Princeton Studies in International History and Politics

Dale C. Copeland

• Publisher: Princeton University Press
• Year: 2014
• ISBN:
  9781400852703
• Topic: Politics & International Relations
• Subtopic: International Relations
• Index: Politics & International Relations

Does growing economic interdependence among great powers increase or decrease the chance of conflict and war? Liberals argue that the benefits of trade give states an incentive to stay peaceful. Realists contend that trade compels states to struggle for vital raw materials and markets. Moving beyond the stale liberal-realist debate, Economic Interdependence and War lays out a dynamic theory of expectations that shows under what specific conditions interstate commerce will reduce or heighten the risk of conflict between nations.Taking a broad look at cases spanning two centuries, from the Napoleonic and Crimean wars to the more recent Cold War crises, Dale Copeland demonstrates that when leaders have positive expectations of the future trade environment, they want to remain at peace in order to secure the economic benefits that enhance long-term power. When, however, these expectations turn negative, leaders are likely to fear a loss of access to raw materials and markets, giving them more incentive to initiate crises to protect their commercial interests. The theory of trade expectations holds important implications for the understanding of Sino-American relations since 1985 and for the direction these relations will likely take over the next two decades. Economic Interdependence and War offers sweeping new insights into historical and contemporary global politics and the actual nature of democratic versus economic peace.

CHAPTER ONE

Theory of Economic Interdependence and War

THE INTRODUCTORY CHAPTER laid out the basic dimensions of the trade expectations approach and how it could be applied to the history of the modern great power system since 1790. This chapter constitutes a more in-depth look at both the existing literature on interdependence and war and the theory of trade expectations itself. My overall goal is a simple one: I hope to show the advantages of viewing the world through the lens of the trade expectations logic in order to demonstrate that it clears up most of the logical problems that have bedeviled current scholarship. In subsequent chapters, we can then see whether the new approach is actually confirmed by both large-N quantitative analysis and detailed historical case studies.

My main concern with the extant literature is not that it is wrong but rather that it is underspecified. By not examining the role of expectations of future trade and investment on the calculation of decision makers, the literature is trapped in deductive models that are static and backward looking. Existing scholarship almost invariably assumes that it is some factor existing in a snapshot of time—either in the present moment or in the recent past—that is driving leaders to do what they do. Leaders enjoy the past and current gains from trade, and are peaceful (traditional liberalism); they see their present vulnerability and they worry (economic realism); they underestimate the other’s present resolve and they push too hard (signaling arguments); they have long-standing unit-level grievances and pathologies that get unleashed when trade levels fall (traditional liberalism again). Such are the basic causal orientations of the current theories on interdependence and war. My approach is fundamentally different. In a very real way, it does not matter in the least whether past and current levels of trade and investment have been low, as long as leaders have strongly positive expectations for the future. It is their future orientation and expectations of a future stream of benefits that will likely make the leaders incline to peace. Likewise, it does not matter whether past and current levels of commerce have been high if leaders believe they are going to be cut off tomorrow or in the near future. It is their pessimism about the future that will probably drive these leaders to consider hard-line measures and even war to safeguard the long-term security of the state.

What this chapter is asking for, in short, is a basic reorientation of the thinking about interdependence and war away from theories of comparative statics and toward dynamic theories that incorporate the future within their core deductive logics.¹ It is only by capturing how leaders really think, something that necessarily involves estimates and assessments of future possibilities and probabilities, that we can build causal theories that actually work in the real world. As we will see, existing scholarship either completely ignores the impact of future variables in constructing their deductive theories or it makes implicit, fixed assumptions about how the future will unfold. Liberal arguments about trade, for example, almost invariably assume that the economic cooperation that is going on today will continue to flourish into the future as long as both sides have an incentive to punish defections, simply because rational actors will see that the absolute benefits of working together (the “mutual cooperation” or CC box of basic game theory) are greater than the benefits of trade conflict (the “mutual defection” or DD box). Realist arguments, on the other hand, assume that dependent great powers know that others will eventually cut them from access to vital goods and markets, given the incentives in anarchic systems to play the game of great power politics hard.

These assumptions are simply indefensible stipulations about the future that have no place in a properly specified dynamic theory. Such a dynamic theory would recognize both the deductive and empirical point that leaders’ level of optimism or pessimism regarding the future will vary greatly over time, depending on a whole host of more ultimate causal factors. It is then the task of good theory to specify what kind of factors are likely to play important roles in shaping estimates of the future, and how these factors are logically likely to act—either alone or in concert—to drive leaders’ beliefs about the future security of their states. If this is done properly, we should be able to understand how great powers in the real world will react when the boundary conditions and parameters of their existential situations change without notice or without their full control. And if, when we open up the documents, we see great powers actually planning and reacting within historical cases as the theory anticipates that they will do, then we know we are on to something.

The task for the rest of this chapter is thus to provide this theoretical foundation for subsequent empirical analysis. I begin with a brief overview and critique of the current state of the literature. I also discuss the tricky question of why great powers would ever trade in the first place if they are driven primarily by security fears. This will set the stage for a more detailed explication of trade expectations theory. This process will take up most of the rest of the chapter. At the end of the chapter, I offer a quick review of how to test competing theories and a summary of my overall approach, drawing from an explanatory diagram that the reader may want to refer to as the chapter proceeds (figure 1.1). A discussion of my research method along with the value of quantitative approaches for the study of interdependence and conflict will be reserved until chapter 2.

OVERVIEW OF EXISTING THEORIES

The theories of international relations that explore the relationship between economic interdependence and war can be grouped according to three broad categories: liberalism, realism, and neo-Marxism. Many scholars might immediately contend that we should be moving beyond broad paradigmatic isms to focus on specific causal arguments, and I agree.² In what follows, therefore, I will examine the specific causal claims that theorists make about how interdependence shapes the likelihood of war in world politics. Yet the broad labels of liberalism, realism, and neo-Marxism can still prove useful in grouping together theories that share a broad set of assumptions and assertions about what actors want from their policies (their ends), which individuals or domestic groups are most influential in driving policy (who matters), and the overall functional roles that trade and investment ties play in the onset of peace or war.

Liberal theories as a whole start with the assumption that actors, regardless of the level of analysis, are interested primarily in achieving material benefits for themselves. In short, actors seek to maximize utility defined in terms of the net material gains from peaceful commerce or war. The foundational model of liberalism, in this regard, is the “opportunity cost” model of trade and war. It begins with the premise that the state is a unitary, rational actor seeking to maximize the overall welfare of the nation as a whole. Trade provides valuable benefits, or gains from trade, to any particular state, as economic theory since the time of Adam Smith and David Ricardo has recognized. Any state that is dependent on trade should therefore seek to avoid war, since peaceful trading gives it all the benefits of close ties without any of the costs and risks associated with military conflict. In other words, the opportunity costs of waging war are high when trade levels are high, and this serves to restrain actors who might otherwise have an incentive for war.³ This straightforward logic supplied the foundation for the first wave of statistical correlational analyses in the field—studies that generally found that the higher a state’s trade level was relative to its GNP, the more peaceful its relations were with other states.⁴

Subsequent liberal theorists have expressed their dissatisfaction with the presumption that the state is a unitary actor, arguing that one cannot understand the causal processes underpinning the large-N finding that trade usually leads to peace without disaggregating the nation-state itself. Hence, over the last decade a number of scholars have opened up the black box of the state to explore exactly how a liberal commercial peace could arise, and what that might mean regarding the conditions for peace overall. Beth Simmons (2003), for instance, suggests that we examine how interdependence creates groups within polities that have a vested interest in maintaining the status quo. Jonathan Kirshner (2007) asserts that open international financial flows makes bankers into a particular influential vested interest group, with bankers almost invariably wanting peace instead of war.⁵

Patrick McDonald (2007, 2009) has provided the most developed argument for the importance of domestic vested interests. He seeks to show that it is only a specific type of trading state that tends to have lower rates of militarized conflict—namely, the liberal capitalist one. McDonald maintains that capitalist states that operate through liberal economic institutions such as private property and competitive market structures are generally less aggressive. Exporters that have a vested interest in keeping peaceful trade going will operate as a powerful domestic group, exerting a strong check on any illiberal policy elites that happen to be running the state. Conversely, in more mercantilist states that do not respect private property or open trade, illiberal leaders with possibly aggressive intentions will have more autonomy to do nasty things, both because the export class is smaller and because higher tariffs supply them with more revenue to fund war.⁶

Both the initial liberal argument and its subsequent domestic-level offshoots revolve around the idea that trade provides high material benefits to certain groups of people—either the society as a whole or particular vested interests—and war therefore is avoided because of its high opportunity costs, namely, the loss of these benefits. Recently, formal modelers have sought to go after the opportunity cost logic while still upholding the overall liberal insight that high interdependence should tend to move the system toward peace. The essence of their critique is clear-cut. In any situation of asymmetrical interdependence, the high opportunity costs of war should give the more dependent state, state Y, a big reason to avoid war. But the less dependent state, state X, knowing Y’s desire to avoid war, has an incentive to coerce it into making concessions through the use of military threats. Whether interdependence will lead to less militarized conflict or in fact more is thus indeterminate when we consider the opportunity cost reasoning on its own. The modelers agree that state Y will be more peaceful. State X, however, will likely be more aggressive, precisely because of Y’s unwillingness to risk the current benefits of peace.⁷

In place of the opportunity cost logic, these critics offer another deductive reason for the liberal prediction that trade should be associated with peace. Drawing on insights from the bargaining model of war, they contend that wars are generally the result of the private information that actors have about the resolve of other states—that is, their willingness to pay the costs of war.⁸ High interdependence helps to foster peace by increasing the number of tools that states have in their toolbox for sending “costly signals” of their true resolve. Leaders of states that are dependent on trade and investment flows can deliberately impose sanctions that hurt their own people, thereby signaling that their nations are willing to suffer high costs to achieve their objectives. This should eliminate any underestimations of their resolve. In an environment of strong commercial ties, therefore, aggressive opportunists in the system will know not to push too hard, lowering the risk of an inadvertent spiraling into war.⁹

The economic realist argument seeks to turn the liberal perspective on its head. All the arguments we have seen so far can be classified as liberal since, in whatever their form, they begin with the assumption that interdependent actors are interested in maximizing their net material gains/utility and will have good absolute gains reasons not to fight when interdependence is high. Realists reject this starting point. In anarchy, realists assert, leaders must be primarily concerned with maximizing the security of the states for which they are responsible (Grieco 1988; Mearsheimer 1994–95). Given this, interdependence will only increase the chances of militarized conflict and war as interdependent states scramble to reduce the vulnerability that dependency brings. States concerned about security will dislike dependence, since it means not only that access to valuable export markets and foreign investments might be reduced by adversaries bent on hurting their relative power positions but also that crucial imported goods such as oil and raw materials could be cut off should relations turn sour.

Such uncertainty about their economic situations, realists assert, will push great powers to war or the use of military coercion to lower their dependency as well as to ensure the continued flow of trade and investment. As Kenneth Waltz (1979, 106) puts it, while actors in domestic politics have little reason to fear specialization, the anarchic structure of international politics forces states to worry about vulnerability, compelling them “to control what they depend on or to lessen the extent of their dependency.” It is this “simple thought” that explains “their imperial thrusts to widen the scope of their control.” John Mearsheimer (1992, 223) observes that states requiring vital goods, fearing cut off, will seek “to expand political control to the source of supply, giving rise to conflict with the source or with its other customers.”¹⁰ The Waltz and Mearsheimer thesis is founded on the assumption, most often associated with offensive realism, that states in anarchy must assume the worst case about the present and future intentions of the other. As such, when states find themselves in situations of dependence, they are forced to grab opportunities to reduce their vulnerability through war, at least when the chance to do so arises at low cost.¹¹

The final group of arguments involves the neo-Marxist theories that link growing interdependence to war. Vladimir Lenin ([1917] 1996) has famously declared that capitalist trading states are more likely to engage in war against peripheral states in order to find cheap raw materials, export markets for their mass-produced goods, and places to invest surplus capital. The competition between capitalist great powers resulting from this struggle for colonial empires will eventually lead to war in the core system.¹² Most post-1945 neo-Marxists scholars of imperialism have adopted this reasoning in one form or another.¹³ At its core, the neo-Marxist logic challenges the liberal domestic-level claim that capitalist sectors and firms dependent on the global economic system have a vested interest in peace. While agreeing with liberalism that such groups are driven primarily by the material gains from commerce, neo-Marxists contend (implicitly borrowing from realism) that the need for secure trade and investment ties makes these groups worry about their future control over their economic partners. Hence, powerful capitalist groups within the state will put pressure on political elites to project military forces into important regions, and use direct occupation or neocolonial coercion to ensure continued trade and investment flows.¹⁴

Despite the realist flavor of the neo-Marxist approach, it does differ significantly from economic realism and the theory that I will put forward below. Neo-Marxists see economic elites and interest groups pressuring political elites into war to further their narrow material concerns. Economic realism and trade expectations theory, on the other hand, maintain that political elites are autonomous actors who choose policies based on what is good for the security of the whole state, not based on the greedy interests of a few.¹⁵ This distinction in causal logic must be kept in mind when we look at the historical cases, given that neo-Marxism, realism, and trade expectations theory all expect ...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• Contents
• Preface
• Abbreviations
• Introduction
• Chapter One: Theory of Economic Interdependence and War
• Chapter Two: Quantitative Analysis and Qualitative Case Study Research
• Chapter Three: The Russo-Japanese War and the German Wars for Hegemony, 1890–1939
• Chapter Four: The Prelude to Pearl Harbor: Japanese Security and the Northern Question, 1905–40
• Chapter Five: The Russian Problem and the Onset of the Pacific War, March–December 1941
• Chapter Six: The Origins, Dynamics, and Termination of the Cold War, 1942–91
• Chapter Seven: European Great Power Politics, 1790–1854
• Chapter Eight: Great Power Politics in the Age of Imperial Expansion, 1856–99
• Chapter Nine: Implications of the Argument
• Bibliography
• Index