Correspondence: The Profitability of Primacy

Acommon argument among scholars and policymakers is that America's military preeminence and deep international engagement yield significant economic benefits to the United States and the rest of the world. Ostensibly, military primacy, beyond reducing security tensions, also encourages economic returns through a variety of loosely articulated causal mechanisms. A deeper analytical look reveals the causal pathways through which military primacy is most likely to yield economic returns: geoeconomic favoritism, whereby the military hegemon attracts private capital in return for providing the greatest security and safety to investors; direct geopolitical favoritism, according to which sovereign states, in return for living under the security umbrella of the military superpower, voluntarily transfer resources to help subsidize the costs of hegemony; and the public goods benefits that flow from hegemonic stability. A closer investigation of these causal mechanisms reveals little evidence that military primacy attracts private capital. The evidence for geopolitical favoritism seems more robust during periods of bipolarity than unipolarity. The evidence for public goods benefits is strongest, but military predominance plays only a supporting role in that logic. While further research is needed, the aggregate evidence suggests that the economic benefits of military hegemony have been exaggerated in policy circles. These findings have significant implications for theoretical debates about the fungibility of military power and should be considered when assessing U.S. fiscal options and grand strategy for the next decade.

ABSTRACT: The authors discuss the erosion of US military primacy and the corresponding dangers for American grand strategy and international security. They analyze three options for restoring strategic solvency and recommend a significant expansion of US defense resources to capabilities back into alignment with US global commitments. America is hurtling toward strategic insolvency. (1) For two decades after the Cold War, Washington enjoyed essentially uncontested military dominance and a historically favorable global environment--all at a comparatively low military and financial price. Now, however, America confronts military and geopolitical challenges more numerous and severe than at any time in at least a quarter century--precisely as disinvestment in defense has left US military resources far scarcer than before. The result is a creeping crisis of American military primacy, as Washington's margin of superiority is diminished, and the gap between US commitments and capabilities grows. Superpowers don't bluff, went a common Obama-era refrain--but today, America is being left with a strategy of bluff as its preeminence wanes and its military means come out of alignment with its geopolitical ends. Foreign policy, Walter Lippmann wrote, entails bringing into with a comfortable surplus of power in reserve, the nation's commitments and the nation's power. If a statesman fails to preserve strategic solvency, if fails to bring his ends and means into balance, Lippmann added, he will follow a course that leads to disaster. (2) America's current state of strategic insolvency is indeed fraught with peril. It will undermine US alliances by raising doubts about the credibility of American guarantees. It will weaken deterrence by tempting adversaries to think aggression may be successful or go unopposed. Should conflict actually erupt in key areas, the United States may be unable to uphold existing commitments or only be able to do so at prohibitive cost. Finally, as the shadows cast by US military power grow shorter, American diplomacy is likely to become less availing, and the global system less responsive, to US influence. The US military remains far superior to any single competitor, but its power is becoming dangerously insufficient for the grand strategy and international order it supports. Great powers facing strategic insolvency have three basic options. First, they can decrease commitments thereby restoring equilibrium with diminished resources. Second, they can live with greater risk by gambling that their enemies will not test vulnerable commitments or by employing riskier approaches--such as nuclear escalation--to sustain commitments on the cheap. Third, they can expand capabilities, thereby restoring strategic solvency. Today, this approach would probably require a concerted, long-term defense buildup comparable to the efforts of Presidents Jimmy Carter and Ronald Reagan near the end of the Cold War. (3) Much contemporary commentary favors the first option--reducing commitments--and denounces the third as financially ruinous and perhaps impossible. (4) Yet significantly expanding American capabilities would not be nearly as economically onerous as it may seem. Compared to the alternatives, in fact, this approach represents the best option for sustaining American primacy and preventing a slide into strategic bankruptcy which will eventually be punished. I Since the Cold War, America has been committed to maintaining overwhelming military primacy. The idea, as George W. Bush declared, that America must possess strengths beyond challenge has been featured in every major US strategy document and reflected in concrete terms. (5) Since the early 1990s, for example, the United States has accounted for 35-45 percent of world defense spending and maintained peerless global power-projection capabilities. (6) Perhaps more important, US primacy was unrivaled in key strategic regions such as Europe, East Asia, and the Middle East. …

As the final product of a project dealing with the security implications of Asia's financial and economic turmoil, this report considers the sharp economic reversals suffered in the Asian region in 1997 and 1998 and the marked but widely varying evidence of significant recovery among the different countries of the region. The report then turns to the medium- and longer-term trends with respect to economic growth, military spending, and military investment in five countries in the greater Asian area: namely, Japan, China, India, South Korea, and Indonesia. The five countries were selected by agreement with the sponsors from a larger set addressed in RAND's previous analyses in 1989 and 1995 of long-term economic and military trends. India, a South Asian country, was included along with the four principal East Asian countries in light of its size and enhanced military prominence. Following the analysis of these longer-term economic and military trends, the report considers the security implications of these trends with respect to alternative security environments in the region, changes in the intraregional balance of military and economic power, and such other issues as prospects for multilateral security cooperation, support for forward-based U.S. forces in the region, and alliance burden sharing. While acknowledging the major uncertainties inherent in these as well as other forecasts, the authors use the gross domestic products (GDPs) and accumulated stocks of military capital as rough proxies for the respective economic and political power of each of the five countries, thereby drawing several inferences from the estimates including the following: Japan's relative economic and military power will diminish appreciably in the region over the 2000-2015 period. China's economic and military power will diminish somewhat relative to those of India. However, the absolute gap between China's GDP and military capital, and those of the other three countries will grow substantially.

The Indomitable Renminbi

During the so-called Cold War the financing of the defense budget was widely discussed. The issue of financing the defense budget was widely discussed during the arms race. Since the end of the Cold War, armed conflicts have become more complex, and their causes are even more diverse than during the Cold War. They were caused by the deterioration of inter-ethnic divisions, hybrid and cyber wars over energy resources and the activities of terrorist groups. Due to the changing security dimension, a new study was conducted examining the determinants of defense spending in a changing security environment: the creation of new islands in the South China Sea to expand China’s military-political power in the region; the possibility of using North Korea's nuclear energy. weapons, Russia’s military maneuver in the conflict in Ukraine, its naval operation in the Black Sea, the occupation of Crimea, military operations in Syria, a change in U.S. military doctrine. The state that has spent the most military spending is returning to the creation of large military units, and to do so, the country needs to increase defense spending. Looking at how these world events work, we see one component that connects them. Strong force, expressed in military action, is used to achieve their political goals. Military power is gaining more and more influence in the formation of foreign policy, therefore the defense budget, as an instrument of foreign policy expressed in military power, is becoming an increasingly relevant object of research. Lithuania's defense budget is not as important to world politics as the United States, China or other major countries in the world, but it is relevant and significant in its region. Expenditures on the Lithuanian military budget began to increase significantly by two thousand and fourteen. It can be argued that the factor that has now influenced cost growth is Russia’s military aggression in Ukraine. Nevertheless, in 2008 Russia's aggression in Georgia did not affect the growth of Lithuania's defense budget. 2008 The economic crisis may have influenced Lithuania's decision not to increase military spending. Some pressure on the country's defense budget is also related to the 2020 Pandemic crisis. The question arises as to why seemingly similar conflicts affect Lithuanian political decisions differently.

CANADA, IN MY OPINION, is one of the most interesting areas for investment, for the following reasons: 1. Stability of Government; 2. Strength and conservatism of Government financial policies; 3. Growth. The ten years since the end of World War II have witnessed a population increase of 24%, a national volume of output which has risen by more than one third, and a dollar value of manufactures which has more than doubled. The gain in personal consumption expenditures has outstripped that of the United States, as has industrial production, private capital expenditures, total corporate profits after taxes and gross national products. This growth has been the result of Canada's unique position and its unusual characteristics. Its position as a friendly, next door neighbor of the United States gives it a vast market. The United States is by far Canada's largest trading partner. Further, in the past thirty years the importance of the United States as an export market has increased sharply as the United States has increased its industrial activity and further depleted many of its natural resources. The United States' share of Canada's exports has risen from 40% of the total to about 60% in recent years. Inasmuch as Canada is short on fabricating facilities in many areas, the United States' share of Canada's imports is greater although over the same thirty year period it has grown from about 67% to about 72 % of the total. In contrast with the expansion of trade in the United States, Canadian trade with the United Kingdom has diminished in relative importance during that period. Canadian exports have declined to 17% of the total and imports have shrunk to 10% of the total. This enormous trade with the United States has boosted Canada to a position of fourth in international commerce and on a per capita basis it exceeds that of most other leading trading countries. Since Canada is a relatively unexplored, undeveloped nation today with a population of only 16 million people, and its vast area of 3,800,000 square miles contains many minerals vitally necessary to our modern civilization, it is quite evident that this growth shall continue over the long term. I would believe that the largest single influence in the rate of this growth will be the rate of industrial activity in the United States. Canada has good seaports on both its coasts which put it in an enviable position to serve world trade. Further, additional strength may be attributed to the country and its relations with the United States because the people are largely English speaking and have a democratic government and the country is in a strategically strong position as a buffer between the United States and Russia. All of these factors combine to make Canada an ideal place for long term capital investment. Indicative of this fact is that the value of United States' investments in Canada in 1954 amounted to $9.6 billion, a new high rate and about double the value at the end of the war. Foreign investors now own about one tenth of the broad field of Canadian industry and commerce. Additional proof, if it were needed, could be supplied by the success of investment trusts formed in recent years for the sole purpose of investing in Canadian common stocks. As stated before, Canada is rapidly developing as a mineral storehouse for 166 million Americans as the great mineral deposits of the United States become depleted. It is, therefore, my opinion that in this area lies the greatest opportunity for investment.

Over the course of the past half century the United States has declined, but unlike its former Soviet rival it has not fallen. From the point of view of the United States, the relevant questions now are, first, how the end of the cold war will affect the subsequent trajectory of its power and, second, how changes in American power (and, more broadly, in the distribution of power in the international system as a whole) will affect the shape and stability of the post-cold war order. In this article, I shall concentrate primarily on the first set of issues, examining in turn how the events of the late 1980s and early 1990s will combine with longer-term trends to shape the further evolution of American economic, military, structural, soft (cultural and ideological), and political power before turning briefly to a consideration of the larger significance of these trends. Because so much is contingent, both aspects of this discussion are necessarily speculative, with the projections of the second portion building on those of the first. Although there are a number of contrary trends, I conclude that on balance the end of the cold war will accelerate the relative decline in American national power. Changes in the distribution of power will lead to mounting disputes over the legitimacy of existing rules and institutions and as a result to a protracted period of international instability. This turmoil is likely to give rise to a set of separate, competing subsystems, not to a new, unified world order.

By shifting rhe relative significan.ee of productive technology and control of territory as factors in rhe imeven growuh of weakh and power among world emiLies, the Industrial Revolution united military power and eco- nomic weakh.’ Britain was the first State capable of Building a bridge berween irs economic wealth and military power. Though ir rerained rhe remnants of a coloniai empire, Britain derived most of its international might frorri naval supremacy and the control of a world market economy based on free trade, freedom of capita! movemenrs. and a unified interna- tional monerary System.2 By the end of the First World War, the United States had surpassed Britain in military power and economic weakh. A few leaders in the United States rccognizcd that the future growth of its economic weakh and military power depended heavily on its ability to replace Brirain as rhe international system’s newT leader. Because of irs limited international experience. however, the United States foimd itself bewiidered by the challenges errianatirig frorri the international system and the extent to which its international actions wouid have to change if it hoped to sueeeed Britain.

Defense of the system: Changing the geometry of great power competition

Extending the American CenturyRevisiting the Social Contract Jahara Matisek (bio), Travis Robison (bio), and Buddhika Jayamaha (bio) As the guns fell silent at the end of World War I, the US could no longer deny its great power status. Though abdicating the responsibilities inherent to this status during the interwar years, the US eventually fought on a global scale again during World War II. The conclusion of this conflict ushered the beginning of the Cold War and what came to be called the "American Century." The United States' efforts during the Cold War focused on protecting itself and its allies without compromising America's democratic system, values, and ideals.1 The US was generally successful at achieving these ends.2 Following the Cold War, the US enjoyed a brief period of primacy. The US was the sole global hegemon and exerted its ideological, political, economic, and military might to expand the world order it created after World War II. Three decades after the Cold War ended, American primacy is eroding and its influence is contested by revisionist powers. America's combat credibility is not in question, and rising powers could only threaten US leadership if American power is weakened on an absolute basis. The true challenge to continuing 21st-century American leadership therefore comes from within. Americans today resent seemingly endless military deployments across the globe with no discernible security benefits, feel abandoned by the supposed economic benefits of globalization that have not accrued to a majority, and are suspicious of laissez-faire capitalism. A vocal minority of Americans actively oppose US foreign engagements [End Page 5] and aim to tear down the global economic and military architecture their forbearers sacrificed to create.3 Americans are also electing representatives that espouse once fringe views that fundamentally undermine American economic and military global leadership. It would be erroneous and selfserving to interpret this shift as a "populist anomaly." Instead, a more accurate perspective is that the shift is a democratic response to failed foreign and domestic policies and an indictment of policy elites.4 This article reflects on the history of US primacy and projects its uncertain future. We argue that the US role in world affairs is fundamentally shaped by its democratic system of governance. US foreign engagements historically depended on the government's ability to maintain an implicit and explicit social contract with the American public that guaranteed domestic prosperity in exchange for supporting foreign policy goals. The social contract remained legitimate to the extent that the government fulfilled its obligation to pursue foreign goals that contributed to the public interest. When the government failed to do so, the public withdrew its support by demanding new policies and electing new leadership to act in accordance with the public's will.5 We see this happening in America today. This indictment of America's foreign policy elites is the result of a fundamental breakdown of the social contract that undergirded the domestic legitimacy of American global engagement during the 20th century. The following sections highlight the nature of the social contract and explain how it frayed through decades of political neglect. We conclude by highlighting the need to reassess the social contract by suggesting that strategic retrenchment may provide an opportunity for reevaluation that will contribute to the strategic solvency necessary for maintaining American leadership in the 21st century. Reluctant Great Power Though the United States had become a leading economic power by the 1890s, few realized that it was taking the first steps toward defining the American Century. When American military forces landed in France in 1917, the American public did not seem to realize the United States' great power status and was eager to "bring the boys home" after the war.6 When the Allied Powers emerged victorious, America's economic and military power was comparable to Europe's on a global scale. However, the US was not the preeminent European power—it played a decisive but not the defining role in the war.7 This became clear during the Paris Peace Conference when the war's victors debated over key provisions of the postwar settlement. President Wilson misread the situation and attempted to negotiate a settlement...

Lessons of the Cold War

JAPAN AFTER THE COLD WAR. Mike M. Mochizuki Japáñese are no different than Americans and West Europeans in welcoming the end of the Cold War. The improvement of Soviet-American relations lessens the possibility of Japan becoming embroiled in a military conflict between the superpowers. Furthermore, the crisis of communism and the global push for military retrenchment affirm the basic correctness of Japan's postwar policies to minimize military expenditures while concentratingon market-driven economic growth. But despite the euphoria surrounding change in Eastern Europe and the Soviet Union, the Japanese are anxious about the future. Their greatest fear in the post-Cold War era is the emergence of a neo-isolationist America—one with weaker security links to East Asia and exclusionary policies towards Japanese imports and investments. The primary challenge facing Japan at the end of the Cold War will be to keep the United States diplomatically and militarily involved in Asia while simultaneously committed to a liberal, international economic order. As the international system evolves from bipolarity to multipolarity, some might argue that Japan will be forced to pursue a foreign policy more independent of the United States. This would, by necessity, mean developing major military capabilities (including a nuclear arsenal) commensurate with its economic resources. Although such a course Mike M. Mochizuki is an assistant professor at the School of International Relations of the University of Southern California. He is currently completing a book entitled Conservative Hegemony: Party Strategies and Social Coalitions in Japan. 121 122 SAISREVIEW cannot be ruled out, it is much more likely that Japan will try to strengthen its alliance with the United States and use economic rather than military power to protect and promote its national interests in this era of systemic change. Benefits ofthe Cold War System Japanese anxiety about the post-Cold War era is not hard to understand , since Japan has benefited more than any other country from the Cold War. While pursuing a militarized containment policy, the United States sought to expedite Japan's recovery from World War II by drawing it into international economic organizations and by shielding it with the American defense umbrella. Not only did U.S. military support obviate the need for Japan to undertake major rearmament, but its military procurements from Japan during the Korean and Vietnam Wars contributed immensely to Japan's economic reconstruction. Meanwhile, Japan initiated asymmetrical trade policies that the United States was slow to correct. The American market was opened to Japanese goods, while Japan implemented restrictions on imports and foreign investments. As Japan's economic capabilities grew, Washington approached Tokyo to liberalize its foreign economic policies, but was constrained by a broader interest in promoting good bilateral security relations. The benefits of siding with the Americans during the Cold War have clearly outweighed the costs. Unlike Germany or Korea, Japan did not suffer the humiliation of national division. As part of the postwar settlement, Washington did compel Tokyo to recognize the nationalist regime in Taipei (rather than the communist one in Beijing), but Japan side-stepped this problem by separating politics and economics, thereby developing economic ties with mainland China. Sino—American rapprochement in 1971 merely cleared the way for the full normalization of relations between Japan and China. Regarding the Soviet Union, Japan's security link with the United States may have hardened Moscow's position on the disputed Northern Territories, and thereby prevented the negotiation of a Soviet-Japanese peace treaty. But this did not prevent Japan from accessing raw materials in Siberia during the period of Soviet-American détente in the 1970s. Moreover, Soviet recalcitrance on the territorial question has helped the Japanese government consolidate and maintain public support for its proAmerican security orientation. The CoCom (Coordinating Committee on Export Control) restrictions may have constrained Japan's trade and investment practices in Eastern bloc countries, but this limitation has been negligible in terms of Tokyo's overall economic interests. JAPAN AFTER THE COLD WAR 123 Given the great benefits and minimal costs of its strategic alignment with the United States, it is not surprising that Japan is most concerned about the future direction of American foreign policy. As Soviet-American relations improve...

conomic conomic theory and history demonstrate that free international trade increases economic welfare. Similarly, the free movement of capital across national borders leads to the most efficient use of resources. Foreign investment in the United States creates jobs, raises productivity, and increases competition. The inflow of foreign technology and management techniques benefits consumers and many businesses as well. Although domestic firms may not welcome the increased competition from foreign companies, the economic benefits to the nation are clear. Foreign investment in the United States, however, became a major public policy issue during the 1980s as the role of foreign firms expanded rapidly. The foreign presence, though, remains small in relation to the size of the U.S. economy. In manufacturing, where foreign direct investment has been concentrated, companies with 10 percent or more foreign ownership account for under 14 percent of assets and employ only 7 percent of all workers. In comparison to other countries, the magnitude of foreign direct investment in the United States is small.' Moreover, the market value of U.S. direct investment abroad is estimated to be at least double the market value of foreign direct investment in the United States.2 The concern over the foreign presence in the United States resembles the European reaction in the 1950s and 1960s to the influx of U.S. finnrms. Experience shows, however, that American investment benefited the European countries. Still, according to a recent poll, 78 percent of Americans favor restrictions on foreign investment. Much of the concern centers on the activities of Japanese investors. Another survey, for example, reported that 58 percent of Americans were uncomfortable with the level of Japanese investment, but

The resources of Ukrainian industry were already depleted prior to the start of Russia’s large-scale military aggression in February 2022; while the forthcoming physical destruction of manufacturing facilities and infrastructure, and the migration of qualified personnel and promising innovators further worsened the situation. Before the outbreak of war, only individual manufacturers of technologically complex products had research units, made innovation, and were able to compete in international markets. Some industries were only based on one or two companies, who mastered unique high-tech competence; these manufacturers paid taxes to budgets of all levels; provided employment, and helped to improve incomes and social stability. At present, the resources possessed by Ukraine’s private sector are critically low; so the country’s leaders are pinning their hopes on foreign investment as a means to solve the complex postwar issues such as the restoration of basic conditions for economic growth, the promotion of stability and the creation of an enabling environment for sustainable development. The goal of the article is to demonstrate some historical examples as to the obstacles and threats of foreign direct investment for host countries, which Ukraine may face in its post-war economic recovery. The author reveals that the foreign investments along with the well-known positive side, also have a lesser known negative side. The paper shows that transnational corporations as major investors, having economic power and political influence, have the potential not only to speed up but also to slow down the development of the host country’s companies, which can have an adverse impact on business results and lead to significant problems including the denationalization of assets, loss of technological competencies and industries, increased external dependence, and various threats to national security and economic sovereignty. On the example of the pharmaceutical industry in Mexico, which appeared and started actively developing after the end of World War II, the key challenges and threats (caused by denationalization and transfer of production control to foreign business) are shown. The author formulates the basic warnings for Ukraine. It is substantiated that the determining factor whether foreign investment will stimulate economic modernization and structural changes or will slow down the country’s development, lead to de-industrialization, and denationalization of the economy and mass unemployment is the extent to which that investment will be integrated by the Government into national development plans, also to what extent the absorption potential of domestic economic entities will be able to implement investments and ensure their maximum effects.

This study examines the power of Turkey and other states in the region and provides a comparative assessment of their current national, military and economic power. For Turkey and the other top military powers, future developments in population, economic power, military power and national power were examined. Forecasts of population, economic, military and national power of these top military powers are presented.