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THE OF RIVALRY: as the Political of the Rivalry Phase of the Hegemony/Rivalry Cycle

Robert A. Denemark1 Visiting Scholar, Arrighi Center for Global Studies, Johns Hopkins University [email protected]

Prepared for the Annual Meeting of the International Studies Association, April 2021.

KEYWORDS: Gains, Hegemony, Mercantilism, , Rivalry

INTRODUCTION/ABSTRACT The shift from a period of hegemony to a period of rivalry signals the advance of very different analytical foundations for interaction. We move away from an interval in which powerful actors assure relatively stable rules, seek to benefit from the ensuing cooperative interactions, and allow others to do so as well, albeit unevenly. Actors seek ‘absolute’ gains, which means that each actor should seek to get ahead by taking actions that will allow them to do so without concern for how those actions might also allow others to get ahead. As hegemony declines, we move toward an interval when major actors engage in unfettered , using the full range of their resources to acquire the and power necessary to re-organize global processes to suit their . During this essentially zero-sum competition, individual states or alliances advance to the degree that others decline. Actors seek ‘relative’ gains. Cooperation and joint benefits should therefore be rare and fragile. In the economic realm, this is generally associated with ‘mercantilism’. Mercantilism is the contentious process that arises among political units of different sizes and scales as they contend for dominance. This contest has a critical internal as well as external focus. Larger scaled units tend to prevail, albeit amid much conflict. Mercantilist ideas about the nature of the , wealth, specie inflow, and the relevant toolbox are identified and considered.

HEGEMONY AND RIVALRY In 1973 Charles Kindleberger outlined the important role a uniquely powerful lead state could have in keeping the global economy stable and open. Hegemony, not just dominance, was adopted as a topic of concern by scholars from multiple perspectives. Realists (Gilpin 1981; Krasner 1976), neo-liberal institutionalists (Keohane 1984), and -systems analysis (Wallerstein 1983) all offered arguments. Wallerstein identified hegemony in its recent

1 I am grateful to Kwanok Kim of Keimyung University, Daegu, South Korea, for including me in his project on 'absolute vs. relative' gains, and Hasan Yonten who is working with us on that project.

1 historical context as the relatively rare outcome of coterminous agricultural, industrial, and financial dominance. This condition allows a single state to acquire sufficient resources to unilaterally establish the rules of the global game. Hegemony contrasts with rivalry. Periods of rivalry are defined by competition among actors to establish rules or norms that serve their interests. Rivalry is not simply the absence of hegemony, in the same way that peace is not just the absence of war.

The rise and decline of hegemony are relatively well understood in the world-systems literature, but the logic of rivalry tends to be ignored. and his colleagues even offered an alternative conception of this cycle that focuses on hegemony alone. The process includes Hegemony: Hegemonic Crisis; Hegemonic Breakdown: New Hegemon (Arrighi and Silver 1999: 122; 180). For Silver and Slater (1999), hegemony re-emerges when new solutions to problems of social disorder are successful. Systemic disorder arises when the dominance of and in the hegemonic state, which tends to widen social and political opportunities as mass and growth increase, evolves into a system more dominated by financial interactions. Financial dominance is highly polarizing. Class tensions increase as opportunities dissolve. The virtuous cycle of expansion, increasing wealth, stability, and peace, and further expansion, breaks down. In its place we find a vicious cycle of intra- and inter-state conflict, well-orchestrated hypernationalism, and military tension. Mobilization increases the importance of labor in security-related industries, which contradicts the increased competition for . Silver and Slater suggest:

“… past hegemonic transitions appear to be moments of escalating social conflict aimed at reaffirming or challenging established status and class hierarchies – an escalation that is intertwined with intensifying interstate and interenterprise competition. In both transitions, social conflict played a double role. On the one hand, it fed into the escalation of interstate and interenterprise competition, speeding the transition from hegemonic crisis to hegemonic breakdown. On the other hand, the intensity and form of social conflict was decisive in shaping the social compacts that emerged in the midst and aftermath of the hegemonic breakdown, and on which the new hegemony would be based” (Silver and Slater 1999:211).

This tracing of the rise and decline of hegemonic systems is particularly insightful, but it does not afford the same depth of analysis to the periods and processes of rivalry. First, this conceptualization speaks primarily to great power contenders and thus ignores the vast majority of states. Even some great powers lack any real chance of attaining, or the desire to contest hegemony. Certainly the states of the semi-periphery might play a role in Arrighi’s hegemonic cycle, but they are not usually themselves contenders, nor are the peripheral states. Together these non-contenders constitute a great majority of the world. Second, the socio-political and economic context of these non-contenders is essentially ignored by such a perspective. I argue that with the demise of hegemony and the rise of rivalry the global system itself is altered such that prior rules, expectations, and predicted behaviors no longer obtain. This new environment generates different systemic forces and incentives that the Wallersteinian Hegemony/Rivalry cycle is well placed to address. How has this context has changed?

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ABSOLUTE vs. RELATIVE GAINS

In this paper I will contend that periods of hegemony and periods of rivalry are animated by different concepts of advantage and gain. An understanding of motivations for state action based on perceptions of the of ‘absolute’ vs. ‘relative’ gains is not new, but this literature has become unproductive and requires some reconceptualization. I tie the ‘gains’ debate to the hegemony/rivalry cycle. I argue that periods of hegemony that are generally understood to facilitate greater cooperation will do so in part because they bring forward a preference for absolute gains. Periods of rivalry that are generally understood to engender greater levels of large-scale conflict will do so in part because they bring forward a preference for relative gains. From this perspective, placement in the hegemony/rivalry cycle will determine perceptions of the value of absolute vs. relative gains, enriching our understanding of both.

Students of global have long considered the nature of cooperation in the state system. One of the major strands in this discussion is poised as a debate between those who believe that states are rational value maximizers who use cooperative mechanisms to aid in gaining as much absolute wealth and power as they can, and those who believe that states seek relative advantages that allow them to get ahead of erstwhile competitors (basically all other states in the system), even if that means a reduction in absolute levels of well-being. From this perspective, cooperation is generally avoided because states fear that superior gains may accrue to others and be used to support aggression against them (Powell 1991; Grieco et al. 1993:739).

Scholars associated with the Realist School of focus on systemic anarchy – a state of governancelessness - as the salient (and fixed) global environmental variable, and the of force as the final arbiter of international contention. Realists argue that states must and do seek relative gains – gains that afford them an advantage over others -- even at the cost of reduced overall wealth and/or power. Any alterations that widen the gap in power resources in their favor will be viewed in a positive light. Any alterations that alter a gap that is not in their favor will be viewed negatively. It is not ‘getting ahead’ that matters, but getting relatively farther ahead. Hence actions that reduce one’s own power resources are rational if they reduce the power resources of others by a greater degree. Cooperation, often to reduce transaction costs and allow multiple actors in a system to benefit from various forms of interaction, is viewed with suspicion from a relative gains perspective. If others might be enjoying greater relative gains from a given cooperative interaction, which will be difficult to predict beforehand, then they may eventually use their power to do you harm. Cooperation is therefore tantamount to arming potential future opponents. Fear that others will be advantaged to a greater extent by any cooperative interactions makes cooperation dangerous and less likely.

Scholars associated with Neoliberal Institutionalism also accept the essentially anarchic nature of the global system, but view cooperation as both likely and consequential. From this perspective, the wealth of a population is just as important to states as is military security (and wealth and power may be impossible to separate), so states seek to improve their absolute, not just their relative wealth and power. Absolute gains lead polities toward cooperation that allows for the benefits of larger markets, lower transaction costs, and reduced defense expenditures. These are self-reinforcing (Powell 1991, Grieco et al. 1993:739). The difficulty here is not that others might get farther ahead, but that cooperative interaction might break down or become

3 grossly unequal given inherent incentives to cheat on or withdraw from cooperative interaction. As a result, neo-liberal institutionalists stress appropriately designed agreements that include sanctions against those who cheat or defect. From this perspective, cooperation is likely and can be organized in intelligent ways to emerge in a robust form. From this perspective, hegemony may be helpful in initiating cooperative interaction, but it is not a vital component of continued cooperation because that is a task that may be accomplished by well-designed agreements that include sufficient and retaliatory protocols (Snidal 1985).

The difference between Realist/Relative and Neo-Liberal Institutional/Absolute gains has been enshrined in textbooks, but no longer generates much attention. It was presented originally as a series of contending formal models, and while such a method is valuable in requiring positions and assumptions to be carefully specified, the postulates tend to drag the model farther and farther from actual conditions. The idea that every decision regarding possible cooperation in every context would present the same level of absolute or relative gains concerns given the transcendent nature of anarchy at the global level is too tenuous to sustain in over time, and drawing the model more closely into line with reality proved too difficult technically. To make matters worse, even minor alterations to the model narrow the relevant range of potential policy differences among those who hold relative vs. absolute predispositions (Kim, Denemark, and Yonten nd.).

From a world-systems perspective, a focus on actors, their allegedly ahistorical propensities, and a fixed global environment, are egregious errors. World-systems analysis privileges the structural and suggests that global social, political, and economic processes co-evolve. Systems provide the incentives that states (and others) act in response to. The agents are constituted by the system within which they interact, and both the actors (in the immediate term) and the system (in the longer term) change as a result. Contrary to the assumptions of most students of global politics, state-level incentives and actions are not as purposeful, as independent, or as fixed as is generally assumed.2

This does not mean that the concept of states as being driven by absolute vs. relative gains is totally unrevealing. In the context of a hegemony/rivalry cycle these propensities take on a new meaning. When hegemonic power emerges, we see rules and norms substitute for conflict over many issue areas. Anarchy is reduced at the systemic level. Cooperation is easier to generate, absolute gains are desirable, and agreements should emerge readily. When hegemony declines and anarchy asserts itself, cooperation is more difficult to generate, relative gains are desirable, and agreements should emerge only rarely.

Figure 1 below below provides an empirical look at this hypothesis. It adopts the hegemonic cycle dates for the UK and US proposed by Hopkins and Wallerstein (1979) as amended marginally based on subsequent literature (e.g. Modelski and Thompson 1996). The y-

2 Students of global politics understand this problem. One of the original statements on absolute vs. relative gains was offered by Robert Gilpin (1981) who questioned the permanence and coherence of state preferences, and the stability of the international environment, though he tended to express the latter issue in traditional power balancing terms. Duncan Snidal also argues that too much attention is placed on state intentions and not enough on “the constraints that face the states and thereby define the strategic logic" (1993:736). But these have been passing thoughts in this larger debate that are rarely taken up for the damage they do to clear lines of analysis and disagreement. 4 axis reports multilateral treaties signed during the relevant period. Multilateral treaties are excellent indictors of coordinated global interaction. They are more important than bilateral treaties in that they tend to be both more transparent and serve as the foundation for international law. Data on multilateral treaties was drawn from the Multilateral Treaty and Agreements (MATRS) dataset that includes about 7,000 entries between 1596 and 1995. (For information on the dataset see Denemark and Hoffmann, 2008.)

Table 1 shows that as hegemony emerges, is established, and matures, global cooperation as measured by multilateral treaty-signings increases. As hegemony declines, the world-system becomes less cooperative. The trend is clearer in the case of the US (with a 10% decline) than the UK (with a 4% decline), but the direction is consistent. Hegemony ushers in periods of greater cooperation, and rivalry will see less cooperative interaction.

Table 1

Cooperative Interaction by Hegemonic Periods 3000

2496 2500 2259

2000

1500 1200

1000 Multilateral Signed Treaties 499 500 183 222 213 43 0 1780-1814 1815-1849 1850-1874 1875-1894 1895-1919 1920-1945 1946-1970 1971-1995

Table 1a – Hegemonic Periodizations

1780-1814 UK Ascending 43 Treaties 1815-1849 UK Victory 183 Treaties 1850-1874 UK Maturity 222 Treaties 1875-1894 UK Decline 213 Treaties 1895-1919 US Ascending 400 Treaties 1920-1945 US Victory 1200 Treaties 1946-1970 US Maturity 2496 Treaties 1971-1995 US Decline 2259 Treaties

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With the period of rivalry resting upon different conceptual foundations, it is likely that such phases would be characterized by different economic, political/military, and social systems. ‘Mercantilism’ is the term most often used to describe a zero-sum perspective on interaction of polities in the economic realm, and is the focus of this paper. As the (re)enters a period of rivalry, (that is, moves from a period of a preference for absolute to one of relative gains), relations between the economy and the state play an important role in the strategy of providing the advantages necessary to compete. Wealth itself is conceptualized in zero-sum terms. The most fungible global resources are especially coveted, and the policy toolkit expands to include any and every method of consolidation at home and advance abroad.

RIVALRY AND MERCANTILISM

Hegemonic systems tend to be more open economically (Kindleberger 1973). Hegemons are efficient, they tend to organize the global system to their advantage, and this is rewarded and reinforced by larger and more open markets. Even if the hegemon does not come out on top of every interaction, the structure of the system allows the hegemonic polity to pay for the maintenance of various -supporting regimes, and it profits in the medium and long-run from the system remaining open and peaceful. During periods of rivalry, hegemonic regimes are challenged, and markets begin to close. States fear others may benefit more from the various types of market-enhancing agreements or organizations they help support. Policies become oriented more toward short-term gains. Organizations degrade.

There is always tension among different forms of economic architectures, as Arrighi (1994) noted with special reference to the internalization of a variety of important elements, including the provision of security, and as is illustrated by new statist movements stressing populism and (Chase-Dunn, Grimes and Anderson 2019). Among the issues in contention are the nature and scale of the dominant unit. Contending states of various designs, commercial enterprises, physical empires, financial empires, regionalization, autonomous city- states, and hybrid commodity chains all seek advantages and contend for the ability to structure the system. In the economic realm the result is 1) increasing tension between the large, open, hegemonic world-system, and various smaller or alternative units; 2) concerns regarding the nature of wealth; 3) a focus on the stable inflow of resources; and 4) the types of policies that may be adopted to pursue different interests. Each of these 4 elements are well-known features of the mercantilist literature and are once again emerging.

FOUR ELEMENTS OF MERCANTILISM

Conflict Over New Polity Forms

Crafting the modern nation-state out of feudal was quite contentious. Small sovereignties with cross-cutting structures of loyalty worked to keep their hard-earned rights and privileges. They were the dominant political form. Contending system-level structures (i.e. the Church and the Zollverein, as per Spruyt 1994), presented formidable alternatives as well.

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Newer and larger political units interested in effectively generating wealth had to break down vestiges of local autonomy to make interaction more efficient (i.e. unifying systems of weights and measures, taxes and tolls, communication and transportation, language and governance). And they had to do so before others, whether neighboring regions, states, or other macro-models, did so. If they did not, they feared they themselves would be engulfed and consumed by stronger neighbors. Gustav Schmoller, the most important mercantilist of the late 19th and early 20th century, famously wrote that “mercantilism was nothing but state-making” (1894:50).3

Consolidation and growth are coterminous in mercantilist thought. Jean-Baptiste Colbert, best known as ’s economics minister from 1661 to 1683, is widely disparaged in modern economic for supporting excessive state intervention. (See especially Smith 1776/1937:434.) Colbert sought to increase the quality of to help secure markets and protect the French brand, facilitated the creation of larger and stronger firms, and organized French trade to secure resources and markets to the disadvantage competitors like the English. But Schmoller argues that Colbert’s most important success elsewhere. His more crucial contribution was breaking down the municipal and provincial authority that hindered progress toward national unity (Schmoller 1884/1896:55). Without these actions, France would remain fractured and weak. Schmoller’s argument follows myriad similar analyses of the importance of unity by earlier mercantilist authors like Friedrich List (1841/1885). Unification as an element of economy policy consumes the entire first volume of Heckscher’s (1934) 2-volume review of mercantilist policies.

Various elements of this complex unification process are recognizable in the policies of the Italian and Swiss states, the Dutch, and the English. List discusses such a process with regard to the (1841/1885:47-51). Victory over the power and control of smaller units was not assured. These units used their traditional positions, the law, and their allies, to stop consolidation. Schmoller laments that insufficient political organization (or put differently, the failure of the larger scale unit to overcome the power of is constituent smaller units) doomed a state to internal disharmony and loss of opportunity, as both he and List argued was the fate of Germany (Schmoller 1884/1896:48; List (1841/1885:41-46).

Unification was also a necessary first step in the process of empire-building. Both Schmoller and List argue that the English model of requires a unified state apparatus, and is crucial for economic competition and success (1884/1896:7; 1841/1885:160).

List and Schmoller to place mercantilism into an appropriate historical context. Schmoller notes that social units “successively evolved of even wider scope” (Schmoller 1884/1896:3). In earlier work Schmoller begins with the development of family life and village consolidation. Creating the village allows for collective development, requires establishing boundaries, and managing both internal and external networks of interaction. Successful development, often in competition with other villages or surrounding rural areas, allows for

3 Schmoller was the dominant intellect in the ‘Younger Historical School’ that updated, consolidated, and applied mercantilist ideas. He was important in intellectual and policy circles through his teaching of hundreds of students from Germany and elsewhere, his editing of a journal and book series, his voluminous works, and his policy work (Balabakins 1988). His work, along with that of Friedrich List, form the foundation for most of the arguments about the content of mercantilist thought in this paper. 7 growth into towns. Town privileges often included rights to establish markets, charge tolls, mint coins, collect taxes, determine citizen liberties, and other important elements of self-government. Lack of successful consolidation may see a village remain small, become subordinate, or sublimate back into the rural environment – all to the disadvantage of the village population. "For centuries economic progress is bound up with the rise of towns and the formation of civic institutions" (Schmoller 1884/1896:6). List focuses on the significant and power of those states that actively pursued enhanced size and unity as an important counterweight to liberal arguments for laissez faire (List 1841/1885:129-165).

Unit scale and integrity allow advantages, but also generate contradictions that lead to what Chase-Dunn and his colleagues have referred to as pulsations of polity size (Chase-Dunn, Inoue, Welch, and Gao 2019). Growth is pursued to accumulate wealth and maintain security, but generates conflict that tends to roll back polity size. Chase-Dunn and his colleagues also note that, as in the case of , “the rise and fall of Chinese dynasties produced larger and larger polities that met and eventually incorporated by trade, migration and conquest formerly autonomous polities in the Yangtze and Pearl River Valleys … So, the system we are studying kept getting larger before it was eventually incorporated into the expanding Europe-centered Central System in the 19th century CE” (2019:13). This is consistent with broader analysis in Chase-Dunn (2005) and Wilkinson (1987). The increasing of unit scale is difficult, highly contested (both internally and externally), and suffers setbacks of various sorts. But the tendency is pervasive over time.

Perhaps the most radical element in List’s mid-19th century and Schmoller’s late 19th century work is the suggestion that transnational elements would emerge and would be part of the same process of attempting to wrestle power away from the states that states were still in the process of capturing from towns and regions. List suggested this was “The highest ultimate aim of rational politics” but argued that only great nations that were economic equals would be able to bring about such a desirable unification. With Britain the only industrial nation, no real transnational unification could take place (List 1841:1885:156). Schmoller saw the growth of transnational processes as inevitable, and not something to be opposed. Coherent states with significant power began to support moves toward freer trade to capitalize on their advantages. Arguments for freedom of the seas emerged. Schmoller was hopeful regarding the new age and the new trans-state scale. He writes about the advent of international law, the development of “humane cosmopolitanism,” an end to , and an increasing sense of community, variably described as “a network of international treaties” or a future age in which “great institutions and interests of international traffic” would help craft “the ideas and tendencies of a " (Schmoller 1884/1896:61-2). Schmoller recognized that the process would be contentious, but might provide a superior system.

From this perspective, mercantilism should be defined not as a specific economic system, the policies of a fixed era, or a set of general understandings. Mercantilism is the process that arises among political units of different scales as they engage in conflict over the locus of authority, with ever-larger organizations eventually overcoming the entrenched positions of smaller groups.

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It would be difficult to find a clearer example of this process of conflict over the scale of the dominant unit of socio-political and economic interaction than in the voluminous literature on , anti-globalization, and now de-globalization. A leading journal in the field uses the plural ‘Globalizations’ to represent the range of experiences associated with the process. The major definitions of globalization focus on the compression of time and space, and the need to consider ‘others’ in the thinking and planning of action. This increased interaction suited hegemonic interests, and market-driven practices were marshalled toward its . But the ‘ Consensus’ generated losses at various local levels and sparked a backlash that emerged in diverse parts. In an attempt to take the impact of globalization out of the hands of markets, there were repeated historical and contemporary attempts to foster greater and more humane governance (Boswell and Chase-Dunn 2000). Poor areas that faced further impoverishment rose up against greater integration and sought solidarity (e.g. the Global Social Forum). Regionalization emerged to allow areas to better protect themselves from the implications of unfettered integration (Mittelman 2000). Traditional nationalism, along with racism and xenophobia, appeared as well (Friedman and Randeria 2004).

The logic of absolute vs. relative gains is clearly implicated in this process. Wealth and growth are uneven, and their increase in absolute terms suits the interests of hegemonic power, but this also generates substantial costs and opposition at the local level. As the hegemonic power declines, the logic of relative gains reasserts itself. Some local areas adopt especially competitive perspectives relative to other regions of the same country. Other areas appear ready to surrender absolute gains to recapture national-level autonomy. Each of these responses may be viewed through the lens of mercantilism as various units pursue their enhanced competitive interests.

The Nature of Wealth

Along with conflicts over the consolidation of the national-state (or even-larger future units), mercantilism is characterized by a particular idea regarding the nature of wealth. Smith argues that mercantilists had a zero-sum concept of wealth, fixating on the acquisition of gold and silver (specie). These were not viewed as commodities that might aid in the accumulation of capital, but as wealth itself. Smith argued that instead of mis-defining, lusting after, and subsequently hording specie, mercantilists might have realized that an individual with gold could use it to obtain land, purchase a building and machinery, acquire resources, secure labor, and begin the process of a salable commodity. Having no gold at the end of the process did not mean that the individual had lost their wealth. This is the basis of Smith’s suggestion that mercantilists opposed the export of specie and therefore stood in the way of increasing national wealth.

Some mercantilists were wary of gold , as they feared that other states were manipulating the of specie to attract it themselves and upend the of their opponents. While Smith believed that an equilibrium price for any commodity, including gold and silver, would be reestablished rapidly in a , it is often the case that periods of upheaval, loss of productive activity, crises, liquidity crises, and the inability to import key intermediate inputs for lack of acceptable payment, will intervene. This form of instability is

9 especially problematic in the early period of the development of when mercantilists were addressing these policy questions (Wennerlind 2014).

The difference between the mercantilists and Smith’s liberals rests with of the conceptual definition of wealth. For Smith, wealth must be understood in terms of market processes. Value is defined by market for exchangeable products. As a result, Smith (and his followers) saw no place for ‘special’ commodities that appeared to have value outside the bounds of direct market exchange. Smith, for example, dismissed knowledge or skill as elements with value as they could not be sold or purchased in any direct manner. Mercantilists, on the other hand, developed their ideas in the context of insufficient capital and unstable markets. For them, the logically prior and therefore most fundamental elements of wealth were infrastructural – and included specie to serve as , secure routes to necessary resources (including labor), functional transportation networks, and access to . While Smith assumed these things were in place, mercantilists wrote in an era when they were not, and so they did not confine economic interaction to simple market processes. List argues that critical was still scarce in most economies some 65 years after the publication of Wealth of Nations in 1776. He writes at length about the critical value of “powers of production” in contradistinction to Smithian market-derived value (1841:60-67).

The development of seamless global infrastructure typify discussions of hegemony, while closed markets, financial barriers, and competition to control and commodity chains re- emerge in periods of rivalry.

Hegemonic powers are often defined as providers of public goods that are not remunerative at the individual level because once provided, no individual can be denied access to them. Things like security, roads, and schools are public goods. Hegemons benefit from the consistent functioning of the global system, making the provision of public goods rational. As hegemony breaks down, the continued maintenance of public goods comes into question. They are expensive to provide, and declining hegemons balk at continued support for things like global security structures. Instead of seeking the absolute gains that come from the coordinated provision of public goods, individual actors once again revert to concerns with relative gains. Assuring that every actor who benefits from security or transportation infrastructure pays accordingly is difficult, and so existing public goods degrade, while new ones prove especially difficult to create. The concept of wealth broadens to (once again) include the infrastructure that Smith and the liberals chose to treat as given.

In the current system we can see that process unfold with the reduction of security assurances to US allies in NATO, or the undermining of organizations to assure like the WTO. As the hegemonic power declines, its policies become less oriented toward allowing gains within the confines of a given set of rules, and more oriented toward using its still- formidable position to wrestle additional gains from others in a bilateral manner. Norms and organizations degrade. Withdrawal from cooperative interaction becomes more likely.

Specie Inflow

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If mercantilists mistake gold and silver for wealth, their arguments about the importance of specie inflow are likely to be spurious as well. Mercantilists are accused of a 'fear of goods' in part as exports drain specie (making more difficult) and displacing local employment. But as we noted above, such arguments assume a stable monetary system and sufficient liquidity to support economic growth, both of which were problems that early mercantilist authors needed to address.

John Maynard Keynes considered mercantilist policies in The General Theory of Employment, Interest and Money (1936:Chapter 23), and argued that in a context with low levels of ready capital, as existed in the agricultural of the early mercantilist era, the only way to increase was to reduce rates of interest by generating a positive flow of specie, and the only way to do that was for the state to take a direct hand. Keynes' reported that the wealth acquired by Sir Francis Drake in the 1570s and 1580s, as he preyed upon Spanish shipping on behalf of England, allowed Queen to satisfy the English foreign and found the Levant , which became the British (EIC). Keynes calculates that the original sum Elizabeth invested in the EIC, increased at the relevant average annual rate of return, would account for the total value of British overseas investment in 1930 (Keynes 1930:156-7). It is clear that commodity fetishism is not productive, but neither are gold and silver simple products to be ‘supplied and demanded’, especially during the formative phases of a national economy suffering from an inability to escape a low-level equilibrium or foster sufficient accumulation for productive investment.

The direct corollary of the desire for specie inflow are policies designed to generate positive trade balances. The simple argument is that a positive inflow of money or that emerges from a outflow of obviates the need to search for specie or other means of settling , and affords the state and the economy more latitude in the areas of internal and external and investment. More capital means lower rates of interest and more overall economic activity. The mechanisms of assuring an inflow are the focus of many of the arguments that emerged among mercantilists. The nature of economic activity and exports is important for mercantilists. Raw materials exports are inferior to those of processed or manufactured goods. They are more vulnerable to competition and are often dependent on uncontrollable elements like the weather. Processed or manufactured goods afford greater levels of employment, support a more educated workforce, tend to provide incentives for entrepreneurs, offer more options for taxation, produce commodities that may be used to provide more public goods, as well as by the military for the provision of security or aggression ( 1791). A concern with trade balances constitutes the most controversial and often-discredited element of early mercantilist thinking, but such arguments are likely to be revisited in the context of a move from hegemony to rivalry.

In the contemporary context, the most important area of concern is in science and . Future economic well-being and security are dependent on the generation of new ideas and their application to commercial and military concerns. Hegemonic power is based upon and facilitates the creation of new commercially exploitable ideas (Modelski and Thompson 1996). In the current context hegemons seek to such advances by creating new categories of (‘intellectual property’) and laws that seek to assure returns to their creators or owners. When national safeguards became insufficient, given the increase in

11 transportation and communication, organizations were formed or altered to establish transnational protections. (First came a series of treaties starting at Paris in 1883, then the WIPO, and now TRIPS/WTO.) Hegemonic powers usually benefit from the creation of new technology wherever it emerges, but as hegemonic states decline they fear the ability of others to gain on them by acquiring (via creation or appropriation) new ideas. Additional safeguards are often sought, though given the nature of ‘ideas’ it is extraordinarily difficult to corral them. Concerns with ‘intellectual property’, ‘intellectual theft’, and various ‘secrets’ or ‘proprietary processes’ become increasingly important.

The Mercantilist Policy Toolbox

The final element of mercantilism is constituted by the policies its adherents adopt to accomplish proposed tasks. Policy tools are often closely related to desired policy outcomes (i.e. free trade for free markets), but mercantilism is a bit confounding in this regard. Mercantilists reject the idea that there is one and only one set of correct tools or policies. Instead, they argued that the conditions in any given location derived from their , internal conditions, and external context, should dictate policy initiatives. List argues that trade restrictions, the bugaboo of Smith and the liberals, were foolish to employ early in the development process, rational (if moderate and temporary) to use to facilitate the growth of new industries or overcome predatory practices, and unnecessary once is well established (List 1841/1885:31;58;75-82). He also identifies goods it is better to protect by applying value added criteria (List 1841/1885:75- 82). List argues it is irrational to adopt the same economic policy for everyone, all the time. Schmoller also argued against the adoption of a single set of simple policies. He and his students made much of the liberal sentiment that an did not need to know anything about a given economy to prescribe the correct course of action for its policy-makers (Balabakins 1988). If one takes the maximization of global profits or growth as the goal, universal policies are easier to identify. If the well-being of people and the viability of various social units rest at the heart of what is desired of economic interaction, this is not the case.

The policy toolkit is therefore as varied as possible contexts. As early as the 13th century we begin to see prohibitions on the export of locally accepted money to avoid swings in value driven by changing market conditions or efforts at manipulation. Laws against repatriation emerge in 1550 (Wilson 1967:500). Mercantilist arguments regarding the utility of a positive emerge. These are not absolute dictates, but contextual responses that may or may not be relevant in various areas or eras. Mercantilism is not about any fixed set of statist policies with regard to trade (e.g. tariffs), production (e.g. state ), or finance (e.g. controls on currency or specie export). Instead, mercantilism was ‘state making’ because socio- political and economic units increase their scale and coherence as a method of acquiring the wealth and power to survive and dominate. Any number of policies can serve in that regard, even the propagation of free markets. A free market, as List notes, may be a mercantilist policy tool so long as its supporters see themselves as the dominant beneficiaries of such openness, or if convincing others of its utility places them at a disadvantage (List 1841/1885:60). List notes British funding for intellectuals to preach the gospel of free trade and free markets on the Continent in the hope of opening new areas for Britain to exploit (List 1841/1885:141-2).

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As a result, it is wrong to judge or even analyze a given economic theory on the sole foundation of the policies that it espouses in a universal manner. Doing so allows the liberal model to define ‘theory’ and judge all others by its universalist standard. Undifferentiated policy proscriptions may be helpful in some areas and harmful in others, both depending upon the goals of a given polity and upon conditions in a given area. When liberals claim that mercantilism is not a theory (ie. Judges 1939), they are biasing the outcome.

Mercantilist policies are contentious. The move from smaller to larger units required the dismantling of old rules that had become "hindrances to trade and economic progress" (Schmoller 1884/1896:14). Conflict emerges and attempts at consolidation could suffer reversals at the hands of local units or be pre-empted by neighboring areas or alternative sources of authority. Winning strategies allowed resources to be drawn to areas from a larger area. Such policies might include more open trade, stable currency, unified weights and measures, and safe transport.

Mercantilism is therefore not a fixed set of policies, nor policies that only enhance the strength of the national state. Schmoller’s much-quoted ‘state-making’ phrase hides a more complex process. Mercantilist policies are those that are used to help increase the power and coherence of any larger scale socio-political and economic units, as well as those policies that smaller units use in support of their existing privileges.

Optimizing markets and assuring security are not the only paths to economic advantage. List and Schmoller argued that these were necessary steps in building a state that could engage in imperialism and reap the benefits of transnational exploitation. At stake were foreign resources that could be acquired at sub-market prices to build the economy at home and compete with others abroad. Failure to take such actions meant falling behind others who would.

The archetypal success story of mercantilist growth, Britain, is the subject of Andre Gunder Frank’s tracing of the elements of successful imperialist architecture (Frank 2014). The key to British success appeared to be the crafting of exchange patterns that placed them between or captive markets that had resources that could be organized in a symbiotic manner, and injecting themselves into the process at the most highly profitable points like shipping, finance, and manufacturing. In the 18th century one such system included the slave markets of Africa, the raw materials of the Americas, and at the apex, the ships and manufactured goods of England. At each step resources were marshalled, traded, and exploited to provide value that flowed to the English. In the 19th century, opium grown mostly in India anchored the huge trade with China that saw wealth in many forms flow back to England. The wealth generated by England’s apex position allowed for hegemony (Frank 2014:120). Bergesen (2011) labeled these geo-economic architectures “Frankian Triangles.”

The various triangles Frank identified and outlined are important, but he does not study the process by which they were conceptualized or constituted. I suggest there are three different processes to consider in the crafting of Frankian triangles: 1) opening new areas and routes; 2) consolidating these areas into profitable interactive units; and 3) defending these units against local resistance and global competition in such a way that they remain profitable. This last element can be especially difficult if it includes the restructuring of pre-existing practices.

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The earliest mercantilists were concerned with opening trade relations or transport routes in areas that were as yet unknown by and unintegrated into the European economy. (i.e. da Gama, Columbus, and their immediate followers.) The domination of unfamiliar territory is often predicated on the control of new transport routes. Land routes played a key role in “silk road” trade, while sea routes were crucial both in Asia, and were highly contested for European expansion. Mercantilist concerns with security, access, money, and usable resources make far more sense in this context. The initial securing of trade routes or preferential access to goods must await ‘exploration' and is a haphazard process. European outposts were often peripheral nodes in existing local or trans-local routes. Consider, for example, Hong Kong, Acapulco, or Manilla. None of these was particularly important in their domestic or regional contexts, but instead they were ‘captured’ and became prominent as hubs of Europe’s expanding economic .

Once new areas are available for exploitation, crafting these Frankian triangles will depend upon decisions regarding which holdings are valuable enough to attempt to consolidate into a coherent commercial or political system. Individual efforts may create profitable enterprises, but only those that are tied to large trading or viewed as critical by states are likely to receive the support necessary to maintain themselves. Both indigenous sovereignty and competing imperialists need to be rebuffed. Imperialist powers are not always thoughtful about what to engulf, nor was communication reliable, so military officers generally sought to conquer first and ask questions later. The logic of any given set of holdings might be worked out in the future. The other side of this process is the need to avoid becoming too deeply entrenched in colonial holdings that might not provide value sufficient to cover costs, or that are unnecessary to stop others from being successful. Recall the English J.R. Seeley’s famous comment in an 1883 essay that “We seem to have conquered and peopled half the world in a fit of absence of mind.” His expression of frustration concerns the British wish to hold areas that might have fit their needs, or prove to be of use to others, but not otherwise. Such future utility is a difficult process to predict, so it is no surprise that the British over-imperialized. It is also not in the least surprising that the process was especially disruptive for native populations that were often enslaved or impressed into the building of forts, the exploitation of resources, the provision of services to support military outposts, the paying of onerous taxes, the theft of their property, and the like.4

An additional element of triangle-building, one that we will likely see develop in the near future, is conflict over the re-fashioning of a given crafted by a hegemonic power that is in decline. Declining hegemony will clear the way for an alteration in the patterns of trade, production, and finance. Hegemonic powers like to foster system openness, but decline will drive new rivalries to preemptively dismantle, or constitute new preferential economic relations. Tariffs, quotas, contention over sea and land routes (e.g. actions in the South China

4 An excellent example of this process may be found on the tiny and largely irrelevant island of St. Martin in the Caribbean, which is 35 square miles in size, not central to any sea lanes, and is described in its own on-line history as "no ace in the imperial holdings." Nonetheless, its control changed hands dozens of times by competing imperial powers before it was formally divided by the Dutch and the French in a 1648 treaty. Even after that, fighting led to the island's altering its colonial overseers an additional 16 times. Two large stone forts were constructed by conscript labor, the second in 1789 – over 140 years after St. Martin’s position was formally settled. See https://www.princessheights.com/st-maarten/history. 14

Sea, the ‘Belt and Road’ initiative, Russian Oil Pipelines circumventing Ukraine, or even peculiar requests to purchase Greenland); new migration patterns or barriers (for refugees, the poor, the technically sophisticated), and the building up of (e.g. Asia's 'Regional Comprehensive Economic Partnership'), breaking down (e.g. Brexit), or marginal shifting of free trade areas (e.g. NAFTA to USMCA), typify such efforts. They are the result of hegemonic decline and the search for a new global economic architecture that will offer new opportunities for extraordinary profits.

These efforts will be joined by financial and monetary competition as states contend over reserve currency status, national industrial champions, sovereign wealth fund options, or via direct or indirect support for technology – 5G, biotechnology, quantum computing, big data applications, and/or new sources of energy (Cohen 2015, 2018).

In each case, economic considered 'natural', but actually the result of power relations of an earlier period, will be questioned, challenged, altered, or replaced by new configurations driven by attempts to acquire additional value in the context of the deconstruction and/or reconstruction of a global system. Declining hegemonic powers will seek to bolster their advantageous positions by wringing greater returns from the open markets they originally created – often by making a palpable joke out of the idea that they are ‘free’. Other great powers, and the marcher states that are well-positioned, will be looking to usurp or reconfigure the economic architecture so that additional value flows toward them in the hope that they can sustain their positions relative to the declining hegemonic power, or each other. Smaller units will find the economic system less free, less fair, and more competitive in ways that they can only hope to cope with.5 We see the relationship between hegemony and a focus on absolute gains that might be derived from stable, open markets (albeit with an inevitably biased ), to rivalry and a focus on relative gains that signal concern with increased economic and especially political competition. The point of the competition will be to assure a lead, even if that means taking expensive actions that reduce your own well-being, so long as it disadvantages others more. All of this is mercantilism: the political economy of the rivalry phase of the hegemony/rivalry cycle.

CONCLUSION

Our understanding of the cycle of hegemony and rivalry has been biased by the fact that much of world-systems literature, and most of the scholarly work on global politics generally, emerged in a period characterized by hegemony or very early elements of its decline. As a result, we tend to focus on hegemony, hegemonic actors, and the decline of both, to the detriment of considerations of the logic of rivalry, toward which we are headed. Rivalry is not simply the lack of hegemony or the search for a new hegemonic order under conditions similar to those that existed under the previous system. The global socio-political and economic environment changes, and brings new challenges that may be incommensurate with those faced in the world-

5 Peripheral areas may benefit from becoming a part of a rising coalition, but should that coalition lose, or should the role of the small peripheral state become irrelevant to the new hegemonic order, their positions will again deteriorate. 'Development' will retrench as much sunk capital and effort are lost. This is the lesson of Latin American industrialization during the , the Second World War, and then after. This was an important insight of dependency theory. 15 system during periods of hegemony. Alterations in the conceptual foundation of interaction from one in which the desire for absolute gains is dominant, to one driven by considerations of relative gains, alters incentives for action. Economically, those changes recall the political economy of ‘mercantilism’ that was dominant in the 16th and 17th centuries. We see a resurgence of these issues and modes of economic interaction. An understanding of mercantilism becomes increasingly important. We might characterize this period as one of the hegemony of rivalry.

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