Political Economy and Grand Strategy

Mark R. Brawley

• Publisher: Routledge
• Year: 2009
• ISBN:
  9781135196851
• Edition: 1
• Topic: History
• Subtopic: Military & Maritime History
• Index: History

This book examines traditional balance of power theory from a political-economic perspective, using historical examples, to draw out distinctions between the liberal and realist approach and how this affects grand strategy.

The realist view of the balance of power theory includes implicit assumptions that economic assets can be turned quickly into power, and that states always respond to threats quickly and only with a view to the 'short-run'. These assumptions drive many of the expectations generated from traditional balance-of-power theory, discouraging realists from looking at domestic sources of power, which in turn undermined their ability to frame strategic decisions properly. By thinking about how power must be managed over time, however, we can model the choices policy-makers confront when determining expenditures on defense, while keeping an eye on the impact of those costs on the economy.

By emphasizing the role of the state, identifying different causal patterns in domestic politics, and demonstrating the importance of systemic competition, this book aims to establish why a neo-classical realist approach is not only different from a liberal approach, but also superior when addressing questions on grand strategy.

This book will be of much interest to students of security studies, international political economy, grand strategy and IR theory in general.

Mark R. Brawley is Professor of Political Science at McGill University, Montreal, Canada. He is author of several books on International Relations, specialising in the connections between political economic issues and security.

1 A neoclassical realist interpretation of grand strategy

Structural realism offers only incomplete explanations for states' selection of grand strategy. In particular, it overemphasizes the appeal of balance of power. While balancing was very common in particular historical epochs, many other grand strategies have been employed, and great powers do not appear to be balancing today. Structural realists emphasize balancing because they assume states are the most important actors in the international system; states cherish their independence. When confronted by an external threat, structural realists expect states to amass power.

Given its underlying assumptions, structural realism is poorly positioned to explain whether a state would look externally for allies (binding itself with similarly threatened states), or turn inward in an attempt to harness its own domestic resources more effectively. In its most elegant interpretation (Waltz 1979), structural realism assumes states continually maximize power— implying each state always extracts as much as it can from its domestic sphere before formulating its foreign policy. This precludes discussion of the domestic sources of power. Relaxing the assumption of power maximization allows us to explore the choice between internal and external balancing. It also compels us to develop a sense of how power springs from domestic resources. All things being equal, realists naturally assume states prefer to provide for their own security rather than rely on another state, but the choice is unlikely to be so simple, for rarely are “all things equal.” How do policy-makers decide between these two options?

Internal and external balancing efforts are not perfect substitutes. One might place greater trust in one's own domestic sources of power than in potential assistance from allies. On the other hand, allies can provide additional realized military power immediately, whereas domestic economic potential only produces actual military power with some delay. Conversion of economic assets into military force may take considerable time, so decision-makers must assess how soon they will face the threat, as well as the comparative speed at which external or internal balancing would provide the additional power they seek. Here again, the assumption that states maximize power conceals (or defers) a significant issue, in this case the time frame decision-makers operate in; maximization insinuates that decisions always reflect short-run considerations. If, however, a threat will only become serious some ten years in the future, should not decision-makers be positioning their state to have greater power a decade from now rather than attempt to maximize current power? Policies attempting to maximize power for a specific point well in the future do not resemble policies maximizing power for today. The former policies demand economic investment, while the latter require forgoing investments to achieve greater expenditures at the present time.

Relaxing some of the structural realist assumptions allows for the introduction of new variables into the equation, to flesh out a more accurate argument concerning states' responses to external threats. First, decision-makers select a grand strategy based on systemic and domestic alternatives. To understand why one form of balancing is chosen over another, we need to assess how easily and quickly a state can find additional power through internal efforts. Second, if tapping into domestic resources may take time (recognizing that economic assets may not be instantly convertible into military force), the selection of one strategy rather than the other will be based at least in part on considerations of how rapidly a balance needs to be constructed.

A neoclassical realist approach provides the best framework for examining these issues. True to the realist tradition, neoclassical realism postulates that systemic pressures dominate (Taliaferro et al.2009; Lobell 2009); moreover, in its view the system contains potentially serious threats. When a state detects such a threat, its response depends on the combination of systemic and domestic constraints or opportunities it faces. Neoclassical realism captures this arrangement by positioning the state at the nexus between the two levels, as the bridge between the two political realms. It incorporates domestic variables into international relations in a distinctive way (Taliaferro et al. 2009; Ripsman 2009). As an approach within the realist strand of thought, neoclassical realism expects systemic pressures to be translated via the state downward onto actors within the domestic political economy. In response to an external threat, the state may choose to ask for more from its constituents. Again, following the realist tradition that stresses security as “high politics,” the state determines the needs of society as a whole when an external threat emerges; the state's efforts on this issue override domestic cleavages formed on the basis of other interests. The state's ability to extract resources from its domestic political economy will alter its assessment of the desirability of alliances. Thus the way neoclassical realism introduces domestic factors differs significantly from the “bottom-up” approach implemented in analytical liberalism (Moravcsik 1997). The distinctions here may appear subtle at first but, as argued below, they entail important consequences for understanding causal chains, and thus produce sharply varied descriptions of the past, as well as quite distinct predictions and policy prescriptions concerning states' grand strategies.

Balancing and other grand strategies

External and internal balancing represent two of several possible responses to an external threat. Even leaving out the option of balancing through internal means, structural realists recognize that external balancing is not always viable. In situations where forming an alliance would not deliver sufficient additional power to deter or defeat the threat, a state might choose to bandwagon (i.e. join with the threat) rather than form an alliance doomed to fail. Structural realists also observe states pursuing other grand strategies, such as appeasement or buck-passing, though they then use their theories to criticize these policies. Structural realists face greater difficulty explaining why states choose such policies in the first place.

The argument developed here seeks to offer explanations for such decisions by treating these policies as rational responses to threats, given certain combinations of domestic and systemic constraints. To argue that a policy is rational from the perspective of a single actor in the anarchic system says little about what the systemic outcome will be: grand strategies succeed or fail depending on how they interact with the strategies employed by other states. Rather, the goal of the argument laid out in this first chapter is to explain variation in states' grand strategies across cases and over time. The argument is intended to explain why states choose balancing at some points in time but choose other grand strategies at other times. It does not focus on failures to form balancing coalitions (for contrast, see Schweller 2008).

Grand strategy refers to the harmonizing of means and ends, in peace as well as war, to serve the nation-state's interests (Kennedy 1991: Ch. 1; Rosecrance and Stein 1993). This definition implicitly raises the question of time horizons posed above, and places the burden of decision-making directly on state leaders. To explain which policy will be selected in a given situation, the model I develop relies on three variables: the distribution of power in the system (which locates the threat, but also identifies if allies are available), the time horizon for responding to a threat (must you respond now or can you wait till later?), and the rate at which domestic economic resources can be converted into military power (can your own resources be transformed into military force immediately, or will it take several years to convert your peacetime economy to a war footing?). The three combine to shape evaluations of the relative effectiveness of forming an alliance, turning to internal balancing efforts, or some other grand strategy. In short, the argument put forth here rests on two simple claims: grand strategies manage a state's power over time; and policy-makers consider both domestic and international factors when selecting a grand strategy.

As demonstrated below, external balancing will be the rational response only under particular systemic and domestic conditions. Unsurprisingly, those circumstances approximate the implicit assumptions held by structural realists: time frames are short and the state can find possible allies. Conditions vary from one situation to the next, however: allies are not always available, external threats fade into the distant future or burst out of nowhere, just as the speed at which economic resources can be transformed into power changes. External balancing is not always the most rational method for managing the state's power. Under certain conditions, strategies that the structural realists scorn, such as buck-passing or appeasement, may be perfectly sensible. To explain why, the interaction of these three variables —the availability of allies, the emergence of external threats, and the speed of changing economic resources into power—needs to be displayed in more detail. That effort, in turn, first requires a closer inspection of the relationship between economic assets and military force.

Economic decisions lie behind the fielding of military power in three ways. First, the rate of investment in the economy critically influences the aggregate amount of economic assets at a later point in time. If a state spends too much money on current defense, it reduces the amount available for investment, potentially reducing its future economic base. Second, the transformation of wealth into power requires some extant military-industrial plant. If this plant falls into disrepair, the ability of the country to convert economic assets into military strength might well be impaired. If, on the other hand, the military-industrial capacity is high, then economic wealth might be converted into realized military force quite quickly. The scale and importance of this plant reflect productive capacities and technologies, which change over time and across countries. Third, a state can rarely forgo current military spending altogether. It normally has to spend a not insubstantial sum to guarantee a minimal level of security. Managing power requires calculating how much to spend, with these three objectives in mind.

Since wealth spent to meet short-run needs is not available to invest in the expansion of the economic base (thereby inhibiting future power), the assumption that states maximize power is simply too vague. One must know whenpower needs to be maximized, which in turn requires that decision-makers calculate how long it will take to construct and field effective forces, thus making them consider the other two dimensions of the relationship between wealth and power. The economic component of a grand strategy depends on information structural realists have largely ignored. Neoclassical realism refines the structural realist perspective by keeping the emphasis on systemic threats, recognizing the significance allies may play in the choice of grand strategies, but also bringing in an appreciation of the importance of political-economic decisions in policy-making. In the absence of political-economic considerations, theories of balancing lack precision; if such theories do not entail an understanding of how the relationship between economics and power can change, they will fail to capture the complexity of the challenge decision-makers face. Once these elements are included, we can explain why states have adopted such varied grand strategies over time. To be a successful refinement, a neoclassical realist argument would need to describe or explain a wider variation of outcomes than structural realism (or other approaches), without adding too much complexity to the argument. While the argument here will be less parsimonious, it offers to describe/explain more, including reference to both the security and the foreign and economic policy dimensions of grand strategy. Put another way, it will offer expectations for a wider array of observable implications than previous arguments, as well as a clearer understanding of well-known cases.

Time, political economy, and the formulation of grand strategy

Like other realist arguments, a neoclassical realist approach begins with information concerning the distribution of power in the international system. By limiting the discussion to great powers, I focus on the most important players in international politics; this keeps the argument centered on the states whose grand strategies define the setting for others. The distribution of power in the system describes how many great powers exist; these provide the only true threats to each other, as well as the only allies capable of providing adequate assistance to deter or counter such threats.

The first step is for decision-makers to locate any threat in terms of both direction and time. Allowing for variation in the time needed for responding to the threat, decision-makers then choose a mixture of current expenditure, investment in the capacity to transform economic assets into power, and investment in the country's economic base.These policies are framed with the alliance options in mind. Policy-makers must be cognizant of the rate at which economic resources can be transformed into military power. If leaders believe that economic assets can be converted into military strength quickly, then economic policies will reflect relative gains concerns. When technology makes conversion easy, states realize threats may emerge quickly. Decision-makers may then feel less secure relying on allies, and therefore pursue policies stressing self-reliance. If a state will only be threatened in the distant future, or if the rate at which economic assets can be transformed into military power is low, then decision-makers are more likely to invest in their economy's long-run performance.

Also remember that this rate reflects national variation: a state may be able to increase its own capacity to convert economic wealth into power by investing in specific military-industrial plant. The state may then improve its ability to respond more quickly to a threat. On the other hand, investment in this capacity also serves as a drag on the growth of the overall economic base. Moreover, depending on the dominant military technology, it may be costly to invest in this capacity, or it may be quite cheap.

By allowing these two constraints on policy-making to vary—the time horizon for responding to a threat and the rate at which wealth can be transformed into power—we can appreciate the conditions that make balancing more or less attractive than alternative grand strategies. Table 1.1 lays out expectations concerning the most desirable strategic options when a major power confronts a significant threat it must meet in the short run. Table 1.2 lays out the strategic choices when a major power determines its most important external threat will only appear further in the future.

In the scenarios represented in the top two boxes of Table 1.1, wealth can be converted into power quickly.This high rate of transformation drives states to spend current resources on arms. Outwardly, the state chooses to enter an arms race, whether or not allies are available. This decision reflects conditions consistent with the traditional structural realist interpretation. But note what happens once it takes more time to convert wealth to power, as portrayed in the two lower boxes. Economic calculations enter in. A state that can pursue external balancing (because allies are available) will do so, but the economic considerations mandate that the state invest in itself as well as in its probable allies. Although international economic activity could enhance the wealth of the state as well as of its allies, concerns about the relative gains from trade or investment are muted. If other major powers are not available as alliance partners, however, it becomes harder to calculate the logical path for states to take. Investing in one's own economy would be the best way to maximize potential power for the future (given the poverty of alternative strategies). Ye t since we are assuming the threat must be responded to in the short run, bandwagoning could also be pursued.

Table 1.2 illustrates what happens when the first variable—the time for responding to a threat—changes. A shift in decision-makers' time horizon interacts with the second factor concerning the management of power. If a state can convert economic assets into military power quickly, should it invest in its own economy or in the economies of its allies? Or rather than invest, should the state instead spend on either its own weapons programs or those of its allies? Once the need for an immediate balance is lifted, these choices become indeterminate. Investing at home becomes the obvious choice when wealth can be s...