Economic interdependence is when entities rely on each other for resources, often due to specialization. This affects societies at all levels, from individuals to countries. The downside is that if one entity fails to obtain resources, others suffer.
Economic interdependence is a system in which one party depends on other parties for resources, such as food and minerals, for convenience or daily life. This system typically affects many layers of society, including countries and regions, people and businesses. One reason for economic interdependence is specialization, as most people within a society will not be able to obtain resources without specialized knowledge and equipment. The main problem with economic interdependence is that if one party fails to obtain resources, the other parties will suffer.
In a society governed by economic interdependence, most entities are largely resourced by other entities. For example, in an agricultural economy, most people can produce their own food and are dependent on the land, not on each other; with interdependence, most people are unable to grow food and depend on farmers, grocers, and other entities to provide them with food. The work is divided in such a way that most people work to provide a service or resource for other entities, but people rarely work to directly provide a specific service or resource.
Societies with economic interdependence typically experience this interdependence on many levels. People depend on other people and companies to provide them with the resources they need. Companies depend on other companies, and sometimes other countries and regions, to create a product or obtain resources. Entire countries and regions may depend on other countries and regions to provide them with resources. Some entities in this company may be independent, but most are not.
One of the main reasons for economic interdependence is specialization. For example, if a company specializes in making gold jewelry, it usually can’t get gold on its own. Instead, it depends on the people – miners and other businesses – to get the gold needed to complete the product. This is beneficial to the business because even if other entities need to exist, the business can focus on specializing in one service or product rather than having to quickly scale out and master many services to meet the needs of their core service or product.
The problem with economic interdependence is that each entity is entirely dependent on other entities. If one entity fails to obtain resources, other entities will not be able to complete their service or product. When a business cannot obtain an essential resource, such as food, it can cause people to starve; at best, such a failure can simply lead to an inconvenience, such as a lack of new jewelry.
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