Matt Domsalla

SAASS 632/4

After Hegemony Precis

In After Hegemony, Princeton Professor of International Affairs Robert Keohane examines “how cooperation has been, and can be, organized in the world political economy when interests exist.” (6) The existence of common interests is insufficient to guarantee cooperation, so he diagnoses the reasons for such failures. While hegemony can facilitate cooperation, it is not necessary, nor is it sufficient. Furthermore, hegemony is less important for the continuation of cooperation once initiated. He defines cooperation as emerging from a pattern of discord or potential discord. It requires active attempts to adjust polices to meet the demands of others, despite the existence of shared interests. Keohane uses Rational-choice theory to demonstrate the pessimistic conclusions often associated with Realism are not valid, even with the assumption of rational egoism. He the uses theories of market failure and rational-choice theory to create a functional theory of international regimes that shows why government may construct regimes and even abide by their rules. Regimes create rules and change the context in which states make decisions based on self-interests. He then further examines how cooperation can take place in world politics in the absence of hegemony. He does this through the liberal monetary institutions created starting with the Brinton Woods Agreement in 1944. He also uses international cooperation in the oil market to highlight cooperation. He postulates “successful attempts to use international regimes to facilitate cooperation depend on efforts to reduce the costs of transactions involved in policy coordination and on measures to provide information to governments, rather than on enforcement of rules.” (17)

Questions and Concepts

Realism, Institutionalism, and Cooperation

· Institutionalists run “the risk of being naïve about power and conflict.” (7)

· “[The] central arguments draw more on the Institutionalist tradition, arguing that cooperation can under some conditions develop on the basis of complementary interests, and that institutions, broadly defined, affect the patterns of cooperation that emerge.” (9)

· “Shared interests and existing institutions make it possible to cooperate, but the erosion of American hegemony makes it necessary to do so in new ways.” (16)

Politics, Economics, and the International System

· “Power… provides a language for describing political action.” (20)

· “We can view international political economy as the intersection of the substantive area studied by economics – production and exchange of marketable means of want satisfaction – with the process by which power is exercised that is central to politics.” (21)

· “Regimes are rarely if ever instituted by disinterested idealists for the sake of the common good. Instead, they are constructed principally by governments whose officials who further the interests of their states (as they interpret them) and of themselves.” (22)

· “The key tradeoffs for the US in the 1980s… are not between power and wealth but between the long-term power/wealth interests of the state and the partial interests of individual merchants, workers, or manufacturers on the one hand or short-term interests of the society on the other.” (23)

· “The conflict between short-run and long-run objectives arises largely in the form of choices between consumption on the one hand and savings or investment on the other.” (24)

· “Defining international political economy in terms of the pursuit of wealth and power leads us to analyze cooperation in the world political economy less as an effort to implement high ideals than as a means of attaining self-interested economic and political goals.” (25)

· “The analysis of this book begins at the systemic level.” (26)

· “What distinguishes my argument from structural Realism is my emphasis on the effects of international institutions and practices on state behavior. The distribution of power, stressed by Realists, is surely important. So is the distribution of wealth. But human activity at the international level also exerts significant effects.” (26)

· “Systemic theories based on rational-egoist assumptions work best when there is one uniquely superior course of action.” (27)

Hegemony in the World Political Economy

· Two central propositions of the theory of hegemonic stability: (1) order in world politics is typically created by a single dominant power and (2) maintenance of order requires continued hegemony. (31)

· The assumptions are erroneous. “Post-hegemonic cooperation is also possible.” (32)

· Hegemony – preponderance of material resources; must have control over raw materials, control over sources of capital, control over markets, and competitive advantages in the production of highly valued goods. (32)

· “The theory of hegemonic stability predicts that the more one such power dominates the world political economy, the more cooperative will interstate relations be.” (34)

· “My contention is that the common interests of the leading capitalist states, bolstered by the effects of existing international regimes are strong enough to make sustained cooperation possible, though not inevitable.” (43)

· “Hegemons require deference to enable them to construct a structure of world capitalist order. It is too expensive, and perhaps self-defeating, to achieve this by force; after all, the key distinction between hegemony and imperialism is that a hegemon, unlike an empire, does not dominate societies through a cumbersome political structure, but rather supervises the relationships between politically independent societies through a combination of hierarchies of control and the operation of markets.” (45)

Theories of Cooperation and International Regimes

Cooperation and International Regimes

· Crucial tension between economics and politics: international coordination of policy seems highly beneficial in an interdependent world economy, but cooperation in world politics is particularly difficult. (49)

· “Cooperation requires that the actions of separate individuals or organizations – which are not in pre-existent harmony – be brought into conformity with one another through a process of negotiation, which is often referred to as ‘policy coordination.’” (51)

· “The concept of international regime is complex because it is defined in terms of four distinct components: principles, norms, rules, and decisionmaking procedures.” (59)

· “A major function of regimes is to facilitate the making of specific cooperative agreements among governments.” (62)

· “Regimes can be viewed as intermediate factors, or ‘intervening variables,’ between fundamental characteristics of world politics such as the international distribution of power on the one hand and the behavior of states and nonstate actors such as multinational corporations on the other.” (64)

Rational-Choice and Functional Explanations

· “A simple explanation for the failure of a given attempt at cooperation in world politics is always available: that the interests of the states involved were incompatible with one another.” (65)

· Prisoners’ Dilemma – mixed motive game characterized by mutual dependence and conflict; defection results in a larger gain. (67)

· The Prisoners’ Dilemma draws “our attention to ways in which barriers to information and communication in world politics can impede cooperation and create discord even when common interests exist.” (69)

· “Used in a sophisticated way, rational-choice analysis should draw our attention to constraints, since choices must be made within a context of power as well as values.”

· “In multiple-play Prisoners’ Dilemma, defection is in the long run unrewarding, since the short-run gains thereby obtained will normally be outweighed by the mutual punishment that will ensue over the long run.” (75)

· “Rational-choice analysis is used… to show that it [cooperation] can be pursued even by purely rational, narrowly self-interested governments, unmoved by idealistic concern for the common good or by ideological commitment to a certain pattern of international relations. That is, rational egoists can have incentives to form international regimes.” (787)

· “Intensive interaction among a few players helps to substitute for, or to supplement, the actions of a hegemon.” (79)

· According to rational-choice theory, “institutions exist because they could have reasonably been expected to increase the welfare of their creators.” (80)

· “Market failure refers to situations in which the outcomes of market-mediated interactions are suboptimal, given the utility functions of actors and the resources at their disposal.” (82)

· “In situations of market failure, the difficulties are attributed not to inadequacies of the actors themselves, but rather to the structure of the system and the institutions, or lack thereof, that characterize it.” (83)

A Functional Theory of International Relations

· “Like imperfect markets, world politics is characterized by institutional deficiencies that inhibit mutually advantageous cooperation.” (85)

· “The Coase theorem has frequently been used to show the efficacy of bargaining without central authority. The principle of sovereignty in effect establishes rules of liability that put the burden of externalities on those who suffer from them. The Coase theorem could be interpreted, therefore, as predicting that problems of collective action could easily be overcome in international politics through bargaining and mutual adjustment.” (86)

· “The anticipated effects of the regimes account for the actions of governments that establish them. Governments believe that ad hoc attempts to construct particular agreements, without a regime framework, will yield inferior results compared to negotiations within the framework of regimes.” (88)

· “Contracts, conventions, and quasi-agreements provide information and generate patterns of transaction costs: costs of reneging on commitments are increased, and the costs of operating within these frameworks are reduced.” (89)

· “The nesting patterns of international regimes affect transaction costs by making it easier or more difficult to link particular issues and to arrange side-payments, giving someone something on one issue in return for her help on another. Clustering of issues under a regime facilitates side-payments among these issues: more potential quids are available for the quo.” (91)

· “The literature on market failure elaborates on its most fundamental contention – that, in the absence of appropriate institutions, some mutually advantageous bargains will not be made because of uncertainty – by pointing to three particularly important sources of difficulty: asymmetrical information; moral hazard; and irresponsibility.” (93)

· Asymmetrical information – systematically biased patterns of information, which are recognized in advance of any agreement both by the holder of more information. (93)

· “A government’s reputation therefore becomes an important asset in persuading others to enter into agreements with it. International regimes help governments to assess others’ reputations by providing standards of behavior against which performance can be measured, by linking these standards to specific issues, and by providing forums, often through organizations, in which these evaluations can be made.” (94)

· “Agreements may alter incentives in such a way as to encourage less cooperative behavior.” (95)

· “As the principles and rules of regime reduce the range of expected behavior, uncertainty declines, and as information becomes more widely available, the asymmetry of its distribution is likely to lessen.” (97)

· “International regimes can facilitate cooperation by reducing uncertainty.” (97)

· Myopic self-interest refers to governments’ perception of the relative costs and benefits to them of alternative courses of action with regard to a particular issue, when that issue is considered in isolation from others.” (99)

· “Because regimes are difficult to construct, it may be rational to obey their rules if the alternative is their breakdown, since even an imperfect regime may be superior to any politically feasible replacement.” (100)

· “The importance of transaction costs and uncertainty means that regimes are easier to maintain than they are to create.” (100)

· “Viewing international regimes as information-providing and transaction cost-reducing entities rather than as quasi-governmental rule-makers helps us to understand such persistence.” (101)

· “It is precisely the costliness of agreements, and of regimes themselves, that make them important. The high costs of regime-building help existing regimes to persist.” (103)

· “Social pressure, exercised through linkages among issues, provides the most compelling set of reasons for governments to comply with their commitments. That is, egoistic governments may comply with rules because if they fail to do so, other governments will observe their behavior, evaluate it negatively, and perhaps take retaliatory action.” (103)

· “The dilemmas of collective action are partially solved through the device of reputation.” (105)

· “International regimes perform the valuable functions of reducing the costs of legitimate transactions, while increasing the costs of illegitimate ones, and of reducing uncertainty.” (107)

Bounded Rationality and Redefinitions of Self-Interest

· “Actors subject to bounded rationality cannot maximize in the classical sense, because they are not capable of using all the information that is potentially available.” (112)

· “People ‘satisfice’ rather than maximize. That is, they economize on information by searching only until they find a course of action that falls above a satisfactory level – their ‘aspiration level.’ Aspiration levels are adjusted from time to time in response to new information about the environment.” (112)

· “Under bounded rationality, the inclination of governments to joint or support international regimes will be reinforced by the fact that the alternatives to regimes are less attractive than they would be if the assumptions of classical rationality were valid.” (115)

· “International regimes… provide rules of thumb in place of those that government would otherwise adopt.” (116)

· “International regimes can be used to affect preferences of future governments by creating constraints on their freedom of action.” (120)

· “Empathetic explanations of behavior in world politics are limited to relatively small spheres of activity: situations in which actions do not have obvious explanations in terms of more narrowly defined self-interest.” (125)

· “Publicly accepting a set of principles as morally binding may perform a labeling function.” (127)

· “The reverse flow of influence, resulting from deference by the client, suggests that a patron-client relationship can often be reconceptualized as an exchange relationship in which intangible as well as tangible flows of benefits take place.” (128)

Hegemony and Cooperation in Practice

Hegemonic Cooperation in the Postwar Era

· “Powerful states seek to construct international political economies that suit their interests and ideologies.” (136)

· American influence rested on three major sets of benefits: (1) a stable international monetary system, (2) provision of open markets for goods, and (3) access to oil at stable prices. (139)

· “The most remarkable aspect of the Marshall Plan and the EPU is that the US gave up its usual demands for reciprocity.” (146)

· “If the failure of the ITO reflected the difficulties of securing a formal international agreement that could command support in the US, the success of GATT was indicative of the conditions facilitating successful hegemonic cooperation.” (148)

· “In trade and money the US supported formation international regimes, while in oil it backed the more narrowly based, company-run regime and engaged in independent action when that seemed necessary. In the short to intermediate term, this strategy worked: the cooperation that it fostered aided the economic and political recovery of Europe and Japan, and maintained the alliance solidarity that the American government sought during the Cold War. In the longer run, however, it success was thwarted, since it neither institutionalized an international regime that might have coped with rising threats to the security of European, Japanese, and, increasingly, American oil imports, nor did it maintain a strong resource base for the exercise of American power.” (177)

· “The story of hegemonic cooperation stimulate reflections on three more general problems in the analysis of international political economy: the relationship between power and interdependence the problem of maintaining hegemony; and the nature of connections between hegemony on the one hand and international regimes and cooperation on the other.” (177)

· “To be successful in the long term, a hegemonic strategy must recreate the conditions for its own existence. Pursuit of a strategy must generate strength, or hegemony will eventually collapse.” (178)

· “American’s strategy of hegemonic leadership, finally, shows that hegemony and cooperation are often complementary rather than incompatible.” (179)

· “One of the most striking things about the postwar period is that many of the most important goods that the US provided were not collective at all.” (180)

· “Perhaps the most important collective good provided by the US during its period of hegemony was the increased certainty about future patterns of behavior that hegemony brought.” (180)

The Incomplete Decline of Hegemonic Regimes

· “If the theory of hegemonic stability were wholly wrong, there would be no reason to expect that the demise of hegemony would make any real difference in prospects for cooperation. If the theory were entirely correct, there would be no hope for post-hegemonic international regimes.” (183)

· “The crude theory of hegemonic stability makes a contribution by pointing to the importance of material power, yet it does not provide a general casual explanation of the changes that we observe. Cooperation seems also to depend on expectations, on transaction costs, and on uncertainty, all of which can be affected by international regimes.” (184)

· “My conclusion is that some causal linkages seem to exist [between the decline of American hegemony and the deterioration of international cooperation], although they are not as direct and uncomplicated as the theory of hegemonic stability would suggest.” (195)

· “A functional theory of cooperation requires, as the condition for its operation, that actors have common interests; otherwise, there will be no mutually advantageous agreements for them to make.” (205)

· “New power relationships are not fully appreciated until they are tested.” (206)

· “In world politics, power is always important, Any functional explanation, which deals with the value of a given process or pattern of interaction, must be embedded in an understanding of political structure, especially the distribution of power among actors.” (206)

· “In oil, on the other hand, the collapse of the old regime made it necessary for the US to take decisive action if it were to retain leadership of a relatively coherent group of advanced industrialized countries. It offered to sacrifice some of its control over domestic oil supplies, in a crisis, in exchange for receiving the deference essential to create a regime in which it could exercise leadership. That is, the US was willing to accept more of the costs of adjustment in oil than it was in the monetary area.” (209)

· “Cooperation may be self-limited in world politics as well as self-reinforcing.” (210)

· “International regimes tend to maintain patterns of cooperation, but they do not necessarily facilitate innovative expansions of cooperation in response to crisis and change.” (210)

· “Classical and neoclassical economists have seen protectionism as a pathology of group politics, driven by demands of individuals and groups for higher and more stable incomes than they would command in a free market.” (211)

· “Pressures of international competition and structural adjustment provide a better explanation of the decline of the trade regime than the theory of hegemonic stability.” (213)

· “The theory of hegemonic stability predicts substantial erosion of the trade regime. This has occurred, but as we saw above, what is equally striking is the persistence of cooperation, even if not always addressed to liberal ends.” (213)

· “Contemporary trade regimes do not create harmony, but they do facilitate cooperation by reducing transaction costs, limiting the legitimate strategies available to actors, and providing information in a relatively symmetrical fashion.” (214)

· “Although regimes can facilitate cooperation among governments that seek to make agreements, they do not automatically produce it among those whose interests are in conflict or those that pursue overly demanding bargaining strategies.” (214)

· “The theory of hegemonic stability, differentiated by issue-area,… calls attention to underlying power factors that may be overlooked by apolitical analyses or by those that ignore international political structure.” (214)

The Consumers’ Oil Regime, 1974 – 81

· “My argument is that cooperation among independent governments in the absence of hegemony, to achieve joint gains, is possible, and that regimes can facilitate such cooperation by reducing transaction costs, providing information, and constructing rules of thumb to guide bureaucracies in making routine decisions.” (221)

· “The principal political justification for the targeting exercise was not that it established binding controls on national oil imports, but that it provided a rhetorical environment in which transgovernmental and international cooperation could take place.” (233)

· “In 1980 the IEA energy regime seems to have mattered; in several ways, it helped to prevent another disaster of uncoordinated responses to a problem of collective action… it facilitated coordination between governments and companies and reduced uncertainty by providing reliable information to them.” (235)

· “What international regimes can accomplish depends not merely on their legal authority, but on the patterns of informal negotiation that develop within them. Rules can be important as symbols that legitimize cooperation or as guidelines for it. But cooperation, which involves mutual adjustment of the policies of independent actors, is not enforced by hierarchical authority.” (237)

· “Even the most highly institutionalized international regimes do not rely on centralized rule-enforcement against their most important members.” (238)

· “Regimes are less important as centralized enforcers of rules than as facilitators of agreement among governments.” (238)

· “Cooperation is most likely to occur not only when there are shared interests but then international institutions that facilitate cooperation on behalf of those interests. But, to be successful, these institutions require not just a pattern of underlying common interest but a sufficiently favorable environment that the marginal contributions of international institutions – to minimizing transaction costs, reducing uncertainty, and providing rules of thumb for government action – can make a crucial difference.” (240)

· “Hegemony and international regimes can both contribute to cooperation. Neither is necessary… Neither is sufficient… if there is neither a hegemonic leader nor an international regime, prospects for cooperation are bleak indeed, and dilemmas of collective action are likely to be severe.” (240)


The Value of Institutions and the Costs of Flexibility

· “Interdependence in the world of political economy generates conflict.” (243)

· “If discord is to be limited, and serve conflict avoided, governments’ policies must be adjusted to one another. That is, cooperation is necessary.” (243)

· “Nonhegemonic cooperation is difficult, since it must take place among independent states that are motivated more by their own conceptions of self-interests than by a devotion to the common good.” (244)

· “Institutions that facilitate cooperation do not mandate what governments must do; rather they help governments pursue their own interests through cooperation.” (246)

· “The fact that governments anticipate a future need for agreements with the same countries to which they currently have commitments gives them incentives to fulfill those commitments even when it is painful to do so.” (258)

· “To pursue self-interest does not require maximizing freedom of action. On the contrary, intelligent and farsighted leaders understand that attainment of their objectives may depend on their commitment to the institutions that make cooperation possible.” (259)

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