Capital moves more rapidly across national borders now than it has in at least fifty years and perhaps in history. This article examines the effects of capital mobility on different groups in national societies and on the politics of economic policymaking. It begins by emphasizing that while financial markets are highly integrated within the developed world, many investments are still quite specific with respect to firm, sector, or location. It then argues that contemporary levels of international capital mobility have a differential impact on socioeconomic groups. Over the long run, increased capital mobility tends to favor owners of capital over other groups. In the shorter run, owners and workers in specific sectors in capital-exporting countries bear much of the burden of adjusting to increased capital mobility. These patterns can be expected to lead to political divisions about whether or not to encourage or increase international capital market integration. The article then demonstrates that capital mobility also affects the politics of other economic policies. Most centrally, it shifts debate toward the exchange rate as an intermediate or ultimate policy instrument. In this context, it tends to pit groups that favor exchange rate stability against groups that are more concerned about national monetary policy autonomy and therefore less concerned about exchange rate stability. Similarly, it tends to drive a wedge between groups that favor an appreciated exchange rate and groups that favor a depreciated one. These divisions have important implications for such economic policies as European monetary and currency union, the dollar-yen exchange rate, and international macroeconomic policy coordination.

In comparative research on industrial policy strategies, attention has shifted from national-level variables to sectoral variables in both the description and the explanation of policy. The sectoral literature, however, lacks analytic focus and has provided little systematic insight into the causes of cross-sectoral variance in governance structures and policy strategies. Based on recent contributions to the economics and sociology of formal organizations, this article attempts to sharpen the concept of “industrial sector” and to provide a rationale for why sectoral structures and strategies vary. Next, it develops a synthetic explanatory framework that combines sectoral analysis and national domestic structuralism in order to account for industrial innovation strategies in advanced capitalist countries. In the final section, the fruitfulness of this approach is illustrated by developing a new account of Japan's success and failure in industrial innovation, an account that overcomes the contradictions among the main alternatives offered in the past. The key objective of the article, however, is to develop a new set of theoretical hypotheses for cross-national research, not a rigorous empirical test of its main propositions.

Informal agreements are the most common form of international cooperation and the least studied. Ranging from simple oral deals to detailed executive agreements, they permit states to conclude profitable bargains without the formality of treaties. They differ from treaties in more than just a procedural sense. Treaties are designed, by long-standing convention, to raise the credibility of promises by staking national reputation on their adherence. Informal agreements have a more ambiguous status and are useful for precisely that reason. They are chosen to avoid formal and visible national pledges, to avoid the political obstacles of ratification, to reach agreements quickly and quietly, and to provide flexibility for subsequent modification or even renunciation. They differ from formal agreements not because their substance is less important (the Cuban missile crisis was solved by informal agreement) but because the underlying promises are less visible and more equivocal. The prevalence of such informal devices thus reveals not only the possibilities of international cooperation but also the practical obstacles and the institutional limits to endogenous enforcement.

Heightened economic interdependence in recent years is commonly argued to have generated great pressures for convergence in economic policies across the advanced industrial democracies. Interdependence has clearly had a great impact on the types of economic policies that governments can pursue: they have been unable to pursue independent fiscal and monetary policies since the mid-1970s. Furthermore, all governments have been forced to attempt to promote the competitiveness of national goods and services in world markets and to increase the speed and efficiency with which national producers adjust to changes in global markets. There are, however, different policies consistent with these goals. Statistical analyses of economic policies since the mid-1970s show that governments of the left and the right continue to be able to enact distinctive supply-side policies that promote competitiveness and flexible adjustment and simultaneously further their partisan objectives.

To reduce its strategic vulnerability, a small state may enter into a cliency relationship with a more powerful state. Among the consequences of cliency for the small state are the acquisition of resources, which can be used against threatening neighbors as well as against domestic populations, and the reduction of autonomy. In 1899, Mubarak, Kuwait's ruler, entered a cliency relationship with Britain. As a result, Kuwait was able to avoid incorporation into the Ottoman Empire. Although Mubarak and subsequent Kuwaiti rulers lost their foreign policy autonomy, they acquired resources enabling them to enhance their domestic autonomy by suppressing elite groups that were formerly integral participants in governing Kuwait. In 1961, oil revenues enabled Kuwait's rulers to end the cliency relationship and to provide their own resources for repressing or pacifying domestic groups. But the fact that oil revenues proved less effective than cliency in maintaining Kuwait's strategic security illustrates the fundamental security dilemma faced by all small states, even rich ones.