPMENT A Systems Approach to the Structuring of the International Economic System by THOMAS BAUMGARTNER The institutions and structures of the International Economic System (IES) become increasingly questioned as the countries of the Third World insistently demand a New Inter­ national Economic and Political Order (NIEPO). In this con­ text, the analysis of international economic exchange requires a more detailed and differentiated set of actors, and a multi­ dimensional conceptualization of economic valuables and actors' goals, including, besides the economic dimension, social, po­ litical, cultural and military aspects of exchange. Further­ more, a dynamic analysis of international exchange has to in­ corporate the constraints placed on actors by IES institutions and structures, the actors' attempts to shape institutions and structures favorable to their action opportunities, and the feedback patterns which link the aggregate multi-dimensional exchange outcomes to the maintenance or transformation of the IES. Such an analysis has to include as inputs into and out­ puts from the operation of the IES inequalities in control by actors over valuables and power resources and in actors' po­ sitions in the structure of relationships. The existence of conflict between actors, and of patterns of dominance and de­ pendency, is fundamental to this conceptualization of the IES. This focus implies a political economy approach to inter­ national economic exchange where economic behavior is analyzed as an integral part of behavior in a social system encompassing economic, social, cultural, political and military spheres. The multi-dimensionality of economic exchange, the feed-back patterns between the multiple levels of the IES, and the role of power inequalities necessitate the use of a systems method of analysis. A review of International trade theories and their em­ pirical verifications shows that the strict assumptions of the Heckscher-Ohlin model have undergone modifications and re­ laxations and have been alternatively formulated to include, mostly implicitly, elements of the systems model mentioned above. Accordingly, Chapter III presents a more formal de­