Understanding International Relations, Third Edition

Understanding International Relations

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theory emerges out of the neoliberal theory of International Relations; that
is to say that its root assumption is that states – and, for that matter, firms –
are rational egoists operating in an anarchical system. How are regimes pos-
sible? That is, how is cooperation possible amongst rational egoists under
anarchy? From a neoliberal perspective it is not too difficult to see why
states (and firms) would want to cooperate – there are absolute gains to be
had from cooperation, that is from mutual adjustments, and on neoliberal
assumptions, states are concerned to make absolute gains. The problem is
that the temptation to cheat may be overwhelming. States will continually
be placed in a situation where it is in their interests that cooperation take
place, but even more in their interests that the cost of cooperation be carried
by others. This is a classic collective action problem. In domestic societies,
one of the roles of government is to solve problems of collective action by
enforcing compliance with a system of rules which are, in principle, in the
common interest. By definition, no such solution is available internationally –
so how do states set up regimes in the first place, and why do these regimes
persist to the extent they do? The most influential explanation for this
phenomenon is the theory of hegemonic stability.
It is not clear who first used the term or popularized the idea, but an
important early statement of what came to be known as the theory of hege-
monic stability is that of Charles Kindleberger in the final chapter of his
economic history of the 1930s, The World in Depression 1929–1939
(1973). In examining explanations for the Great Depression, he tells the
basic story as follows: the international economic system before 1914 was
not, as it was usually taken to be, self-regulating. Instead, the hegemonic
financial power of Great Britain, exercised by the quasi-autonomous Bank
of England, had been employed to smooth over problems of cooperation
generated by the operation of the gold standard. Britain had had the capacity
to do this, given its enormous holdings of overseas capital. It also had had
the will to do this, because, as the largest financial power, it had the biggest
stake in the preservation of the system. Its role as the hegemon was widely,
albeit tacitly, accepted as legitimate by other members of the system.
Capacity, will and legitimacy need to be found in one country if the system
is to work. In the 1930s they were not and the system collapsed. But, after
1945 a new hegemonic economic power emerged, the United States.
The US was the strongest financial and productive power and had the
capacity to provide hegemonic leadership. Because the US leadership of the
time recognized that it was in their interest to promote a flourishing world
economy, the US was prepared to use this power to promote cooperation.
And because of the poverty of the rest of the capitalist world, and their fear
of the Soviet Union, American leadership was widely accepted. Thus it was
that the post-war institutional structure was underwritten by the power of
the US. The GATT rounds of tariff reduction were driven by American
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leadership, and the willingness of the US to abide by the rules of the system,
and to use its political power to encourage others to do likewise, was criti-
cal. Moreover, because of the strength of the United States it was able, if it
wished, to turn a blind eye to infractions of the rules by other states, if by so
doing it was able to preserve the system. Thus the hegemonic power of the
United States was able to act as a kind of substitute for international
government, but without violating the basic assumption of rational egoism;
the US performs this role because it is in its interests to do so. As the country
with the largest stake in the preservation of the system, it is willing to act in
accordance with the rules and to bear most of the transaction costs of
running the system, not as an act of altruism but on the basis of enlightened,
medium-term, self-interest (Ikenberry 2001).
However, hegemonic leadership is a wasting asset which creates the
conditions for its own downfall. The hegemon is required to play fair – in
the case of the trade regime, to open its borders to imports and to eschew
the sort of creative measures that can undermine the rules of the system.
However, its rivals are not so hampered. They will use the regime set up by
the hegemon to the full, taking advantage of access to the hegemon’s mar-
ket, but relying on the hegemon not to overreact to their own measures to
prevent its access to their markets. Gradually, the material basis upon which
hegemony rests will be eroded and the hegemon will cease to have the
capacity to act as such – instead it will start to play fast and loose with the
formal rules, and, as a result, will no longer have the legitimacy to act as
hegemon. In the end, it will be perceived by other members of the system as
acting solely in its own interests rather than in the interests of all. This, it is
suggested, is more or less what has happened to US economic hegemony
over the last 50 years – gradually its trade rivals outproduced it, partly
because it was hampered in its actions by its responsibilities, and America
then became incapable of continuing to act in the interests of all, and liable
to succumb to the temptation to act on short-term self-interest, financing
the Vietnam War by inflation rather than taxation, for example.
The good news is that regimes may well survive ‘after hegemony’
(Keohane 1984). The hard work of setting up regimes has been done, and
the remaining task is the easier one of keeping them ticking over. The very
fact that rules are written down and thus institutionalized makes it more
likely that states will abide by them, while the institutions can provide a
great deal of useful information that will prevent states acting against their
own interests. The hypothesis is that most of the time when states act as free
riders it is either because they do not believe they will be found out, or
because they do not appreciate the longer-term consequences of their
actions. The existence of institutions makes it unlikely that either position
will hold, which creates an incentive to cooperate. Thus it is that coopera-
tion can continue – but at ‘sub-optimal’ levels by comparison with the
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cooperation that can be generated by a hegemon. US hegemony will be
discussed again in Chapter 12, but, before leaving behind the notion of a
regime, it is worth noting that the issue of hegemonic stability arises as it
does partly because the ‘Krasner’ definition of a regime given above is so
closely connected to mainstream American rational choice IR. Other
notions of a ‘regime’, associated particularly with European scholars and
the constructivist turn in IR theory, place more emphasis on the ideational
component of regimes, rather than the rational egoism of social choice
theory – thus cooperation may be sustained because states come to believe
that it constitutes a good in itself rather than simply because it is in their
immediate or even medium-term interest to cooperate, and the need for
some kind of mechanism to enforce cooperation may be less compelling
(Rittberger 1993: Hasenclever, Mayer and Rittberger 1997, 2000).