Power Ties: Economic Interdependence, Balancing, and War (review)

Paul A. Papayoanou, Power Ties: Economic Interdependence, Balancing, and War. Ann Arbor: University of Michigan Press, 1999. 193 pp.

The notion that economic interests play a crucial role in foreign policy was espoused early in the twentieth century by Marxists and liberals, and was popularized by muckrakers and those who blamed wars on "merchants of death." During the first twenty years of the Cold War, this view was marginalized, but in the 1960s it was revived by revisionist scholars who depicted U.S. policies as a product of the capitalist system.

Paul Papayoanou makes a more subtle but related argument: that the willingness of status quo powers to cooperate in deterring aggressors depends mainly on their economic relations. States that have close economic ties will be more likely to work together against a common adversary, especially if they have weak economic relations with that adversary. This is his explanation for the success of deterrence during the Cold War and its failure before the two World Wars. Before World War I, the Entente powers (especially Great Britain) had important economic relations not only with each other, but with Germany as well. Before World War II, the countries that should have opposed Nazi Germany were not economically dependent on Germany, but they lacked close economic ties with one another. This argument is a refreshing departure from standard realist accounts, in which economic interests are either less important than or largely determined by foreign policy calculations. Nonetheless, Papayoanou's logic is questionable, and the evidence he cites does not really back it up.

The basic claim that strong economic ties increase a state's willingness to come to the aid of its economic partners makes sense, at least superficially. However, one might question whether economic interdependence causes political alignment or vice versa, or whether some other factor (for example, the existence of a common enemy) accounts for the political-economic correlation. In addition to this problem, Papayoanou's logic is not as tight as it first seems. If a state believes it faces conquest or domination by an adversary, it does not require the added incentive of economic ties to motivate it. Moreover, regardless of a state's economic ties to allies and potential adversaries, the leaders of the state will always consider whether support for an ally and opposition to an adversary will increase or decrease the chance of war. Thus in the 1920s and 1930s, most British leaders believed that all-out support for France and a refusal to conciliate Germany would make war more--rather than less--likely. This reasoning did not depend on the extent of trade with either country.

A further problem arises with the possibility of buck-passing. Even if a state has close economic ties with its ally and believes that the adversary is a menace, it may try to pass responsibility to others. If, for example, France had been stronger in the 1930s, British policy would have been rational irrespective of economic relations. Papayoanou's claims about the economic consequences of war are also dubious. It is not at all clear that a state's domestic economic interests will suffer in a war between an ally and an adversary. Trade may increase during war, not decrease; American firms profited a good deal before Pearl Harbor. Nor does Papayoanou acknowledge that trade creates domestic losers as well as winners and may increase frictions between countries. It would be useful, but perhaps excessively difficult, to have a way of predicting not only the direction of the effect of interdependence, but also its magnitude: How much stronger will an alliance become if trade increases by a specified amount?

The evidence does not bear out Papayoanou's argument as fully as he claims. Although he is correct in noting that before World War I the members of the British cabinet with economic portfolios were the ones who opposed firm ties to France and Russia, this does...