The Challenge of Hegemony: Grand Strategy, Trade, and Domestic Politics

6 Great Power Tenure

C H A P T E R 6 Great Power Tenure T H E D O M E S T I C C O N S E Q U E N C E O F I N T E R N A T I O N A L P O L I T I C S In integrating systemic and domestic politics, this book makes a second image reversed plus a second image argument to explain a declining state’s grand strategy. I argue that the nature of and shifts in the international environment will affect the constellation of political power within the declining hegemon and thereby guide its grand strategy. If the hegemon confronts predominantly liberal contenders, this will empower the constituents of the free-trade coalition who will lobby for a cooperative grand strategy, while if it encounters predominantly imperial states, this will enable the supporters of the economic nationalist faction who will press for a belligerent grand strategy. The empowered coalition will use the political and economic distributional gains to advance its preferred policy package. In certain instances, these external pressures will push the coalition that is in threat of being rolled back to advance a grand strategy that will enhance its relative coalitional power, even though it threatens to undermine the nation’s economic capacity or to erode its military security. Any reversals in the commercial orientation of the rising states will roll back the gains of the empowered coalition and will once again alter the domestic balance of political power, the distributional gains and losses, and ultimately the orientation of the hegemon’s grand strategy. The two key components of this argument are the contenders’ foreign commercial orientation and the hegemon’s domestic coalitional competition . Foreign commercial policy re›ects the commercial order that a state will impose on its overseas formal and/or informal empire and any regions that it comes to dominate. A liberal strategy entails creating and maintaining an open door commercial order in any sphere that the state con153 trols. An imperial strategy means imposing an exclusive economic order in any locale that the state controls, favoring a commercial policy of economic autarky, imperial preferences, or self-suf‹ciency. An imperial contender will impose such an order whether the existing trading arrangement is open or closed. The second component of this argument is the domestic coalitional competition between the members of the free-trade and the economic nationalist factions. Within the hegemon, two broad and logrolled coalitions will compete to advance their preferred program for the declining state’s grand strategy and to capture the associated distributional gains (while avoiding the losses). The membership of the free-trade coalition includes ‹nancial conservatives, capital-intensive export-oriented ‹rms, large banking and ‹nancial services, skilled labor, and ‹nance-oriented government bureaucracies. The free-trade coalition favors lowering the cost of hegemony through retrenching from empire, especially in regions with emerging liberal states; ensuring ef‹cient industry has access to foreign capital, markets, and resources; implementing ‹scal and monetary orthodoxy; and participation in collective security arrangements, disarmament , and arms limitation agreements. In opposition, supporters of the economic nationalist coalition include public sector workers, the military services, settler pressure groups, unskilled labor, inef‹cient industry, agriculture and landowners, import-substituting manufacturing, labor-intensive industry, colonial and empire-oriented state bureaucrats, pro-empire lobby groups, small businesses that compete with imports, and trading companies. The policy preference of the economic nationalist coalition is protecting inef‹cient industry from foreign competition; greater military preparedness and engaging in offensive military operations; and strengthening economic and military ties to the empire. c o o p e r a t i o n a n d e m p o w e r e d f r e e t r a d e r s In encountering new and old competitors on disparate fronts, free traders will respond to these external pressures by pushing the government to cooperate with liberal contenders and perhaps even imperial contenders. The domestic outcome of cooperation will ratchet-up the strength of ef‹cient industry, the ‹nancial sector, consumers, and ‹scal conservatives. Cooperation entails reduced protectionism, elimination of exchange controls , participation in NGOs and IGOs, territorial concessions, membership in collective security arrangements, and the negotiation of arms limi154 The Challenge of Hegemony tation agreements. Economy-minded free traders will favor aiding in the rise of liberal contenders, thereby expediting the hegemon’s...