Economic threats, balancing, and the pattern of international conflict and cooperation

I explore the underlying potential for economic conflict in the international system by asking if states balance in the economic realm. If the nature of the international system constrains states to balance, they should do so in both the military and the economic realms. However, I argue that military threats will dominate economic threats when they occur simultaneously. I find evidence for this in two case studies that examine the behavior of the United States and Germany in the late nineteenth century. In the absence of a significant military threat, the US perceived the relative economic strength of Great Britain as a threat and balanced against it. Unlike the US, Germany was not militarily secure during this period; it faced military threats from within Europe, and its policy towards Great Britain and other states was dominated by those military threats. These cases thus establish first, that states do balance in the economic realm, and second, that they are more likely to do so in the absence of significant military threats. This suggests that to the extent that the military threats faced by states today have declined or disappeared, economic threats will increase in importance and the likelihood of international economic conflict will increase. The substitution of economic for military threats at the top of states' agendas will also affect the pattern of conflict and cooperation in the international system. Because the distribution of economic strength changes more slowly than the distribution of military power, I argue that there is a greater stability in the source of economic threats. I expect this greater stability to help moderate the instability in the source of threat associated with multipolarity. This means that the pattern of conflict and cooperation in a multipolar system dominated by economic threats will resemble that traditionally associated with bipolarity (long-term rivalries and alliances) more than that traditionally associated with multipolarity (rivalries and alliances that shift quickly over time).