World Markets and Political Instability within Less Developed Countries

Abstract

It is often asserted that instabilities in world markets are transmitted into and exert destabilizing effects upon the national economies and domestic socio-political systems of LDCs. Yet our knowledge of these linkages is scant, owing partly to the unintegrated state of prior theory and empirical research. This paper draws together the disparate literature on international economic and domestic political instabilities, specifies types of linkage between them, and formulates a framework to organize empirical research. Two broad categories of linkage are identified: (1) those issuing from exposure to volatilities in world markets for the goods and commodities that LDCs export and import; and (2) those stemming from participation in markets for capital, technology, and other factors of production. The second category is partitioned into two subtypes: transnational corporations and international financial institutions. Conceptual and methodological problems attendant to the modeling and testing of these relationships are also discussed.