On Hegemons and Trade (Part I): Origins

I am currently in the process of entirely rewriting and redesigning one of my earliest academic papers that I want to update with the context of better data and methods in evaluating the hypotheses I initially proposed. That is, I am writing the same paper a second time.  As part of this process, I am revisiting some classic works on the topic of Hegemonic Stability Theory. Consequently, this is part one of a multi-stage blog post series.  Part 1 of the project deals with the origins of Hegemonic Stability Theory, Part 2 will dig into the advancements in the theory in the 1980s and 1990s, and Part 3 discusses the empirical record for the topic.

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Hegemonic Stability Theory (HST) contains a set of different authors who propose that a state that is dominant internationally has the capacity to make particular rules, norms, and institutions that guide the course of international relations.  The theories often articulate that a unipolar system is unique and the enabling condition of unipolarity cannot, or is unlikely to, manifest in multipolar systems.  The outcomes of interest for theorists of global power preponderance theories vary with popular topics including trade, war, and the creation and maintenance of international regimes.  For the context of this series of posts, I am focusing on the trade-related theory of hegemony as it has been developed in political science and economics.

The concept of hegemony itself is a loaded term that has many different meanings for different scholars and schools of thought.  Rather than give a precise definition now, I will generally refer to it as a state that has global dominance in military, economic, and financial power. Throughout this post, I have included the CINC scores for major powers from 1816-2007.  Naturally, CINC scores are imperfect for several different reasons depending on the context in which they are used. In the case of hegemony, they may be best apt for gauging some level of military power, but are insufficient to capture the other aspects of global hegemony that are important. For the rest of this series, I will be using hegemon, unipolarity, and preponderance of power as synonyms.  Having a more refined sense of when we know we have hegemony and when we do not is a task better suited for the third part of this series.

The idea that the hegemon under unipolarity is afforded special privileges that other states do not have is not unique to scholarship in the latter half of the 20th century (for example, Hirschman’s 1945 book), nor the 20th century alone, but much of the principle tenants of the theory solidify under scholars examining the topic.  Specifically, the 1970s offered two major advancements in the theory in the work done by Kindleberger and Krasner. The former developing a thread of HST that is best described as “Leadership Theory” within HST and the latter offering a Structural Theory of HST.

Kindleberger’s (1979) foundational work, The World in Depression, is an ambitious scholarly undertaking to identify the key international and domestic causes of the great depression. Fundamentally, for Kindleberger, stability in the international system is provided by a dominant power that can maintain the rules of the system and provide the incentives necessary to encourage states to behave in a way that is conducive to liberalization and integration.  The interwar period offers a unique period of transition as there are two possible actors that could fulfill this role: Great Britain and the United States.  Great Britain has the willingness to be the leader, but lacks the capability to do so (Great Britain acts in the appropriate manner in the 1920s, but, according to Kindleberger, it becomes evident in 1931 that the British are unable to provide the necessary leadership to maintain stability). The United States has the capability, but lacks the domestic willingness to do what is necessary to prevent a race towards retrenchment in globalization.  Specifically, Kindleberger highlights five necessary behaviors for a hegemon to encourage stability (p. 289):

  1. maintaining a relatively open market for distress goods;
  2. providing countercyclical, or at least sable, long-term lending;
  3. policing a relatively stable system of exchange rates;
  4. ensuring the coordination of macroeconomic policies
  5. acting as a lender of last resort by discounting or otherwise providing liquidity in financial crisis.

He follows this list with the explicit statment of “These functions, I believe, must be organized and carried out by a single coutnry that assumes responsibilty for the system” (Kindleberger 1973, p. 283). After going through each of these five points, Kindleberger comments on the contemporary hegemonic decline of the 1970s and prospects for US leadership in the 1980s and 1990s.

Krasner’s branch of HST comes from his 1976 article titled “State Power and the Structure of International Trade.” The structural view of HST asserts that it is not a function of willingness that determines liberalizing behavior in regards to trade, but it is a product of a state’s position in the international system.  Fundamentally, and contrary to Kindleberger, capability breeds willingness.  Explicitly, a state in a privileged position in the international system ought to seek global liberalization of trade policies as such policies necessarily advantage its strategic global position.  It becomes part of the state’s national interest to encourage free trade.  Beyond having a national willingness for trade liberalization, it would necessarily have the ability to encourage the system as well. Krasner argues that the hegemon has an array of positive and negative incentives, including offering access to competitive markets, providing cheap goods, encouraging other states to outcompete and ruin the business recalcitrant states, and withholding aid/grants/loans (p. 322-323).

Thus, for Krasner, the 19th century and post-WWII bouts of liberalization were products of hegemonic dominance while the interwar period was marked by uneven multipolarity.  For Kindleberger, leadership marks the 19th and latter half of the 20th century, while the interwar period lacked a state willing and capable of providing hegemonic leadership.  The two different veins of HST create a possible conundrum for empirical scholarship as deriving testable implications may rely on definitional issues of hegemony.  Since, as social scientists, we are interested in causal determinants of behavior, it becomes hard to pinpoint the effects of HST if part of knowing whether there is a hegemon in the first place is that a state is acting hegemonic.  Finding other measures to predict hegemonic behavior becomes part of the task. In the structural sense, we should expect a dominance of power to lead to a willingness for hegemonic behavior; however, for Kindleberger and leadership theory, we may not be able to predict willingness for hegemony until we see hegemony.

A few notes. First, both authors are writing in a time where the decline of the United States seemed evident to scholars and non-scholars alike.  Powerful states, especially the winners of World War II, had created powerful institutions that seemed to guide world politics to a degree that transcended mere state-base perceptions of International Relations.  Naturally, with a perceived decline of the United States in the 1970s and 1980s, trying to figure out how the state of international affairs would change, warp, or collapse was important.  Would hegemonic institutions endure? Would a leader that was incentive-compatible with the United States emerge and lead to a peaceful transition?  Would Japan/Germany become the new global financial centers?  The debates surrounding hegemonic stability theory escalated from this point and remained healthy throughout the 1980s.  With the collapse of the Soviet Union, questions about US decline halted for the unipolar moment and other questions of hegemony emerged.  We will turn to the expansions of both authors’ work in the second installment of this discussion.

A second note: Krasner does allow for non-hegemonic configurations to encourage liberalization. A common misconception is that hegemony is conducive to trade, but other configurations are not, In the original 1976 piece, he argues “Let us consider a system composed of a large number of small, highly developed states.  Such a  system is likely to lead to an open international trading structure. The aggregate income and economic growth of each state are increased by an open system…” (p. 321). Thus, in a multipolar world dominated by highly industrialized states, a push for liberalization may emerge.  Of course, he goes on to argue that a system composed of a small number of large, asymmetrically developed states would lead to protectionist behavior and norms.  This creates the following table of possible system configurations on page 323:

Finally, in Krasner’s original article, he concludes, after examining qualitative and quantitative evidence of trade-related behavior under different configurations of world power, that a simple measure of power is insufficient to understand hegemonic pressures on liberalization. Instead, periods of increased integration occur after shocks to the system encourage a change in behavior by the dominant state. This clarification of temporal shocks does become become important when we evaluate attempts to test Hegemonic Stability Theory.

Michael A. Allen

About Michael A. Allen

Michael is an Assistant Professor in Political Science at Boise State University with a focus in International Relations, Comparative Politics, and Methodology (quantitative and formal). His work includes issues related to military basing abroad, asymmetric relations, cooperation, and conflict. He received his Ph.D from Binghamton University in 2011.

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