Classics in the Economics and Security Literature: One...
Transcript of Classics in the Economics and Security Literature: One...
Classics in the Economics and Security Literature:
One View of the Landscape
A Very Rough Draft Paper
Circulated at the Political Economy of National Security Workshop
The Annual Meeting of the
International Studies Association
February 18, 2015
New Orleans, LA
William J. Norris, PhD
Assistant Professor
The Bush School of Government and Public Service
Texas A&M University [email protected]
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Author’s disclaimer: This is a very early draft of an old working paper I happened to have sitting on my
hard drive. After speaking with Rosella, she seemed to think that it might be interesting grist for the mill
for when we get together in New Orleans. It is by no means exhaustive and is only a preliminary effort to
organize and categorize some of the overlapping literatures that bridge the realm of IPE and Security
Studies. Although its incompleteness (and, for many in this crowd, remedial nature) makes me hesitant to
share, I’ve been persuaded that the potential benefit to our collective endeavor ought to outweigh any
personal embarrassment I suffer from sharing something so inchoate and self-referential. In any event, I
hope it gets some fruitful conversations going.
This paper provides an overview of some of the major works that seek to bridge the subfields of
international political economy and security studies in international relations. My purpose in writing it
was to think synthetically about how the various mini-literatures within economics and security seemed to
fit together. My secondary motivation in writing it was to help me clarify how my own research agenda
fits into the existing body of scholarly work that intersects economics and security. As such, I ought to
apologize in advance for the paper’s frequently annoying self-referential tone. Rest assured, these will be
wrung from a final version, but I did not have the time to purge them before ISA. Lastly, being a rather
old draft, it also does not include many of the more recent works in these areas. As you read, if you
happen to think of pieces that ought to be referenced/discussed that are missing from this draft, please do
let me know (along with any other comments and suggestions for how to improve it).
Overview of the Field & Where My Work Fits In
The literature that seeks to bridge economics and security studies is distributed in three broad
topic areas as depicted in the diagram below. At the intersections of these broad topics, scholars have
also produced more specialized works. The diagram’s central point of intersection identifies the body of
literature that is most germane to my areas of research: namely the scholarship addressing questions about
the nature, causes and exercise of international economic power.1
1Although my own work is most directly located at the central point of intersection, various aspects of my work
broadly touch on each of these areas of inquiry. At the same time, my work seeks to address specific shortcomings
of each of these families of the literature on economics and security.
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The Landscape of the Economics-
Security Literature
Dia. 1: The Literature on Economics and Security
I begin this review of the literature by focusing first on the three large circles (the areas labeled:
“A,” “B,” and “C”) each of which represents a broad topic concerning the relationship between
economics and security. The upper left circle, which I have labeled “Economic Foundations of Military
Might” encapsulates works that pertain to questions of the war-making potential of states. In the abstract,
Economics &
Likelihood of
Conflict
Economic
Foundations of
Military Might
Political
Economy of
Defense
Mobilization &
Wartime
Economics
Strategic Goods
& Sensitive
Trade Leninist
Imperialism
Nature, Causes &
Exercise of
International
Economic Power
(A) (B)
(C)
(D)
(E)
(F)
(G)
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a nation’s military capabilities are often fundamentally dependent on its economic position.2 This
“Economic Foundations of Military Might” portion of the Venn diagram includes works that address the
relationship between a country’s economic base and its international position.
The study of the economic basis of national power has roots going back to the very foundations
of modern social science. Adam Smith, Alexander Hamilton and Friedrich List were each very conscious
of the security ramifications of a state’s economic orientation.3 Each of these thinkers had a seminal point
of view regarding national security and the proper role of the state vis a vis commerce. Smith articulated
an elegant case for moving away from what was, at that time, the dominant model of mercantilism toward
a liberal economic system in which state power is maximized by allowing free market forces to operate as
extensively as possible.4 This minimally intrusive state is contrasted by List’s mercantilist strategy. List
believed that the state should take on a central role in directing and defending the economy as part of a
larger effort to ensure that economic activities maximally contributed to the state’s strategic objectives.5
Hamilton also believed in using economic policy as an instrument of national power and unification. His
views helped define the terms of debate regarding a government’s appropriate relationship to private
sector actors in matters of strategic significance.6 Domestic business-government dynamics continue to
2 For a good perspective on how states engage in mobilizing domestic resources, refer to Fareed Zakaria, From
Wealth to Power: The Unusual Origins of America’s World Role (Princeton, NJ: Princeton University Press, 1998),
especially Chapter Two. 3 Edward Mead Earle is credited with bringing these thinkers to the attention of modern political science. See his
Chapter 6 entitled “Adam Smith, Alexander Hamilton, Friedrich List: The Economic Foundations of Military
Power,” from Edward Mead Earle, Gordon Alexander Craig, and Felix Gilbert, Makers of Modern Strategy:
Military Thought from Machiavelli to Hitler (Princeton: Princeton university press, 1943) pp.117-154. Earle argues
that each of these authors were quite clear in placing security concerns above mere economic opulence. Moreover
each advocated a more or less nationally-self serving economic strategy that was designed to enhance the security of
his respective homeland: Smith—a system of free trade when Britain enjoyed a hegemonic position that outgrew
more narrow colonial mercantilism; Hamilton—an infant industries argument to spur a nascent American military-
industrial capability that would enable continued independence; List—a unifying system of internal free trade and
external protectionism designed to bring about a greater Germany. 4 Adam Smith and Charles Jesse Bullock, An Inquiry into the Nature and Causes of the Wealth of Nations (New
York: P. F. Collier & sons, 1909); Adam Smith, Ernest Campbell Mossner, and Ian Simpson Ross, The
Correspondence of Adam Smith (Oxford Oxfordshire; New York: Clarendon Press; Oxford University Press, 1977);
Adam Smith, Thomas Wilson, and Andrew S. Skinner, The Market and the State : Essays in Honour of Adam Smith
(Oxford: Clarendon Press, 1976). Whereas Smith is often credited with the birth of liberal economics, other
classical liberals like John Stuart Mill also deserve considerable credit for refining the limited role of the state in the
production of a society’s wealth. Refer to:Philip Ellis Wheelwright et al., eds., Jeremy Bentham: An Introduction to
the Principles of Morals and Legislation; James Mill: Essays on Government, Jurisprudence, Liberty of the Press,
and Law of Nations; John Stuart Mill: On Liberty; Utilitarianism,Anonymous , 1st ed. (Garden City, N.Y.:
Doubleday, Doran & company, inc, 1935) and John Stuart Mill, John Stuart Mill : The Economic, Political, and
Feminist Papers (Woodbridge, CT ; Reading, Berkshire: Research Publications, 1988) 5 Friedrich List et al., National System of Political Economy (Philadelphia: J.B. Lippincott & co., 1856)
6See, for instance, Hamilton’s “Report on Manufactures” that was submitted to Congress on December 5, 1791 in
which Hamilton made the case for protecting American infant industries that had considerable implications for
ongoing American efforts to maintain its independence. Alexander Hamilton and Henry Cabot Lodge, The Works of
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play an important role in determining a state’s ability to use its economic power. These three classic
theorists laid the epistemological foundations that future generations of scholars would build upon when
exploring the relationship between international economics and security. List’s arguments in favor of
economic nationalism continue to inspire notions of “state capitalism,” national champions, and other
economic strategies in which the state provides a heavy guiding hand to the economy. Hamilton’s ideas
of protecting strategic and infant industries helped lay the foundation for many strategic trade and
protectionist-oriented perspectives. Smith, of course, became the intellectual grandfather of a liberal, free
trade-oriented approach to international economic relations that argued that states will stand to benefit
most when allowed to freely engage with each other under conditions of minimal political distortion.
Smith’s view is an argument that states stand to maximize their own individual welfare by
engaging in unfettered commercial interaction—but what if states cared more about their relative welfare
compared to other states rather than their absolute gains? Almost two hundred years later, these ideas
underpinned another important body of literature located in this “Economic Foundations of Military
Might” portion of the diagram. This body of literature addresses whether states are motivated by absolute
or relative gains from trade. Like the works of Smith, Hamilton and List, at its core this debate lay
questions about why states pursue international economic interaction. Was commerce ultimately
designed to fuel national power or simply sought as a goal in itself to improve popular welfare? If states
were primarily concerned with their performance vis a vis other states in the system, it was because the
international environment was anarchic. Scholars like Joseph Grieco, Michael Mastanduno, and James
Morrow argued that under conditions of international anarchy, military power necessarily became the
final arbiter of interstate conflict and thus, states were constantly forced to consider the eventual security
ramifications of economic gains.7 This logic resulted in an emphasis on how much a given state benefitted
from economic interaction relative to other states, since economic performance would provide the
foundation for military might—the “buck” ultimately stops at relative military capabilities.8
Alexander Hamilton (New York and London: G. P. Putnam's sons, 1904) Vol. IV pp. 70-198. Hamilton’s policies on
public debt, the national bank, munitions production, the US Navy, and his military policies all point to his “jealous
regard for the political and economic power of the nation.” From Earle, Craig, and Gilbert, Makers of Modern
Strategy: Military Thought from Machiavelli to Hitler, p.130 7 For more on the security side of the relative gains debate see: Joseph M. Grieco, "Realist Theory and the Problem
of International Cooperation: Analysis with an Amended Prisoner's Dilemma Model," The Journal of Politics 50, no.
3 (1988): 600-624.; Michael Mastanduno, "Do Relative Gains Matter? America's Response to Japanese Industrial
Policy," International Security 16, no. 1 (1991): 73-113; and James D. Morrow, "When do "Relative Gains" Impede
Trade?" The Journal of Conflict Resolution 41, no. 1, New Games: Modeling Domestic-International Linkages
(1997): 12-37. 8 The logic of this position locates the relative gains debate literature squarely in this portion of the Venn diagram.
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On the opposite side of this debate were scholars like Duncan Snidal, John Ruggie, and Arthur
Stein who believed that states, in fact, were concerned with the absolute gains that accrue from economic
interaction. Drawing on the assumptions of economics in which actors are motivated by maximizing their
own benefits, these scholars downplayed the intrinsic connection between economic gains and a nation’s
international competitive position. According to the absolute gains view, states were primarily concerned
with gaining wealth as an end in itself (to make their domestic populations better off, to become
economically more advanced, etc.). The logic of this position implies that all states would want to
cooperate and engage in mutually-beneficial economic interaction as long as that interaction made them
better off than they would be without it. Yet, many of these scholars found empirically that international
economic cooperation is by no means automatic—rather states need to overcome certain intrinsic
characteristics of international relations that make economic interaction between states difficult. The
prominent group espousing this position came to be known as the neoliberal institutionalists. Much of the
neoliberal institutionalist works focused on how states solved cooperation and cheating problems endemic
to what is essentially a positive-sum pursuit of wealth.9
This neoliberal institutionalist assumption of absolute gains was challenged most prominently by
Joseph Grieco who argued that gains among competitive states are relative rather than absolute. He
contended that states are more concerned about how much they are benefiting relative to other states and
that states’ considerations of their absolute gains alone will not be enough to determine whether they
cooperate or not.10
In other words, states are not just concerned with how well off they become as a result
9 Neoliberal institutionalists tended to stress the ability of regimes to overcome market failures, uncertainty,
transaction costs and information gaps. See: Robert O. Keohane, International Institutions and State Power
(Boulder, CO: Westview Press, 1989), pp. 2-3; For another perspective on how the interests of non-hegemonic states
can prompt them to prolong a regime even in the absence of a hegemon, see David A. Lake, Power, Protection and
Free Trade: International Sources of U.S. Commercial Strategy, 1887-1939 (Ithaca, NY: Cornell University Press,
1988); Although some like Keohane argued that states seek both wealth and power, [See: Robert O. Keohane, After
Hegemony: Cooperation and Discord in the World Political Economy (Princeton, NJ: Princeton University Press,
1984), pp. 18-22.] most neoliberals tend to emphasize the cooperation and coordination problems states face in their
collective pursuit of wealth. Keohane is correct to note that states can pursue both and that the two are not mutually
exclusive. However, in practice much of the neoliberal research agenda focused on mechanisms designed to enable
states to cooperate to achieve mutual gains. See for example: John Gerard Ruggie, "International Regimes,
Transactions, and Change: Embedded Liberalism in the Postwar Economic Order," International Organization 36,
no. 2, International Regimes (1982): 379-415.; Arthur A. Stein, "Coordination and Collaboration: Regimes in an
Anarchic World," International Organization 36, no. 2, International Regimes (1982): 299-324.; Robert O. Keohane,
"The Demand for International Regimes," International Organization 36, no. 2, International Regimes (1982): 325-
355.; Kenneth W. Abbott and Duncan Snidal, "Why States Act through Formal International Organizations," The
Journal of Conflict Resolution 42, no. 1 (1998): 3-32. 10
See Joseph M. Grieco, “Anarchy and the Limits of Cooperation: A Realist Critique of the Newest Liberal
Institutionalism,” International Organization, 42, 3 Summer 1988, pp.485-508. See also David A. Baldwin (ed.),
Neorealism and Neoliberalism: The Contemporary Debate, (New York, NY: Columbia University Press, 1993)
especially Chapters 11 and 12. Robert Powell replied that neorealists have mistaken effects for causes of
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of economic interaction, but rather place considerable weight on how well off other states are doing in
relative terms.
The relative versus absolute gains debate was somewhat artificial since the empirical reality is
that states often pursue both relative and absolute gains (just as Carr and Viner had put forward a
generation earlier, states often pursue both power and wealth).11
What is still missing from this field is a
theory that tells us about how states think about an integrated strategy that seeks to maximize both
“power” and “plenty.” This is one of the gaps in the literature that my work on the role of economics in
grand strategy seeks to address.
A third group of scholars working on the topic of “Economic Foundations of Military Might”
have been concerned with the measurement of national economic standing as part of an effort to measure
the relative strength of “great powers.”12
Such works often focus on long-run economic developments,
natural resource endowments, improvements in factor productivity, etc. They tend to emphasize the
fundamental economic building blocks of military power. A good deal of this literature is concerned with
questions of international power dynamics and how macro-economic factors may serve as leading
indicators of future military might. Although these works tend to be empirically detailed, they often
international cooperation when discussing relative gains. He argued that conditions in a state’s “strategic
environment” determine the state’s sensitivity to relative gains. However, the same strategic environmental
conditions also impede cooperation. In other words, concern for relative gains covaries with lack of cooperation but
both are being caused by conditions in the state’s environment. See Robert Powell, “Anarchy in International
Relations Theory: The Neorealist-Neoliberal Debate,” International Organization, 48, 2 Spring 1994, pp.313-344. In
the end, the relative gains debate eventually seemed to inconclusively run out of steam; For more on the debate see
Grieco, Realist Theory and the Problem of International Cooperation: Analysis with an Amended Prisoner's
Dilemma Model,; Mastanduno, Do Relative Gains Matter? America's Response to Japanese Industrial Policy,;
Robert Powell, "Absolute and Relative Gains in International Relations Theory," The American Political Science
Review 85, no. 4 (1991): 1303-1320.; Duncan Snidal, "International Cooperation among Relative Gains
Maximizers," International Studies Quarterly 35, no. 4 (1991): 387-402.; Duncan Snidal, "Relative Gains and the
Pattern of International Cooperation," The American Political Science Review 85, no. 3 (1991): 701-726.; Joseph
Grieco, Robert Powell, and Duncan Snidal, "The Relative-Gains Problem for International Cooperation," The
American Political Science Review 87, no. 3 (1993): 727-743. 11
See Edward Hallett Carr, The Twenty Years' Crisis, 1919-1939; an Introduction to the Study of International
Relations (London: Macmillan and co., limited, 1940) and Jacob Viner, "Power Versus Plenty as Objectives of
Foreign Policy in the Seventeenth and Eighteenth Centuries," World Politics 1, no. 1 (1948): 1-29. In After
Hegemony, Keohane also argues that states seek both wealth and power noting that the two are not mutually
exclusive Robert O. Keohane, After Hegemony : Cooperation and Discord in the World Political Economy
(Princeton, N.J.: Princeton University Press, 1984) Robert Gilpin’s US Power and the Multinational Corporation is
another work with this basic premise. In it, Gilpin claims the following position as a basis for his own study of
commercial actors: “In the short run there may be conflicts between the pursuit of power and the pursuit of wealth;
in the long run the two pursuits are identical.” Robert Gilpin, U.S. Power and the Multinational Corporation : The
Political Economy of Foreign Direct Investment (New York: Basic Books, 1975) p.37. 12
Kennedy, The Rise and Fall of the Great Powers : Economic Change and Military Conflict from 1500 to 2000,;
William C. Wohlforth, "The Perception of Power: Russia in the Pre-1914 Balance," World Politics 39, no. 3 (1987):
353-381.; Stuart J. Kaufman, Richard Little, and William Curti Wohlforth, The Balance of Power in World History
(Basingstoke England ; New York: Palgrave Macmillan, 2007)
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neglect to give sufficient attention to the idiosyncratic characteristics of a given national economy that
may make specific conversion of economic potential into actual military power more or less efficient; in
other words, the effective conversion exchange rate between economic and military power. For instance,
a largely agrarian economy may be considerably less efficient at converting its economic capabilities into
military might then say an industrial economy; even if both countries have the same size GDP. As we
will see below, these types of questions are treated directly in the literature on mobilization. This
mobilization literature is really a subset of both the literature on economic foundations of military might
(discussed above) and the body of scholarship that addresses topics related to the domestic political
economy of defense—to which we now turn.
If the scholarship located in first large circle focused outward on international military
capabilities and the economic dynamics that underpinned military might, the second major family of
literature focuses inward and examines questions involving the domestic political economy of defense.
Such works focus on explaining economic outcomes in the defense arena like procurement decisions,
bureaucratic politics, the dynamics of the military-industrial complex, and budgetary analysis.13
Scholarship on these topics frequently addresses issues relating to the interaction between business sector
actors and the government. This focus on commercial actors deserves to be highlighted. The important
questions surrounding the role of commercial actors are often neglected in other analytical perspectives
on the exercise of international economic power that treat the state as the exclusive unit of analysis.
Indeed, works in the “Political Economy of Defense” arena seem to suggest that a deeper examination of
the domestic business-government bargaining dynamics may yield important insights regarding the ability
of the state to realize its strategic objectives through the use of its economic power. In particular, I
believe a principal-agent approach provides useful leverage for understanding these types of business-
government interactions.
The last large circle (labeled “C”) encompasses works whose primary concern is the effect of
economics on the likelihood of conflict.14
Whereas the works related to the political economy of defense
13
For example see: Jacob K. Javits, Charles Johnston Hitch, and Arthur F. Burns, The Defense Sector and the
American Economy (New York: New York University Press, 1968); Omer L. Carey, The Military-Industrial
Complex and United States Foreign Policy (Pullman: Washington State University Press, 1969); Morton H.
Halperin, J. A. Stockfisch, and Murray L. Weidenbaum, The Political Economy of the Military-Industrial Complex
(Berkeley: Institute of Business and Economic Research, University of California, 1973); Alan S. Milward, War,
Economy, and Society, 1939-1945 (Berkeley: University of California Press, 1977); Jacques S. Gansler, The Defense
Industry (Cambridge, Mass.: MIT Press, 1980); Paul A. C. Koistinen, The Military-Industrial Complex : A
Historical Perspective (New York: Praeger, 1980). 14
For a typical example of this literature see Solomon W. Polachek, “Conflict and Trade,” Journal of Conflict
Resolution, vol. 24, no. 1, March, 1980 pp. 57-78. Other works include: William K. Domke, War and the Changing
Global System (New Haven: Yale University Press 1988); Mark Gasiorowski, ‘Economic Interdependence and
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tend to be domestically-oriented, scholarship in this third large circle tends to focus on interstate
dynamics and the extent to which economic relations may be related to conflict. Many of the scholars
that are currently doing work at the intersection of economics and security studies today focus their
efforts on the relationship between economic interaction and the likelihood of war (or peace). Being
mainly concerned with the relationship between economics and conflict, almost all of this literature is
largely outside the scope of my areas of research. That said, this corner of the international relations
literature does occasionally touch on areas that are germane to my focus on how states use economic
power. For example, when states seek to use economics as an alternative lever of power (thus avoiding
military conflict), they are engaging in behavior that is of interest to my work.15
Specifically, some
strands of the economics and conflict literature argue that economic developments in the international
system have mitigated the likelihood of conflict. For instance, Richard Rosecrance contends that trade is
simply a more efficient mechanism than military conquest for acquiring material benefits like new
markets and cheaper resources. Rosecrance added that as trade in the international open system became
more and more wide-spread, war has become an increasingly costly method for pursuing national
interests.16
Stephen Brooks also attempted to highlight the role of multinational corporations and the
impact of globalization on "the changing calculus of conflict" in his 2005 Producing Security.17
Brooks
argues that globalization--specifically the disaggregated supply chains that characterize production
networks--has made conflict less likely. However, I would argue that globalization is not necessarily
predisposed to be an unqualified force for peace, rather globalized economic interaction merely provides
an alternative channel of international power projection. The activities of multinational corporations can
be used by states to further their strategic objectives. Others on the topic of globalization and its impact
on conflict like Carl Kaysen and John Mueller also explore the use of economics as an alternative to
International Conflict: Some Cross-National Evidence,” International Studies Quarterly vol. 30, no. 1, March, 1986
pp 23-28; S. Brock Blomberg and Gregory D. Hess, "The Temporal Links between Conflict and Economic
Activity," The Journal of Conflict Resolution 46, no. 1, Understanding Civil War (2002): 74-90.; Solomon W.
Polachek and Judith McDonald, “Strategic trade and the Incentive for Cooperation,” in Manas Chatterji & Linda
Forcey (eds.) Disarmament, Economic Conversion and Peace Management (New York: Prager 1992) pp. 273-284;
and Dale Copeland, “Economic Interdependence and War: A Theory of Trade Expectations,” International Security,
vol. 20, no. 4, 1996 pp. 5-41. Some would also include the scholarship that reverses the causal arrow and examines
the effect of conflict on economic interaction. See Katherine Barbieri & Jack S. Levy, “Sleeping with the Enemy:
The Impact of War on Trade” Journal of Peace Research vol. 36, 1999 pp. 463-479. 15
As mentioned below, works located in this area of the Economics and Conflict literature would be reflected in the
section of the diagram labeled “G.” 16
See Richard Rosecrance, The Rise of the trading State: Commerce and Conquest in the Modern World (New
York: Basic Books 1986). 17
Stephen G. Brooks, Producing Security : Multinational Corporations, Globalization, and the Changing Calculus
of Conflict (Princeton, N.J.: Princeton University Press, 2005).
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military power.18
One need not agree that economic conflict has superseded military conflict as the
dominant means of international competition or that a high degree of economic interaction has made war
obsolete to recognize that states have a range of tools for pursuing their strategic interests. Economic
levers of power are certainly one of those. Understanding exactly how such levers of power are exercised
is a key element of this literature that deserves deeper exploration.
It should be noted that such works that explore economics as an alternative tool of national power
are not the norm in this family of literature. Indeed, most work located in this prolific literature on
economics and conflict takes economic interaction as being exogenous and focuses its attention on the
statistical correlation between economic interaction (or lack thereof) and the onset of war.19
Broadly
speaking, this literature can be organized into four causal arguments: 1.) “Economic interaction causes
peace,” 2.) “Economic interaction does not cause peace,” 3.) “Economic interaction does not cause war,”
and 4.) “Economic interaction causes war.”
On this first proposition—that economics causes peace—there exist a number of different
rationales of why economics might bring about peace. The most common variant of why trade fosters
peace is that states are unwilling to jeopardize the stable benefits they enjoy from continued economic
interaction. Conflict would run the risk of destroying the economic links that are beneficial—and in some
cases, crucial—to the nation’s continued progress and prosperity. Most variants of this theory trace their
roots to Cobden.20
He argued that trade promoted peace by fostering economic dependence between
nations. States would then come to realize that their own continued prosperity depended on the well-
being of their trading partners and the continued maintenance of strong economic links between them.
Norman Angell carried Cobden’s theory into the modern era and argued that the use of military means
18
See Carl Kaysen, “Is War Obsolete? A Review Essay,” International Security, vol. 14, no. 4, 1990. and John E.
Mueller, Retreat from Doomsday : The Obsolescence of Major War (New York: Basic Books, 1989). Edward
Luttwak is also known for his views on globalization and conflict: "Patient investment capital is replacing firepower,
the development of civilian products is displacing military innovation and the penetration of markets is displacing
military garrisons on foreign soil." Edward N. Luttwak, "America's Setting Sun," New York Times September 28,
1991 p. 17. 19
For a very good critique of this literature see: Mansfield and Pollins, The Study of Interdependence and Conflict:
Recent Advances, Open Questions, and Directions for Future Research, 20
Richard Cobden, Political Writings (London; New York: W. Ridgway; D. Appleton & co., 1867) and Richard
Cobden and Richard Cobden, England, Ireland, and America (London: J. Ridgway and Sons, 1835) This body of
literature has also often been linked to the democratic peace literature that often views Kant as its philosophical
genesis: A. C. Armstrong, "Kant's Philosophy of Peace and War," The Journal of Philosophy 28, no. 8 (1931): 197-
204.; Michael W. Doyle, "Kant, Liberal Legacies, and Foreign Affairs," Philosophy and Public Affairs 12, no. 3
(1983): 205-235.; Michael W. Doyle, "Kant, Liberal Legacies, and Foreign Affairs, Part 2," Philosophy and Public
Affairs 12, no. 4 (1983): 323-353.; Michael W. Doyle, "Liberalism and World Politics," The American Political
Science Review 80, no. 4 (1986): 1151-1169.
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will not improve the conqueror’s wealth.21
As such, conquest had been replaced as a mechanism for
wealth-building by the more efficient wealth-building tools of international economic trading ties.
Solomon Polachek is generally credited with formalizing this view.22
Polachek’s work touched
off a vigorous debate that continues today. Polachek’s utility model posits that the primary cost of
conflict is the lost potential welfare gains from trade.23
If the system is peaceful and trade is flourishing,
Polachek concludes, all countries will be benefiting and none will have the incentive to jeopardize the
system by initiating conflict. He later elaborated this point and demonstrated that even if a complete
severing of trade relations did not result, conflict would lead to less favorable terms of trade. In his 1992
article, Polachek showed that the more interdependent two countries are, the less likely they are to fight
each other.24
Unfortunately, Polachek does not control for other causes of war in his models. Some of
these strategic factors may account for his results. Oneal & Russett did include controls for geographic
contiguity, relative economic growth, each of the dyad’s members’ relative military capabilities, and
whether they were allies.25
Dale Copeland and Paul Papayaonou produced some of the most thought-
provoking work to grow out of the Polachek scholarship. Copeland developed a theory that stresses the
actor’s perceptions of future likelihood of free trade.26
Copeland’s synthesis incorporates elements of
both liberal and realist views producing a more compelling theory than most of the work in this area.
Papayaonou posited that concern for jeopardizing economic benefits would manifest itself differently
depending on the nature of domestic institutions.27
Papayaonou’s work extends Arad and Hirsch who
21
Norman Angell, The Great Illusion (New York: G. P. Putnam’s Sons 1908—reprinted 1933). 22
Solomon W. Polachek, “Conflict and Trade,” Journal of Conflict Resolution, vol. 24, no. 1, March, 1980 pp. 57-
78 and Solomon W. Polachek and Judith McDonald, “Strategic trade and the Incentive for Cooperation,” in Manas
Chatterji & Linda Forcey (eds.) Disarmament, Economic Conversion and Peace Management (New York: Prager
1992) pp. 273-284. 23
Solomon W. Polachek, “Conflict and Trade,” Journal of Conflict Resolution, vol. 24, no. 1, March, 1980 pp. 57-
78. Polachek is often considered to be the seminal formal work on this perspective. 24
Solomon W. Polachek and Judith McDonald, “Strategic trade and the Incentive for Cooperation,” in Manas
Chatterji & Linda Forcey (eds.) Disarmament, Economic Conversion and Peace Management (New York: Prager
1992) pp. 273-284. This work examined the actor’s elasticity of import demand and export supply toward the target
country and found that the more inelastic this demand and supply was—i.e. the less easily the country could switch
to substitute goods—the less likely the country would become involved in conflict with the target country. 25
John R. Oneal and Bruce M. Russett, "The Classical Liberals were Right: Democracy, Interdependence, and
Conflict, 1950-1985," International Studies Quarterly 41, no. 2 (1997): 267-293.There is a large body of literature
on this topic. Here, I only present a sample of this body of work to provide context for my main focus: the exercise
of economic statecraft. For a good resource on the various debates over the relationship between economic
interaction and conflict see: Edward D. Mansfield and Brian Pollins, Economic Interdependence and International
Conflict : New Perspectives on an Enduring Debate (Ann Arbor: University of Michigan Press, 2003). 26
Dale Copeland, “Economic Interdependence and War: A Theory of Trade Expectations,” International Security,
vol. 20, no. 4, 1996 pp. 5-41. 27
See Paul A. Papayaonou “Interdependence, Institutions and the Balance of Power,” International Security, vol. 20,
no. 4, 1996 pp. 42-76. For additional historical evidence that includes the turn of the century Franco-Russian
alliance, Pre-WWI and Pre-WWII decision-making and early cold war economic containment strategy, see Paul A.
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examined the effect of trade on domestic economic actors and concluded that enhanced trade generated
incentives for consumers, producers, exporters and importers to lobby for continuation and expansion of
healthy trading relationships.28
Using a similar line of reasoning, functionalists like Haas, Deutsch and
Mitrany also claim that economic interaction causes peace. This school of thought claims that economic
interaction causes additional economic and non-economic linkages to form between societies.29
For these
theorists, economic interaction promotes better communication, reduced misunderstanding through
greater cultural familiarity and fosters institutions that help diffuse conflicts before they can escalate.
Patrick McDonald focused his domestic-oriented rationale for how economics causes peace on the
proliferation of a particular institution: private property rights.30
Each of these theorists struggle with
understanding the causal mechanisms that are operating to generate the outcomes they observe. However,
statistical correlation is a notoriously difficult tool to use to establish specific causality.31
For
understanding exactly how economic interaction generates externalities related to a nation’s security, I
would suggest that we need to look at in-depth case studies that reveal causal relationships between a
given type of economic interaction and the security effects of that interaction.
The second causal argument of this literature—that economics does not cause peace—grew up
mainly in opposition to the affirmative positions just discussed. For the most part, theories in this
category tend to stop short of claiming that economic relationships necessarily result in war. Rather,
these authors argue that economic interaction tends to sow the seeds for conflict more than economic
interaction tends to bolster peace. Since these theories offer more mitigated support for the answer that
economic interaction causes war, I have categorized them as ‘not causing peace’ rather than ‘causing war’
per se.32
Because of its historical breadth, one of the more interesting theories in this area is put forward
by Katherine Barbieri. Barbieri examined an extensive set of state dyads dating from 1870-1938, finding
Papayaonou, Power Ties: Economic Interdependence, Balancing and War, (Ann Arbor: University of Michigan
Press 1999). 28
Ruth W. Arad and Seev Hirsch, “Peacemaking and Vested Interests: International Economic Transactions,”
International Studies Quarterly, vol. 25, 1981 pp. 439-468. 29
Some samples of these ‘spillover’ concepts may be found in Ernst B. Haas, Beyond the Nation-State (Stanford:
Stanford University Press 1964) and in David Mitrany, A Working Peace System (Chicago: Quadrangle 1964) as
well as in Karl Deutsch’s Political Community and the North Atlantic Area: International Organization in the Light
of Historical Experience (Princeton: Princeton University Press 1957). 30
Patrick J. McDonald, "The Purse Strings of Peace," American Journal of Political Science 51, no. 3 (2007): 569-
582. 31
Mansfield and Pollins, The Study of Interdependence and Conflict: Recent Advances, Open Questions, and
Directions for Future Research 32
Two other leading authors who would fit into this category would be Richard Cooper and Mark Gasiorowski. See
Richard N. Cooper, The Economics of Interdependence: Economic Policy in the Atlantic Community (New York:
McGraw Hill 1968) and Mark Gasiorowski, ‘Economic Interdependence and International Conflict: Some Cross-
National Evidence,” International Studies Quarterly vol. 30, no. 1, March, 1986 pp 23-28.
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“little empirical support for the liberal proposition that trade provides a path to interstate peace.”33
Instead, she found that increased trade interaction frequently corresponded with militarized conflict. To
explain why increasing economic links tend to foster conflict, she speculates that the benefits of trade
may be subject to diminishing returns while the costs or risks associated with increased economic links
may grow exponentially as countries become more and more dependent.
As Hirschman illustrates, this sort of dependency can be leveraged to impose political control
over the dominated states. This sort of policy was Germany’s strategy toward the states of Eastern
Europe. In his 1945 work, Hirschman documented how Germany developed a conscious national strategy
for making the states of Eastern Europe economically dependent on Germany. The intention was to have
Germany manipulate this dependence to force political and further economic concessions from the
dependent states.34
Carried to its logical extension, such dependence can create tensions between the
trading partners when the target state perceives the dependency as threatening its sovereignty.35
The third proposition—that economics does not cause war—is largely a group of authors that
argue against the significance of economic interaction as a cause of conflict. In this category are those
theorists who contend any independent impact that trade may have on the likelihood of war is
overshadowed by more germane strategic factors that account for why a state becomes involved in a
war.36
Neorealists generally relegate economic interaction to the status of “low politics” and are skeptical
that any economic considerations might play a significant role in determining whether a state decides to
go to war.37
However, classical realists do tend to allow for trade to be used as a tool for the state to
exercise its influence and extend its power.38
In this perspective, trade is seen as largely instrumental and
subservient to the larger pursuit of power. It is to be preserved only as long as it increases a country’s
power position but if war is a more effective method for increasing that country’s position then war ought
to be pursued. Authors like the classical realists who largely argue for the primacy of non-economic
causes as the root of war, also nonetheless recognize that economic interaction can be usefully used by
33
Katherine Barbieri, “Economic Interdependence: A Path to Peace of a Source of Interstate Conflict?” Journal of
Peace Research vol. 33, 1996, pp 29-49. 34
Albert O. Hirschman, National Power and the Structure of Foreign Trade (Berkeley: University of California
Press 1945 [1980—reprint]). 35
See Hirschman above. For more on the costs associated with any sort of economic relationship, see Cooper
above. 36
For a good example of this perspective see Barry Buzan, “Economic structure and International Security: the
Limits of the Liberal Case,” International Organization, vol. 38, no. 4 1984 pp. 597-624. 37
See Kenneth N. Waltz, “The Myth of National Interdependence,” in Charles P. Kindleberger (ed.) The
Multinational Corporation (Cambridge: MIT Press 1970) for the primacy of non-economic strategic factors in the
causation of war. See also Waltz, Theory of International Politics, (Reading, MA: Addison-Wesley 1979). 38
Hans Morganthau, Politics Among Nations (New York: Alfred A. Knopf 1953).
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states in their pursuit of strategic goals.39
This group of theorists may be summarized as believing that
strategic interests are the primary cause of war and that economic interests will be sacrificed to security
interests if a serious conflict should develop.40
While this group of theorists may be correct in asserting
the ultimate primacy of a state’s strategic interests, this position begs the question of how states may
nonetheless pursue their interests through economic rather than military means. Precisely how states
exercise such power in a contemporary international environment deserves to be better understood.
The final causal argument in this economics and conflict body of literature states that economic
interaction is a cause of war rather than peace. This theoretical perspective traces its roots to Rousseau
who argued that “interdependence breeds not accommodation and harmony, but suspicion and
incompatibility.”41
Rousseau believed that interaction generated inequality and made states conscious of
that inequality and that, in turn, bred discontent and insecurity both of which fostered conflict. For
Rousseau, greater economic interaction simply offers more opportunity for conflicts to arise. Later
authors elaborated on Rousseau’s theoretical proposition by seeking to identify specific mechanisms and
proximate economic causes for conflict.
In fact, as it often the case with cumulative bodies of scholarship that build on earlier works, the
search for specifying economic causes of conflict has produced a distinct subset of the economics and
security literature: those works that address strategic goods and issues of sensitive trade. This subset of
the literature deals with the economic activity related to resources, technologies, knowledge or other
assets that carry significant implications for a nation’s military power. These works both borrow from
and trace their intellectual heritage to the conceptual overlap between the literature on economics and
conflict and the literature on the economic foundations of military might.42
Bridging families of work
(like the “Strategic Goods and Sensitive Trade” literature) are subsets of the three large families of
literature on economics and security that have been discussed up to this point. As such, they are situated
at the areas of overlap between the three large circles on the diagram.
39
See Arnold Wolfers, Discord and Collaboration; Essays on International Politics (Baltimore: Johns Hopkins
Press, 1962); Hans J. Morgenthau, Politics among Nations; the Struggle for Power and Peace, 2d , rev. and enl ed.
(New York: Knopf, 1954) pp.38-40. 40
See Kal J. Holsti, “Politics in Command: Foreign Trade as National Security Policy,” International Organization
vol. 40, pp. 643-671. 41
As quoted on page 319 in Stanley Hoffman’s, “Rousseau on War and Peace,” American Political Science Review
vol. 57, 1963, pp 317-333. 42
For example, the “Strategic Goods and Sensitive Trade” literature portion of the diagram shaded with green wavy
lines (labeled “D”) is formed at the juncture of the “Economic Foundations of Military Might” and the “Economics
& the Likelihood of Conflict” circles. This area of intersection reflects the intellectual overlap that is inherent in the
strategic trade literature. Trade in strategic goods or sensitive technologies is a form of economic interaction that
often directly carries implications for a nation’s military capabilities. At the same time, competition over strategic
natural resources or vital supplies may constitute a cause of conflict.
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Anne Uchitel provides a good illustration of this sort of “bridging” work. Her argument that the
nature of certain assets makes them more or less strategically significant places her squarely into the
“Strategic Goods & Sensitive Trade” literature—labeled “D” in the diagram.43
At the same time, she
argues that economic interaction (specifically transactions in, or competitions for, such goods) may be a
cause of war rather than peace. She contends that countries that are dependent on imports of strategic
goods will be forced to “adopt expansionist policies and offensive military strategies.” 44
For Uchitel, it is
not so much the need for markets as the need for a reliable supply of strategic material that is likely to
cause a state to go to war. Framed in this light, her work may be thought of as reflective of the economics
and conflict literature. At the same time, Uchitel is implicitly noting that states require certain critical
goods if they are to be able to develop military capabilities—an important theme in the economic
foundations of military might family of literature. For these reasons, Uchitel and the rest of the “Strategic
Goods and Sensitive Trade” literature may be conceptually located at the intersection of the “Economic
Foundations of Military Might” literature and the “Economics and Conflict” literatures.
Although there was a considerable amount of scholarly work done on “strategic trade” in the
1980s, much of what constituted this “strategic trade literature,” (despite its name) had very little to do
with grand strategy.45
Rather, such works typically focused instead on the relative merits of protectionism.
A refreshing exception is Marc Busch’s, Trade Warriors: States, Firms, and Strategic Policy in High
Technology, which provides useful insight about how well states can internalize and capitalize on the
43
Uchitel’s emphasis on the nature of the goods being traded is an interesting insight and deserves to receive
additional attention. 44
See Anne Uchitel’s chapter, “Interdependence and Instability,” in Jack Synder and Robert Jervis (eds.), Coping
with Complexity in the International System (Boulder: Westview Press 1993). Quote is from p. 243. She presents
Nazi Germany, Imperial Japan, and Great Britain in the interwar period as evidence of her theory. Whereas
Germany and Japan had to adopt offensive strategies to secure their strategic materials, Great Britain could afford to
rely on a more defensive strategy that ensured its continued access to colonial supplies. 45
A typical example of such work is Paul R. Krugman, Strategic Trade Policy and the New International
Economics (Cambridge, Mass.: MIT Press, 1986). Although this edited volume does a fine job presenting various
perspectives on “strategic trade,” there is very little discussion of grand strategy and the role of economics in
pursuing national strategic interests. For the most part, these are treated as exogenous factors. For instance, James
Brander’s chapter provides a seminal essay in favor of strategic trade. His case is one made explicitly on
exclusively economic grounds. See James A. Brander’s Chapter 2 “Rationales for Strategic Trade and Industrial
Policy,” in ibid. pp. 23-46. “This paper is concerned exclusively with the economic rationale for certain trade
policies; economic objectives are the only objectives considered. This is not to deny that there are legitimate
noneconomic grounds for trade policy. Export subsidies, for example, might well have a role in helping to provide
key exports to countries with friendly governments, whereas export restraints might be used to inhibit technology
transfer to unfriendly countries. Such policies are undoubtedly important, but they are not taken up here.” ibid. p.
24. Unfortunately, such sentiments reflect the relatively narrowly economic scope that colors much of the strategic
trade literature.
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beneficial externalities associated with particular patterns of trade.46
Unfortunately, even his work largely
neglects questions of grand strategy and the various techniques and tools that states use to manipulate
their commercial actors. In fact, remarkably little empirical work has been done that explicitly examines
the specific causal mechanisms by which countries use economic interaction to further their larger
strategic goals.47
In his work on strategic goods Robert Gilpin pointed out that economic nationalists fear
interdependence because it is likely to lead to greater uncertainty about the continued supply of strategic
goods which would then be a cause for insecurity that would increase the likelihood that conflict would
result.48
Although Gilpin posits the more traditional causality: that countries may directly clash with
other countries in a competition to secure strategic goods, he and Uchitel share a common view that
economic interaction need not necessarily always lead to peace. In fact, in areas of strategic significance,
economic interaction (whether trade or investment) is often fraught with national security complications.
The competitive dynamics that are an undercurrent in Gilpin’s “economic nationalism” logic also
seem to underpin the causal links between economic interaction and conflict for the “Leninist
Imperialism” literature. However, both Gilpin and Uchitel offer a rationale that differs substantially from
the well-known Marxist-Leninist views of capitalist imperialism that believe states compete for access to
ever decreasing new markets. 49
Such competition sows the seeds for eventual imperialism and military
conflict as states intervene on behalf of their commercial interests.50
Just as the “Strategic Goods & Sensitive Trade” literature can be thought of as a subset of the
“Economics and War” literature that argues that economics may be a cause of war, so too can we
46
Marc L. Busch, Trade Warriors : States, Firms, and Strategic Policy in High Technology (Cambridge England ;
New York: Cambridge University Press, 1999). 47
Many strategically-focused works have often neglected the role of commercial actors, while works that examine
commercial actors tend not to consider their behavior in a strategic international context. See: Karen M. Sutter,
"Business Dynamism Across the Taiwan Strait," Asian Survey 42, no. 3 (May/Jun, 2002), 522. A notable exception
is Rich Nation, Strong Army (Ithaca: Cornell University Press, 1996) in which Richard Samuels outlines how Japan
has pursued technological advancement to further its national interest. 48
See Robert Gilpin’s chapter, “Economic Interdependence and National Security in Historical Perspective,” in
Klaus Knorr and Frank Trager (eds.), Economic Issues and National Security (Lawrence: Regents Press of Kansas
1977) pp. 39-42. Like Uchitel, this piece of Gilpin’s work is most appropriately placed in the “Strategic Goods &
Sensitive Trade” area of the diagram. 49
Vladimir Ilyich Lenin, Imperialism, the Highest Stage of Capitalism (New York: International publishers, 1933). 50
Choucri & North offer a related logic of how trade causes war with a greater emphasis on the Malthusian (rather
than class) impetus. See Nazli Choucri & Robert C. North, “Lateral Pressure in International Relations: Concept
and Theory,” in Manus I. Midlarsky (ed.), Handbook of War Studies (Boston: Unwin Hyman 1989) pp. 289-326. In
their view, the finite resources available make states increasingly competitive in their drive to secure access to cheap
resources. As trade expands, greater and greater amounts of resources must be found to fuel growing populations.
These pressures cause states to go to war to guarantee their access to resources.
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conceive of the “Leninist Imperialism” literature (labeled “F” in the diagram) as another argument of how
economics may cause war rather than peace. Due to its emphasis on conflict, the “Leninist Imperialism”
literature may be categorized as a subset of the larger “Economics and Conflict” literature. Whereas the
“Strategic Goods & Sensitive Trade” literature drew on elements of both the “Economic Foundations of
Military Might” and the “Economics & the Likelihood of Conflict” literatures, theories of Leninist
imperialism combine domestically-oriented political economy aspects found in the “Political Economy of
Defense” literature with the internationally-oriented interstate dynamics characteristic of “Economics &
the Likelihood of Conflict” literature.
Theories of Leninist imperialism frequently point to capitalist expansionary tendencies as a root
cause of war. This literature often argues that commercial (capitalist) actors enjoy such extreme levels of
agency that they influence and even direct the behavior of the state.51
Much of this literature argues that
commercial actors must be the unit of analysis since the state is little more than a puppet of the capitalist
class that is constantly searching for new markets. This quest often places states in conflict with other
states who are competing for the same markets and/or resources. While this focus on the commercial
actor is a helpful contribution to scholarship on economics and security, the majority of this literature
overstates the agency that commercial actors enjoy in foreign policy. In addition, a considerable portion
of this literature is prone to conspiratorial biases that undermine the reliability of its findings.
If the Leninist imperialism literature views commercial actors as using states to pursue their
capitalist interests, the literature on economic mobilization flips this causality and examines states’ efforts
to harness the capabilities of commercial actors and direct those efforts toward war. This “Mobilization
and Wartime Economics” literature lies at the intersection of a country’s domestic political economy and
its latent economic power base (labeled “E” in the diagram).52
It focuses on a narrow subset of the more
general defense problems of organization and structural architecture found in the political economy of
51
For the classic statement of capitalist imperialism see: Lenin, Imperialism, the Highest Stage of Capitalism.
Other works in this tradition include: Lionel Robbins, The Economic Causes of War, (New York: Macmillan, 1940);
H. C. Engelbrecht and Frank Cleary Hanighen , Merchants of Death; a Study of the International Armament
Industry, (New York: Dodd, Mead & Co., 1934); Victor Perlo, American Imperialism (New York: International
Publishers, 1951); Victor Perlo, Militarism and Industry; Arms Profiteering in the Missile Age (New York:
International Publishers, 1963); Michael Barratt Brown, After Imperialism (London: Heinemann, 1963); Michael
Barratt Brown, Essays on Imperialism (Nottingham: Bertrand Russell Peace Foundation, 1972); Michael Barratt
Brown, The Economics of Imperialism (Harmondsworth: Penguin Education, 1974); James Adams , Engines of War
: Merchants of Death and the New Arms Race (New York: Atlantic Monthly Press, 1990); Stephen C. Schlesinger
and Stephen Kinzer, Bitter Fruit : The Story of the American Coup in Guatemala, Rev. and expand , 2nd David
Rockefeller Center for Latin American Studies ed. (Cambridge, Mass.: Harvard University, David Rockefeller
Center for Latin American Studies, 2005). 52
This body of literature is indicated by the red, brick-like pattern reflecting the overlap between the “Economic
Foundations of Military Might” and the “Political Economy of Defense” circles.
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defense literature. The mobilization literature can also be considered a specific component of the
“Economic Foundations of Military Might” literature since the “Mobilization and Wartime Economics”
literature explicitly concerns itself with how those basic economic building blocks are actually translated
into war fighting capabilities (usually under wartime conditions). Such works are concerned with the
process of wartime industrial mobilization—or how states practically convert their potential war fighting
capability into actual military power.53
The works found in both the “Economic Foundations of Military Might” and “Mobilization and
Wartime Economics” segments have been primarily concerned with understanding phenomena related to
an economy’s ability to fuel a country’s military power. Although useful for calling attention to the
economic dimension of national power, these literatures tend to omit the non-military applications of
economic power that can be just as important in realizing a country’s strategic objectives. In other words,
issues surrounding a country’s application of its direct economic power (rather than having to convert it to
military power first) are largely unaddressed in this area of the literature.54
Developing a better
understanding of how states go about such exercising of direct economic power is a key contribution of
my first book (forthcoming, Cornell UP).
Up to this point, we have discussed the three large families of literature pertaining to the
relationship between economics and security; namely: A.) the economic foundations of a nation’s
outward-oriented military might, B.) the inward-oriented questions of domestic political economy of
defense, and C.) the inter-state dynamics that involve economics and conflict. We have also adjusted our
aperture and explored the three bodies of what I have called “bridging scholarship” that conceptually
53
Horst Mendershausen, The Economics of War, Rev. ed. (New York: Prentice-Hall, inc., 1943); Klaus Eugen
Knorr, The War Potential of Nations (Princeton: Princeton University Press, 1956); Hardy L. Merritt, Luther F.
Carter, and National Defense University. Mobilization Concepts Development Center, Mobilization and the
National Defense (Washington, D.C.: National Defense University Press : Supt. of Docs., U.S. G.P.O., distributor,
1985); Martin L. Van Creveld, Supplying War : Logistics from Wallenstein to Patton, 2nd ed. (Cambridge ; New
York: Cambridge University Press, 2004). This body of literature includes much of the work that economists have
done in the arena of security studies. See for example: Charles Hitch, "National Security Policy as a Field for
Economics Research," World Politics 12, no. 3 (1960): 434-452. and John J. Clark, The New Economics of National
Defense (New York: Random House, 1966). A significant portion of the economics component of the curriculum
that is taught at China’s National Defense University is also focused on this type of work. See for example: 国防经
济学 (National Defense Economics) edited by 库桂生 (Ku Guisheng) and 沈志华 (Shen Zhihua), (Beijing: National
Defense University Press, 2007); 中国国民经济应变力研究 (their trans: Emergency Capability of National
Economic Mobilization of China) by 朱庆林(Zhu Qinglin), (Beijing: Military Science Press, 2007) and 国民经济动
员学教程,第二版 (National Economy Mobilization Course, 2nd ed.) by 朱庆林(Zhu Qinglin), (Beijing: Military
Science Press, 2007) among others.
54 The area that has given more attention to international economic power is that literature found at the heart of the
diagram—namely the literature on the nature, causes and use of international economic power. This literature is the
focus of the next section.
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emanate from the areas of overlap between these three families; namely: D.) strategic goods and sensitive
trade, E.) mobilization and wartime economics and F.) Leninist imperialism.
In the literature review thus far, I have cast the net wide and offered a (necessarily shallow) tour
of the full range of the bodies of literature that seek to address aspects of the relationship between
economics and national security. This effort was partly to situate my own work in the context of the
larger bodies of economics and security literature. I have borrowed from and been inspired by various
elements found across these literatures. At the same time, my critiques of these efforts, my perceptions of
gaps and overlaps in the literatures as well as areas of their underdevelopment have helped guide the
focus of my own research agenda.
Although aspects of each of these six bodies of literature speak to my research focus, none are as
directly germane as the body of literature found at the core of the diagram in the region labeled “G.” This
body of literature specifically seeks to explore the nature, causes and exercise of international economic
power. This literature is located at the center of the Venn diagram, reflecting the intellectual intersection
of a part of each of the literatures discussed above. Questions relating to international economic power
synthesize elements of a nation’s economic foundation, its domestic strategic political economy and the
competitive struggle for power in the international arena. In addition, the best work examining the nature,
causes and exercise of international economic power often incorporate both elements of the principal-
agent dynamics that lay at the heart of the mobilization and Leninist literatures as well as the
consideration of security externalities that drive much of the strategic goods literature. My own work
seeks to extend the literature at the intersection of these intellectual currents. Let us therefore turn to the
extant scholarship found at this core: the literature on “Economic Statecraft.”
Evolution of the Study of Economic Statecraft
A good deal of the scholarship from the World War II era that laid the foundations for modern
political science also recognized the importance of understanding the relationship between economics and
security.55
One of the best known, early efforts to examine how states could use their economic relations
to pursue security goals is Albert Hirschman’s study of Germany’s trade relations with its weaker Eastern
55
Much of the mobilization and political economy of defense works discussed above date to the World War II or to
the post-War era.
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European neighbors.56
Hirschman depicted the German state policies designed to establish, deepen and
exploit asymmetric structural economic dependence on the part of Eastern European states on Germany
before World War II. By the time that Hirschman wrote his well-known book, Herbert Feis had already
discussed how pre-World War I powers used investment and finance to facilitate their own security
policies.57
Both of these works helped to frame how states could use various types of economic
interaction to pursue their strategic goals. Eugene Staley premised his 1935 work, War and the Private
Investor, on the notion that the economic behavior of private sector actors cannot be fully understood
without also considering the political and military contexts that frequently influenced ultimate economic
outcomes.58
His work drove home the importance of considering the commercial actors when examining
how states wield their international economic power. In particular, Staley’s framing of his cases reflected
the heart of the principal-agent challenge inherent in economic statecraft: namely whether the commercial
actor or the state is ultimately driving the strategic outcome. The classical realist E.H. Carr also made a
seminal contribution to our understanding of economic power when he stated that ‘‘the military and
economic weapons are merely different instruments of power.’’59
This critical insight provides the basis
for my assumptions that economic power may be studied in much the same way that the field of security
studies examines the nature and application of military power. Jacob Viner elaborated on the relationship
between wealth and power in his 1948 piece, “Power Versus Plenty as Objectives of Foreign Policy in the
Seventeenth and Eighteenth Centuries.”60
Viner argued that wealth and power are not mutually exclusive
goals for states to pursue. Rather, Viner believed that power is complementary to wealth and vice versa.
While I do not directly disagree with Viner, I offer a slightly different approach more in line with Carr’s
perspective. I would argue that the pursuit of wealth is really little more than the national pursuit of
power by other means.
56
Albert O. Hirschman, National Power and the Structure of Foreign Trade (Berkeley and Los Angeles: University
of California press, 1945). 57
See: Herbert Feis, Europe the World's Banker, 1870-1914 (New Haven; London: Yale university press; H.
Milford, Oxford university press, 1931). Feis would later also document the American and British efforts to support
China’s currency against Japanese attempts to undermine the currency as part of Japan’s strategy to fracture China
into more easily conquered autonomous regions. Herbert Feis, The Road to Pearl Harbor; the Coming of the War
between the United States and Japan (Princeton: Princeton University Press, 1950). 58
Eugene Staley, War and the Private Investor; a Study in the Relations of International Politics and International
Private Investment (Garden City, N.Y.: Doubleday, Doran & Co., inc., 1935). This work was an early attempt to
systematically examine cases in which commercial actors behaved in ways that were conducive to states’ strategic
objectives. Staley was also keen to note that his research often found governments doing the bidding of their
commercial actors as well. 59
Carr, The Twenty Years' Crisis, 1919-1939; an Introduction to the Study of International Relations, pp. 117-120. 60
See Jacob Viner, “Power Versus Plenty as Objectives of Foreign Policy in the Seventeenth and Eighteenth
Centuries” World Politics 1,1 pp.1-29. Viner examines evidence primarily from British and French Mercantilists
showing that rather than claim power is more important than wealth, states sought both.
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Although some of these early works in the field of economics and security examined ways states
may seek to further their strategic goals through private sector or quasi-private sector actors,61
most of this
literature is largely framed in mercantilistic terms that do not account for the complex relations between
the state and the firm in a more modern, liberalized economic context. Although the broad, general
concepts pertaining to the role of the state in managing its economic affairs may still provide insightful
conceptual leverage, much of the specific empirical relevance of these early works are naturally rather
limited in a contemporary Twenty-First Century context.
Later works did seek to explore how states could use economic power to achieve their interests in
a more modern, globalized and interdependent environment. Authors in this spirit include Klaus Knorr,
Robert Gilpin, Robert O. Keohane, and Joseph S. Nye whose work on the nature and exercise of modern
transnational economic power was both insightful and path breaking.62
Knorr’s work carried Carr’s initial
insight—that economic power and military power are merely two sides of the same coin—into a more
modern multinational context. Knorr sought to provide a theoretical framework for understanding how
modern states harness, aggregate and utilize the economic tool in international relations. Knorr applied
economic concepts and principles to parse out the nature, mechanics and consequences of economic
power.63
In many respects, my work is an extension of Knorr’s efforts to analyze the economic
dimensions of the strategic international power dynamics between states in the international system.
Although Knorr provided an intriguing foundation for the study of economic power, his enumeration of
the various uses of economic leverage lacked a unifying logic as well as a mutually exclusive and
collectively exhaustive categorization. By building a framework based on understanding the relationship
between economics and security to be one of “security externalities,” I bring a unifying conceptual
organization to many of the “uses” of economic power that Knorr first itemized.
While Knorr’s work is an important contribution, he focused on the macro-level strategic aspects
of economic power: “Our focus on government policy excludes from major consideration those kinds of
61
See especially Staley’s War and the Private Investor and Hirschman p. 170. 62
See Klaus Eugen Knorr, Power and Wealth; the Political Economy of International Power (New York: Basic
Books, 1973), Knorr, The Power of Nations : The Political Economy of International Relations, Klaus Eugen Knorr
and Frank N. Trager, Economic Issues and National Security, Vol. 7 (Lawrence: Published for the National Security
Education Program by the Regents Press of Kansas, 1977). Also see Robert Gilpin, U.S. Power and the
Multinational Corporation : The Political Economy of Foreign Direct Investment (New York: Basic Books, 1975);
Robert O. Keohane, After Hegemony: Cooperation and Discord in the World Political Economy (Princeton, NJ:
Princeton University Press, 1984); and Robert O. Keohane and Joseph S. Nye, Power and Interdependence: World
Politics in Transition (Boston: Little, Brown, 1977). 63
See especially Chapter 4 “International Economic Leverage and Its Uses,” of Knorr and Trager, Economic Issues
and National Security, and Chapter I “International Power and Influence” of Knorr, The Power of Nations : The
Political Economy of International Relations,.
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international relations that occur between private groups and individuals across national boundaries.”64
As a result, he was not able to fully explore the tactical dimensions of the actual exercise of economic
power. One area in particular that seems to be lacking in Knorr’s work is the role of commercial actors.65
Even though “many of these interactions are fostered by governments (e.g., international trade conducted
by private business), and their regulation often raises issues of foreign policy” Knorr was not able to go
into any significant level of detail regarding the operational role of commercial actors in the exercise of
economic statecraft.66
By developing a commercial actor-based approach to economic power, I extend
some of Knorr’s principles and examine how they actually play out in modern practice.
Other important authors that contributed to the development of this economic power literature,
while providing important theoretical insights, likewise tended to lose sight of the commercial actors.
Susan Strange made a significant contribution with her depiction of the structural dimension of economic
power.67
Although mainly concerned with national macroeconomic goals, Richard Cooper was among
the first to elucidate the constraining nature of modern interdependence on states’ use of economic tools
to achieve their objectives in the international system.68
Keohane and Nye explicitly sought to examine
the various ways in which states were made vulnerable to economic pressures from other states in this
interdependent world.69
Their notions of asymmetry and dependence exploitation inform many of the
concepts and ideas put forward in my work. Although these works blazed important new paths in the
study of international economic power, they often sacrificed specificity in their efforts to build a general
theoretical foundation for the exercise of economic power.
One portion of the literature that has sought to lend precision to the discussion of the tools of
economic statecraft is the literature on sanctions. Unfortunately, much of this prolific body of literature
64
Knorr, The Power of Nations : The Political Economy of International Relations, p. 28. 65
In The Power of Nations, Knorr discusses multinational corporations chiefly in the context of a brief refutation of
neo-Marxism. See: Chapter IX “Imperialism and Neocolonialism,” in ibid. pp. 239-309. 66
ibid. p. 28. 67
Susan Strange, States and Markets (London: Pinter Publishers, 1988). Although the systemic architectural
designs of the international regime do clearly confer a significant source of power to the hegemon, like other works
in the hegemonic theory literature, Strange’s focus on the third level of analysis prevents her from directly engaging
the role of commercial actors. Cheryl Christensen also discusses the importance of structural power in the context of
economics and security in her Chapter 5 “Structural Power and National Security,” in Knorr and Trager, Economic
Issues and National Security, pp. 127-159. 68
See Richard N. Cooper and Council on Foreign Relations, The Economics of Interdependence; Economic Policy
in the Atlantic Community, 1st ed. (New York: Published for the Council on Foreign Relations by McGraw-Hill,
1968) especially Chapter 6 “National Economic Policy in an Interdependent World.” 69
Robert O. Keohane and Joseph S. Nye, Power and Interdependence : World Politics in Transition (Boston: Little,
Brown, 1977).
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focuses rather narrowly on the effectiveness of sanctions.70
The quantitative nature of much of this work
makes it difficult to gain insight into the actual causal mechanisms behind states’ use of economics in
pursuit of their objectives. Like the economics and conflict literature discussed above, the quantitative
approach used by a good deal of the sanctions literature precludes a deep exploration of the causal logics
underpinning the contending schools of thought. In addition, as is often the case in social science
research, much of this work tends to focus rather narrowly on a phenomenon that is relatively easily
measured, namely sanctions imposed by states or other intergovernmental bodies. By not paying
sufficient attention to other (albeit perhaps less easily measured) causal mechanisms, this narrow
approach focused on sanctions may be missing a wide range of security consequences associated with
various other more subtle mechanisms of economic statecraft like foreign aid policy. Finally, almost all
of these works have been limited to trade sanctions—thus missing the empirical richness of the full
panoply of economic interaction and the security externalities related to non-trade based economic
interaction like financial and monetary relations.71
70
See: T. Clifton Morgan, Navin Bapat, and Valentin Krustev. "The Threat and Imposition of Economic Sanctions,
1971—2000*." Conflict Management and Peace Science 26, no. 1 (2009) pp. 92-110 for the TIES Dataset on
sanctions that has spurred a new round of sanction research. Morgan et al were building on earlier work of Gary
Clyde Hufbauer, Jeffrey J. Schott and Kimberly Ann Elliott, Economic Sanctions in Support of Foreign Policy
Goals, Vol. 6 (Washington, DC; Cambridge: Institute for International Economics; Distributed by MIT Press, 1983);
Lisa L. Martin, Coercive Cooperation : Explaining Multilateral Economic Sanctions (Princeton, N.J.: Princeton
University Press, 1992); David Cortright and George A. Lopez, Economic Sanctions : Panacea Or Peacebuilding in
a Post-Cold War World? (Boulder: Westview Press, 1995); Richard N. Haass, "Sanctioning Madness," Foreign
Affairs 76, no. 6 (11//Nov/Dec97, 1997), 74-85; Richard Haass and Council on Foreign Relations, Economic
Sanctions and American Diplomacy (New York: Council on Foreign Relations, 1998); Daniel W. Drezner, The
Sanctions Paradox : Economic Statecraft and International Relations (Cambridge England ; New York: Cambridge
University Press, 1999); Richard Haass and Meghan L. O'Sullivan, Honey and Vinegar : Incentives, Sanctions, and
Foreign Policy (Washington, D.C.: Brookings Institution Press, 2000); David Cortright et al., Sanctions and the
Search for Security : Challenges to UN Action (Boulder: L. Rienner Publishers, 2002); Gary Clyde Hufbauer,
Economic Sanctions Reconsidered, 3rd , Expand ed. (Washington, DC: Peterson Institute for International
Economics, 2007) and for work on smart sanctions see: David Cortright and George A. Lopez, Smart Sanctions :
Targeting Economic Statecraft (Lanham, Md.: Rowman & Littlefield Publishers, 2002). 71
See for example David A. Baldwin, Economic Statecraft (Princeton, N.J.: Princeton University Press, 1985);
Hufbauer, Economic Sanctions Reconsidered,K. Barbieri and G. Schneider, "Globalization and Peace: Assessing
New Directions in the Study of Trade and Conflict," Journal of Peace Research 36, no. 4 (1999) 387-404.
Frequently, the most readily available data is trade data. Partly as a result, foreign direct investment and cross-
border capital flows as well as monetary interaction have received far less attention in the literature. Important
exceptions are Janet Kelly’s Chapter 9 “International Monetary Systems and National Security,” in Knorr and
Trager, Economic Issues and National Security,; Jonathan Kirshner, Currency and Coercion : The Political
Economy of International Monetary Power (Princeton, N.J.: Princeton University Press, 1995); Erik Gartzke and
others, "Investing in the Peace: Economic Interdependence and International Conflict," International Organization
55, no. 2 (2001), 391-438; Rosecrance and Thompson, "Trade, Foreign Investment and Security,” Annual Review of
Political Science 6, no. 1 (2003) 377-398; Benn Steil and Robert E. Litan, Financial Statecraft : The Role of
Financial Markets in American Foreign Policy (New Haven: Yale University Press, 2006) and Andrews,
International Monetary Power.
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David Baldwin’s Economic Statecraft is one of the best efforts to provide order to the myriad
tools states could call upon to achieve their national interests.72
Baldwin’s work made a number of
important contributions that I seek to build upon. Like Baldwin, my work also builds on Lasswell’s four-
part classification scheme of national power73
in seeking to develop and expound the economic set of
tools available to states to pursue their national objectives. I also share Baldwin’s assumption that
“foreign policy is generally viewed as purposive behavior, i.e., activity oriented toward some end, goal,
objective, or aim.”74
Baldwin also seeks to illuminate both “positive” and “negative” consequences from
economic statecraft—he points out that scholarship on economic statecraft often fails to adequately
appreciate the strategically beneficial aspects of economic interaction.
One area of Baldwin’s work that I seek to improve on is his definition of “economic statecraft.”
In particular, Baldwin’s concept is poorly specified to develop a deeper understanding of how states
actually exercise their economic power. Baldwin focuses his scholarship on the phenomenon of
“economic statecraft” which he defines as “influence attempts relying primarily on resources that have a
reasonable semblance of a market price in terms of money.”75
Essentially, Baldwin’s definition begins by
saying that statecraft defines the range of tools, policies, etc. that a state has at its disposal to pursue its
interests in the international system.76
This definition is straightforward. He goes on to define economic
as those transactions, goods, etc. which can be measured and priced in terms of money.77
This logic leads
Baldwin to conclude that economic statecraft defines the activities, policies, etc. of a state that rely on
resources that have a price tag. His purpose in constructing such a definition seems to be to emphasize
that the term “economic” merely defines the means employed (rather than the end-state goals that are
sought—which may be purely political). I do agree with this perspective and in the practice of
international relations, states do seem to frequently seek to achieve non-economic ends by way of using
economic means. However, this does not seem to be a particularly innovative nor analytically helpful
insight. It would be more interesting if we could say something about exactly how it is that states use
such tools. What is different about state use of economic tools as opposed to other means of international
influence? What are their limits? Are there any patterns that we can explore regarding conditions that are
likely to result in “success?” If so what are those conditions? Exactly in what manner do state
72
Baldwin, Economic Statecraft. 73
Harold D. Lasswell, Politics: Who Gets what, when how. with Postscript (1958) (New York: Meridian Books,
1958) Lasswell’s postscript suggests that states can exercise their power across four dimensions: information,
diplomacy, economics and force. My work, like Baldwin’s, is concerned with the economic tools of statecraft. 74
Baldwin, Economic Statecraft,p. 16. 75
ibid. p. 30. Baldwin actually introduces this definition on page 13-14 of Chapter 2, but develops it more fully in
his Chapter 3 “What is Economic Statecraft?”. 76
See ibid. pp. 8-9 in which he borrows from Harold and Margaret Sprout and K.J. Holsti. 77
ibid. pp. 31-32.
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applications of economic instruments produce the strategic consequences that states seek? Baldwin’s
definition of economic statecraft is too vague to provide useful analytical leverage on such questions. In
my own work, I offer a more specific, analytically precise definition of economic statecraft that moves
away from Baldwin’s “intentionally broad” definition in favor of an understanding of economic statecraft
that frames the strategic outcomes as security externalities that result as a consequence of the economic
activities of commercial actors. Defining economic statecraft in this way allows us to be more precise
about the conditions under which and the manner in which states seek to use economic interaction to
promote their strategic goals.
By focusing the analytical lens on the consequences of various patterns of economic interaction,
my work is also able to move beyond another limitation of Baldwin’s formulation: namely, that specific
policy tools are categorized simply as “positive” or “negative.” On pages 41 and 42, he provides a table
of policy tools that states may use to pursue their national objectives. These tools are categorized as
either “negative” (having a harmful effect on the target) or “positive” (having a beneficial effect on the
target) and as having to do with either “trade” or “capital” (by which he means financial flows). His
definition of economic statecraft as essentially the economic means to realize foreign policy objectives
may be partly responsible for this narrow, binomial categorization. The outcome of economic statecraft
(i.e. the end it is designed to achieve) is largely exogenous for Baldwin. He is primarily concerned with
identifying the economic set of tools that states can use to pursue a range of foreign policy goals.78
By
framing economic statecraft as an issue of security externalities, my approach focuses on the security
effects of economic interaction and thus is better able to illuminate and distinguish the specific types of
security concerns arising out of various patterns of economic interaction. Rather than merely categorizing
the various policy tools that states can use to engage in economic statecraft (which, as Baldwin admits,
may be an almost infinite list of policy tools), I organize the space differently.79
I put forward a
comprehensive typology that distinguishes the specific security effects that state policies may seek to
bring about. By framing the conceptual space in this way, I am better able to distinguish and specify the
causal pathways that link the economic behavior of commercial actors to the ultimate security
consequences for states. This approach provides a much clearer view of the inner workings of economic
statecraft—exactly how states use economics to pursue their foreign policy objectives. This higher
78
On pp. 40-41 he provides a long list of the “wide variety of foreign policy goals.”ibid. 79
“These tables are intended to illustrate the wide variety of economic techniques and do not purport to be
exhaustive.” ibid. p. 40. One can imagine a dizzying array of policy options available for the state to influence
economic conduct: laws, conditionalities, regulations, tariffs, taxes, licensing, quotas, bilateral and multilateral
regimes, fiscal measures, subsidies, etc.
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resolution on the actual conduct of economic statecraft permits a richer categorization of the conceptual
domain of economic statecraft than Baldwin’s positive/negative framework.
Although Baldwin set out to cast a wide net encompassing all the various positive and negative
mechanisms states could pursue across all types of economic interaction—trade as well as financial
relations—in the end, most of his book focused on sanctions. However, ten years later, Jonathan
Kirshner’s Currency and Coercion would help address the lack of systemic scholarship on the use of
monetary tools of economic statecraft.80
Each of these works made important contributions to the study
of economic statecraft, but in seeking to develop the theoretical context for the exercise of contemporary
economic power, these works tended to focus almost exclusively on the state and drifted away from the
commercial actor-driven approach that characterized the earlier generation of scholarship (e.g. Staley).
One notable exception is Robert Gilpin’s US Power and the Multinational Corporation. Gilpin
argued that multinational corporations thrive because the international system’s hegemon creates and
maintains an international environment in which private sector actors can benefit and thrive.81
At the
abstract level, Gilpin’s work seeks to directly account for the role of commercial actors in international
strategic relations. However, Gilpin was mainly motivated by an effort to explain the long-term rise and
decline of hegemons in the international system. The field is still lacking a middle-range theory that
bridges the levels of abstract theory and the more concrete applications of exactly how commercial actors
do the strategic bidding of the hegemon.
Although Gilpin’s work is largely compatible with the theory put forward in my first book, there
are inevitably, some areas of friction: First, Gilpin’s book emphasized the unique role of the hegemon in
the international system and the benefits accruing to the hegemon’s multinational corporations (MNCs).
This perspective stands in contrast to my work that argues that any state is more or less theoretically
capable of using its commercial actors to further its national strategic interests. Moreover, there does not
seem to be any a priori reason to assume that the MNCs of non-hegemonic states would not also accrue
benefits in a modern, liberalized global regime (e.g. WTO). Second, Gilpin’s normative position
highlighting the danger of national over-reliance on investment returns also seems not to have been borne
out by the facts in the American case as it has developed since the time of his writing.
80
See Jonathan Kirshner, Currency and Coercion : The Political Economy of International Monetary Power
(Princeton, N.J.: Princeton University Press, 1995). In 2006, David Andrews edited a very good volume that builds
on earlier work relating to the use of monetary power: Andrews, International Monetary Power. 81
“…[T]his book argues that the international political order created by dominant powers primarily in their security
interests has provided the favorable environment for economic interdependence and corporate expansionism.”
Gilpin, U.S. Power and the Multinational Corporation : The Political Economy of Foreign Direct Investment,p. 19.
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Finally, Gilpin’s work left many questions unanswered—is it only the hegemon’s corporations
who can benefit or can all commercial actors? If all commercial actors benefit, then can other non-
hegemonic states also pursue their strategic goals through the use of commercial actors? How? What are
the processes through which such strategic alignment of interests between the commercial actors and the
national strategic interests actually take place? To what degree can states shape and influence the
behavior of their multinational firms? In what way does the behavior of MNCs affect national security?
Gilpin’s work was an important step forward in considering the inter-relationship of modern multinational
corporations and US national interests. His book frames a discussion of how the behavior of MNCs
served that interest. As with Knorr, my work attempts to build on elements of Gilpin’s theoretical
foundation and examine the resulting theory in the empirical context of contemporary Chinese interests.
Many of the other works in the literature on globalization that sought to explore the role of
commercial actors tended to overstate the autonomy of multinational corporations and the erosion of the
nation state as the dominant actor in international relations.82
My own work demonstrates that even if the
direct, classical mercantilist power of the state to dictate policy to its private sector actors has diminished
under a more liberalized system, sufficient power remains for the state to influence and generate
incentives for the private sector to behave in ways that are conducive to state interests. Although many of
the exaggerated claims of a “vanishing state”83
have since been largely corrected,84
the field has yet to
develop a middle range theory that would connect the micro-level behavior of commercial actors who
possess some degree of autonomous agency to the macro-level strategic outcome of how modern
sovereign states actually mobilize their economic interaction to further national security goals. It is not
82
Examples of works making the case for a significantly diminished national state in the era of globalization
abound. See for instance: The Retreat of the State: The Diffusion of Power in the World Economy by Susan Strange
(Cambridge University Press, 1996); Global Order and Global Disorder: Globalization and the Nation-State by
Keith Suter (Praeger, 2003); Martin Wolf, “Will the Nation State Survive Globalization?” Foreign Affairs January-
February 2001; Twilight of Soveriengty: How the Information Revolution is Transforming Our World by Walter B.
Wriston (Scribner Book Company, 1992). In response to a frequent assumption in this literature on globalization
that the state has become irrelevant in the face of multinational corporations, my work argues that the mechanisms
of state influence may have changed over time, but states remain powerful international actors. For a somewhat
similar theoretical perspective see: Sean Kay, "Globalization, Power, and Security," Security Dialogue 35, no. 1
(2004): 9-25. Contemporary conditions of complex, interdependent global economic interaction require that we
understand the ways in which states continue to exert their influence. 83
Richard N. Rosecrance, The Rise of the Trading State : Commerce and Conquest in the Modern World (New
York: Basic Books, 1986). 84
See for example: Suzanne Berger and Ronald Philip Dore, National Diversity and Global Capitalism (Ithaca,
N.Y.: Cornell University Press, 1996); Maria Gritsch, "The Nation-State and Economic Globalization: Soft Geo-
Politics and Increased State Autonomy?" Review of International Political Economy 12, no. 1 (2005): 1-25; and
Peter Evans, "The Eclipse of the State? Reflections on Stateness in an Era of Globalization," World Politics 50, no.
1, Fiftieth Anniversary Special Issue (1997): 62-87.
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enough to simply “bring the state back in” to our analyses—as scholars, we should also illuminate how
states interact with their commercial actors in a strategic context.
Summary
In summary, there is a long tradition of scholarly work that has sought to understand how states
use economic power. As reflected in the Venn diagram, this body of literature incorporates elements of
several different types of works that have sought to bridge the economics and security studies fields. A
comprehensive approach to understanding the exercise of economic statecraft synthesizes elements of a
nation’s basic economic foundation, its domestic strategic political economy and the competitive struggle
for power in the international arena. Moreover, a complete analysis should include both elements of the
principal-agent dynamics that pervade the business-government relations at the heart of the mobilization
and Leninist literatures as well as a deeper understanding of security externalities that drive much of the
strategic goods literature.
Inspired by the early Twentieth Century classical realists who emphasized the importance of both
national strategic goals and the role of commercial actors in pursuing those goals, my work seeks to
address a number of gaps in the literature. My own work seeks to extend and tactically operationalize
some of the earlier work done on the nature of economic power and how states actually mobilize
commercial actors to pursue national strategic interests in a contemporary context. Specifically, my first
book tries to answer the following questions: In what manner do states seek to use economic interaction
to further their larger strategic goals? What is the role of commercial actors in states’ strategic efforts to
wield economic power? Why do these efforts succeed or fail? What factors facilitate or hinder effective
economic statecraft?
When attempting to answer such questions, the existing literature has tended to take too narrow of
an approach. In particular, existing efforts to explore this topic have generally fallen victim to some
combination of three limitations. First, existing literature has focused mainly on the most readily
observable form of economic interaction: a statistical examination of trade—thus missing the empirical
richness of the full panoply of economic interaction and the security externalities related to non-trade
based economic interaction like financial and monetary relations.
Second, much of the work that has been done on the issue of using economic interaction to pursue
larger strategic goals has been framed in the context of sanctions, missing the wide range of security
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consequences associated with various other mechanisms of economic statecraft. Framing the issue
through this sanctions lens may omit more subtle mechanisms that seek not only compliance, but a deeper
transformation of interests themselves. Starting from this standpoint, the field ought to embrace a
theoretical approach and research agenda that is not narrowly limited to sanctions, but rather encompasses
a broad range of economic activities like aid, investment flows, etc. and their concomitant security effects.
Finally, much of the literature dealing with the use of economics to pursue strategic goals tends to
traditionally take a state-centric approach. By focusing predominantly on states as the unit of analysis,
these perspectives give relatively little consideration to a rigorous treatment of the role of commercial
actors—the agents actually responsible for conducting most of the economic activities of the modern
state.85
The behavior of these commercial actors plays a crucial role in determining economic interaction,
and ultimately, how states may use that economic interaction to pursue their strategic interests more or
less effectively. In my own work, I adopt a principal-agent framework that facilitates a meaningful
exploration of the business-government dynamics that are so important for understanding how states use
economic interaction to further their strategic interests.
Although economics and its relationship to security has been a long time topic in the international
relations literature, the field continues to lack an integrated theory that links microeconomic, firm-level
behavior with the macro-level grand strategy of states. As a result, we have little sense of the micro-
foundations of economic statecraft as practiced in grand strategy. My first book provides an account of
how aggregate economic agents’ micro-level incentives and consequent behavior generate national
security outcomes at the level of state grand strategy. Commercial actors, acting on their own interests,
engage in various forms of cross-border economic interaction.86
This interaction often generates security
externalities.87
Moreover, even in a modern, liberal economic system in which states themselves are not
directly responsible for conducting the majority of economic interaction, states can create incentives for
commercial actors to behave in ways that encourage the creation of security externalities that are
conducive to a state’s strategic interests. Thus, states can pursue strategies that seek to manipulate these
externalities by structuring the incentives of the commercial actors involved. I define such manipulation
as economic statecraft.
85
Karen M. Sutter, "Business Dynamism Across the Taiwan Strait," Asian Survey 42, no. 3 (May/Jun, 2002), 522. 86
In a modern, liberal economic system, most of the economic interaction that takes place is conducted by
commercial actors. These commercial actors engage in economically rational decisions which result in international
economic interaction. 87
States in highly charged security environments are particularly likely to be sensitive to such security externalities.
These externalities may be usefully distinguished from one another by their security effects and the manner in which
these effects are generated.