This challenge to the commercial peace has not gone unanswered. In an early survey of the simultaneous interaction between trade and conflict, Soo Yeon Kim determines that the strongest line of cause and effect runs from commerce to peace.51 Oneal, Russett, and Berbaum likewise demonstrate that while a two-way relationship characterizes trade and conflict, a dispute between states will only depress bilateral commerce for a short period. Controlling for several factors that might influence trade flows, they also find that alliances have no impact on commerce between states.52 Last, Havard Hegre, Oneal, and Russett uncover methodological flaws in the two recent studies negating the commercial peace. They “show that the pacific benefit of interdependence is apparent when the influences of size and proximity on interstate conflict are explicitly considered.”53
A subset of the literature on trade and peace explores how economic interdependence interfaces with domestic politics to shape a state’s strategic choices. Paul Papayoanou maintains that extensive economic ties with a rival power will hinder a state’s capacity to hedge or contain. Groups that directly benefit from commerce with the rival power will be reluctant to view it as hostile and oppose the adoption of confrontational policies. In addition, political leaders will fear the consequences of a more assertive strategy—that the rival power will sever commercial relations, resulting in painful economic dislocation at home. Papayoanou argues that democracies are more vulnerable to both of these dynamics because they accord all interests a voice in the making of foreign policy.54 Kevin Narizny advances a related argument. Sectors dependent on an external power for their economic livelihood will champion a foreign policy of accommodation while sectors that compete with that power in third markets will prefer more hardline approaches. Sectors reliant on trade and investment with a multitude of foreign partners will advocate international law and institution building but stand ready to oppose aggressors that threaten regional or global stability. The balance of these sectors within a state’s ruling political coalition will dictate its strategic choices.55
The commercial peace scholarship thus offers another vantage point for understanding how democratic leaders formulate strategy during power transitions. Trade and investment linkages may impose comparatively greater constraints on the rising state if its economy remains smaller than the democratic power’s. Yet if trade with the rising state constitutes a sizeable percentage of the democratic power’s national wealth, or if other types of economic entanglements exist, the potential loss of valuable commercial relations and the prospect of domestic blowback may overhang democratic leaders as they decide whether to appease, integrate, hedge, or contain. Except for the onset of the Cold War, all the case studies in this book feature nonnegligible economic ties between the democratic power and the ascendant state. Although the limited number of power transitions in the book provides an insufficient basis for broader claims about the role of economic interdependence, the analysis of multiple cases allows for a more nuanced understanding of the interplay between commercial ties and foreign policy.
Ordering of the Book
The remainder of the book offers an analytical framework and supporting historical evidence that, in turn, illuminate the geopolitics of the twenty-first century. Chapter 2 explains how regime type frames power shifts and sets the stage for how democratic states respond to the emergence of other powers. The next five chapters cover a period of time stretching from the late nineteenth century to the present. Chapter 3 explores the British responses to the simultaneous rise of the United States and Imperial Germany. Chapter 4 looks at Great Britain’s approach to the resurgence of Germany during the 1930s. Chapter 5 focuses on how the United States in the 1940s managed the rise of the Soviet Union. Chapters 6 and 7 respectively examine how the United States and Japan have responded to the growth of Chinese power. Chapter 8 discusses the scholarly and policy implications of the book’s main findings.
Chapter 2
Power Shifts and Strategy
This chapter connects power transitions, regime type, and the choices that democratic leaders make as they navigate the rise of other nations. The argument is that democracy in an ascendant state reassures while autocratic rule creates a climate of uncertainty and mistrust. Democracies can rise without sowing alarm because their domestic institutions clarify intentions and allow outsiders to shape their strategic behavior. Conversely, rising autocracies provoke anxiety because centralized control and pervasive secrecy obscure their ambitions and reduce opportunities to influence their trajectory. What this means is that democratic powers pursue different strategies as democracies and autocracies rise. They appease newly powerful democracies in order to remove points of conflict and pave the way for integration into international institutions. However, autocratic rule in a rising state necessitates a different approach. Democratic powers will avoid appeasement, and instead attempt to embed rising autocracies in international institutions while looking to military capabilities and alliances as a hedge. This approach amounts to a delicate balance between two disparate strategies. Containment becomes attractive if an autocracy’s behavior as its rise continues unmistakably demonstrates the failure of integration to have a moderating effect.
Power and Perceptions
Changes in the balance of power and the balance of perceptions precede a fateful transition. Clever diplomacy or convincing rhetoric may, for a time, boost a nation’s status in world affairs, but without an accompanying accumulation of economic and military assets, this ascendance will prove short lived. To rise, a state must bring about a shift in the prevailing balance of national capabilities. Yet that state’s emergence may initially go unnoticed by outsiders. Fateful transitions unfold only when democratic leaders begin to perceive another nation’s rise. This section unpacks the balance of power and the balance of perceptions because a detailed understanding of each is critical to identifying the universe of cases relevant to the book.
The Balance of Power
Although power lies at the heart of a vast body of international relations scholarship, its main components remain contested. Theorists such as Kugler and Organski put forward gross national product as a concise indicator of overall national strength.1 To measure the balance of power, more recent academic work has used gross domestic product (GDP) and the Correlates of War, a composite index of state capabilities.2
It is tempting to simply define the balance of power as the balance of wealth using GDP. Yet when inflated by a large population size, GDP can provide a misleading indicator of national capabilities. As Fareed Zakaria observes, a state’s power reflects the resources the national government can command.3 If much of a state’s population exists at the level of subsistence, a government can harness few resources despite the overall size of the economy.4 History demonstrates the disjuncture between GDP and the balance of power. Well into the nineteenth century, China boasted the largest GDP of any nation. Yet the government of Great Britain—able to extract more resources from an industrializing economy—could impose its will on China.5 GDP may overstate a nation’s actual capabilities for another reason: the state refrains from translating economic prowess into military might. Blessed by a favorable geography and distrustful of standing armies, the United States long avoided maintaining a military commensurate with its economic clout. Contemporary Japan has yet to develop military forces proportionate to its status as the world’s third-largest economy.6 In short, GDP as a catchall indicator of national power
