by Joseph Solis-Mullen
In 1950 French Foreign Minister Robert Schuman proposed that France, Germany, and other interested European countries pool their coal and steel resources, with the aim of preventing future conflicts over these essentials. The following year the European Coal and Steel Community (ECSC) was formed. Consisting of France, West Germany, Italy, Belgium, Luxembourg, and the Netherlands, this first supranational organization laid the foundation for further economic cooperation by the members. Building on the success of the ECSC, the same six states followed the 1951 Treaty of Paris with the 1957 Treaty of Rome, which established the European Economic Community (EEC). The purpose of the EEC was the creation of a common market and customs union among member states, facilitating the free movement of goods, services, capital, and people. Over time the EEC expanded, adding the United Kingdom, Denmark, and Ireland in 1973, followed by Greece in 1981, then Spain and Portugal in 1986. That same year the Single European Act was signed with the aim of furthering economic integration by continuing the process of eliminating barriers to trade and streamlining decision-making within the body. Integration took a huge step six years later with the signing of the Maastricht Treaty (1992), which transformed the EEC into the European Union (EU). The Union’s common currency, the Euro, was launched seven years later (1999) and entered public circulation a few years after that (2002).
While the project of further European integration began encountering stiff headwinds shortly thereafter, the 2005 rejection of the so-called “EU Constitution” by the populations of key states fearful of potential losses of sovereignty resulting in the compromise Lisbon Treaty two years later (2007), the EU represents perhaps the most ambitious example of interstate federalism yet attempted. To be sure, it has its shortcomings. Despite multiple reforms the EU remains an effectively top-down and distant set of institutions; while its inherently deflationary common currency compounds the troubles of any floundering member, both by increasing the real costs of its debt and by preventing the devaluation a currency sovereign would undergo and which would boost its exports during a downturn. For all these difficulties, however, the EU has now navigated multiple crises that might well have undone it.
From the Eurozone Debt Crisis (2008-2013) to the Russo-Ukraine War (2014-present), this fullest realization yet of Hayek’s vision of interstate federalism has expanded trade, increased cooperation, and helped secure peace between members while boosting the strategic autonomy of what otherwise would be at this juncture (mostly) an assortment of second and third-rate geopolitical and geoeconomic powers. However, while the shared values, interests, and institutions constructed by the Europeans themselves over the course of decades deserve their credit, the United States played a key role in this process. Particularly in its early stages, the project of European integration succeeded because of major security and trade asymmetries with the United States that facilitated the solving of important coordination problems. An archaeology of the circumstances of Europe’s early success can be instructive, therefore, to those who wish, in Hayek’s words, to further “do away with the impediments as to the movement of men, goods, and capital between the states.” For despite important steps having been made toward solving these similar problems at a global level during the post-war, and especially unipolar period, the trend now appears to be going in reverse.
To begin with, as the liberal institutionalist Robert Keohane illustrated in his school’s seminal work, economic cooperation comes more readily than security cooperation. This, Keohane showed, was due largely to the difference between the experiences of relative versus absolute gains in the respective realms of security and trade. In the first case, the paramount necessity of state survival to the pursuit of any further objectives, such as economic success, means states are sensitive to relative gains and losses and will not engage in a transaction or partnership with another state unless it perceives that it benefits more than other states do from the new situation. Mearsheimer argues that this is a zero sum game. Trade, by contrast, presents a scenario in which participants are more likely to accept differing levels of absolute gains so long as the outcome is win-win, the benefits to one not necessarily coming at the expense of the other.
As shown above, in the case of western Europe security concerns drove early efforts at integration; however, these occurred under the security auspices of an overwhelming United States umbrella and in the face of a single perceived opponent in the Soviet Union. Ignored for the purposes of this brief survey are the differences within the states of western Europe, which could have easily produced communist governments in France or Italy for some years after the war; ignored, too, are the admitted interference campaigns conducted by the United States in western Europe after the war to prevent such outcomes. It is enough for the purposes of this analysis to take the existence of the eventual, willing ECSC governments, their incentive structures, and relationship to the United States as a given. Each needing in varying degrees to rebuild societies, economies, or political institutions, access to the American market on favorable terms offered a tremendous incentive for the ECSC governments to cooperate with one another and with the United States.
Peace through prosperity via gradually deepening interdependence and integration, what the Europeans wanted, was different from what the Americans wanted. As an April 1950 report by the Bureau of the Budget put it:
Foreign economic policies should not be formulated in terms primarily of economic objectives. They must be subordinated to our politico-security objectives and the priorities which the latter involve.
The North Atlantic Treaty Organization (NATO), whose purpose was, in the words of the alliance’s first Secretary General, “to keep the Soviet Union out, the Americans in, and the Germans down,” had just been created the year before; and with western Europe dependent on the United States for its security and on its consumer market for demand, the Americans were in a position to trade deference to its policies regarding the former in exchange for advantaged access by the Europeans to the latter. In the words of Philip Trezise, a State Department trade specialists for the Nixon administration: “We did make some big tariff cuts and didn’t get any reciprocity. It was quite deliberate.”
Judith Stein has documented that this policy extended to the American alliance system in east Asia as well. An early example was in 1953, following the “loss of China,” when the National Security Council (NSC) advised opening the American market to Japanese goods on the grounds that failure to do so might slow Japan’s economy and create an opening for Japanese socialists and communists to exploit, thereby endangering US basing agreements. Its state-directed export growth model would provide the template for the later “Asian Tigers,” South Korea, Taiwan, and Singapore, all of whom enjoy long-term security relationships with the United States similar in principle to that enjoyed by Japan.
To be clear, then, what Washington was creating was not free trade between itself and its allies; rather, it was creating a preferential system of asymmetric trade concessions in the name of ensuring stability in allied states in the name of maintaining their easy cooperation in the realm of security policy. To return to the European example, its preference system of tariffs, quotas, subsidies, and broader agricultural and industrial policies meant EEC member states were clearly in violation of the General Agreement on Tariffs and Trade (GATT). Washington, of course, ignored this.
By way of contrast, as the political scientist Chalmers Johnson has noted, when members of the GATT began trading with Warsaw Pact members such as Poland and Hungary in the 1960s the United States showed no such largesse, stipulating that their imports from GATT signatories needed to increase a certain percentage year-on-year or suffer the immediate termination of their trade privileges. In the context of the present it is interesting to note that under the auspices of the World Trade Organization (WTO), which effectively replaced the GATT upon its creation in 1995, Washington engaged with China on similar economic terms to those with which it engaged western Europe and the parts of east Asia referenced above: allowing it to subsidize its industries, protect its domestic market, and maintain an artificially low exchange rate.
But unlike in those cases, which featured some combination of US occupation, direct means of influence, shared values, or shared institutions, China was never occupied by US troops and still resents Washington for numerous imperialist misdeeds dating back to the mid-19th century; further, Washington had no means of directly influencing the political process, as for example it had in Japan, helping to power the pliant center-right Liberal Democratic Party (LDP). The U.S. and China also lacked shared values or common institutions. Those who argued that engagement with China would significantly change its behavior or interests because of past U.S. successes in this regard ignored these vital differences.
While not the place to try to disentangle the varying thought processes and incentive structures which led to the present relationship between Washington and Beijing, from the dream of the China market to the various strands of development theory that guided its strategy of engagement, it can at this juncture be safely asserted that attempts to make China a “responsible stakeholder” in the American-dominated world system that was developed during and after the Cold War have failed to transform China in the ways desired by Washington. China is no more willing to yield to Washington’s desired security policies in southeast Asia than was Russia in its near abroad. Far from moving closer together in terms of values and institutions, the richer China has become and the harder Washington has pushed the more Beijing has sought to set itself apart, emphasizing its own national greatness and setting up alternative institutions to those underwritten by the United States.
Because a strong and independent China is now a fact, it would behoove policymakers in Washington to seek pragmatic relations with Beijing despite their serious differences. Decoupling, or “de-risking,” as it is now being termed, is scarcely an option, and not even a good one at that. Though no panacea (major trading partners have gone to war before), trade is a powerful, though not fool-proof, deterrent to war. In the words of the 19th century liberal Otto T. Mallery in his Economic Union and Durable Peace, “If soldiers are not to cross international boundaries, goods must do so.”
Multipolarity
The preceding section raises the question of whether and to what extent security cooperation is necessary for economic cooperation. Two things seem clear; first, that trading with rivals has been a given historically; and two, given that a drastically different kind of future, the kind described by Fukuyama’s End of History that defined the so-called “unipolar moment,” now seems beyond reach, a more quid pro quo, bilateral rather than multilateral approach to interstate cooperation may be necessary. Particularly when reviewing the products of Washington’s policies to this point, it is by no means clear that this would be a bad thing. For all its successes, the policies Washington pursued came at a heavy cost. What started as using the American market as an incentive and destination of last resort for anything the allies wanted to offload, quickly cut into the American current account once these states had been rebuilt. Combined with Washington’s profligate spending on “guns and butter,” it undid Bretton Woods, ushering in a new age of explosive asset price and consumer price inflation.
And while the domestic benefits of increasingly liberalized trade were widespread, the costs were concentrated to specific areas and industries. This destroyed whole communities, prompting political backlash against further such policies. As Michael Lind has noted, there was a high correlation between those who voted for Donald Trump during the 2016 Republican Primaries and those who likewise voted for Bernie Sanders during the Democratic Primaries, and that one of their highest shared predictors was exposure to industries affected by increased trade with China. Even strictly assessing the results of Washington’s chosen policies in terms of their security implications, its results seem decidedly mixed.
On the one hand, Europe and much of east Asia are dependent on the United States for material, logistical, and direct military support and for that reason alone pose no serious threat to it or to one another. On the other hand, Washington’s policies have provoked Russia and are presently provoking China. In fact, it can be reasonably argued that it was U.S. policy makers who ensured that the unipolar moment, once it passed, would not pave the way to the essentially demilitarized and borderless global marketplace some had increasingly envisioned. Kenichi Ohmae spoke for many such thinkers, writing in 1995:
economic activity is what defines the landscape on which all other institutions, including political institutions, must operate. Business and government are just beginning to live with the consequences. Most visibly, the nation-state itself—that artifact of the eighteenth and nineteenth centuries—has begun to crumble.
The state, however, fought back, given new life by Washington’s thirty years of militarism. One can choose their favorite quotation, from the sociologist Charles Tilly’s “war made the state and the state made war,” journalist Randolph Bourne’s “war is the health of the state,” American founding father James Madison’s “no nation could preserve its freedom in the midst of continual warfare,” or any number of others.
In The Great Delusion: Liberal Dreams and International Realities (2018) Mearsheimer effectively summarizes the problem facing those who favor a liberal world order but simultaneously reject the idea of a world government effectively capable of unilateral coercion and (somehow) deputized to legitimately behave as such:
In the absence of a world state, states bent on survival have little choice but to compete for power. Liberalism has to have a night watchman if it is to work. It demands a hierarchic political system such as exists inside the state itself. But the international system is anarchic, not hierarchic.
While this is not the place to debate anarchism, or for that matter minarchism or any other political philosophy, it is worth pointing out that to take such a view is to ignore many of the earlier examples of political history: when, for a variety of reasons, otherwise durable and effective political institutions were unable to act in the now familiar and expected manner of the developed states of the 19th and 20th centuries. These institutional arrangements emphasized local autonomy, patience with regard to mediated dispute resolution, and sometimes accepting that a resolution was simply beyond reach. In accordance with this line of reasoning, it may further be argued that what a workable international rules-based order requires more than the use of force to maintain it is acceptance of those rules as legitimate and binding: this requires that all states adhere to them, particularly the strongest. This is because, on the one hand, as countless examples have shown, even the most relatively powerful state cannot reliably bend other states or societies continually to its will; while on the other hand nothing will undermine a rule more than its being ignored by those whose relative power allows them to ignore it.
After all, with regard to the first: how much stronger could a hypothetical “World Government” based out of the Hague be than the United States was during the post-war period, and especially during the 1990s and early 2000s? While with regard to the second, the United States has by no means been alone in ignoring rules it didn’t like: France and Germany both broke EU deficit rules when it suited them while pushing for the punishment of less powerful offenders, like Greece, Ireland, and Spain.
Isonomy, in short, is critical. Today, for example, China has come under withering criticism from Washington for its ignoring of multiple rulings against its claims in the South China Sea and its human rights record: But what good does it do to criticize China for ignoring international rulings when the United States has ignored them in the recent past and does not even acknowledge the authority of those same institutions as applied to themselves? Why is Putin expected to be locked up, while George W. Bush sits on his ranch playing Bob Ross? To borrow again from Mearsheimer, rights and rules are all too often merely the rhetorical arabesques powerful liberal states use to obscure the naked pursuit of their interests abroad – an opinion clearly shared by much of the global south. In this, then, Washington is no different than the Athenians of Thucydides day, who at least had the decency not to obfuscate the matter: “Rights,” they said, could “only have meaning between equals in power. Otherwise, the strong do as they can and the weak suffer as they must.” Washington’s entire grand strategy during the postwar period has been predicated on not allowing such a rival to emerge. In fact, its relative power has been greatly diminished and a multipolar world looks increasingly likely. Attempts by the United States to apply the same methods it used during the Cold War and unipolar moment, therefore, will fail both domestically and abroad, resulting in tremendous and violent disorder. It must learn, in the absence of deference by its trade partners to its security preferences, to engage in peaceful commerce with other states.
Joseph Solis-Mullen is a graduate student in the economics department at the University of Missouri. Send him mail. Find him on Twitter/X.
Isonomia Quarterly 