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Producing Security
Multinational Corporations, Globalization, and the Changing Calculus of Conflict
By Stephen G. Brooks Princeton University Press
Copyright © 2005 Princeton University Press
All right reserved.
Chapter One
INTRODUCTION SCHOLARS AND STATESMEN have debated the influence of international commerce on war and peace for thousands of years. Around A.D. 100, Plutarch maintained that international commerce brought about "cooperation and friendship" and that the cessation of commercial exchange would cause the life of man to be "savage and destitute." This line of reasoning became particularly prominent in the eighteenth and nineteenth centuries with the writings of philosophers such as Adam Smith, Jeremy Bentham, Immanuel Kant, Thomas Paine, Jean-Jacques Rousseau, Montesquieu, and John Stuart Mill. These men were united in their belief that enhanced international commerce made war among states more costly and, thus, that "the natural effect of commerce is to lead to peace," as Montesquieu maintained in 1748. Many of them also believed that commerce was a dynamic force having a progressively stronger stabilizing effect over time. In the eyes of Kant, "the spirit of commerce, which is incompatible with war, sooner or later gains the upper hand in every state."
This sanguine view of commerce as having a strong, positive effect on interstate relations has not been universally embraced. Indeed, many have argued the opposite is true. Perhaps the most prominent early pessimistic statement in this regardwas advanced by Alexander Hamilton. Writing in 1787, he devotes most of Federalist 6 to critiquing the notion that the "spirit of commerce has a tendency to soften the manners of men and to extinguish those inflammable humors which have so often kindled into wars." After running through a series of historical examples, Hamilton ultimately concludes that numerous wars were "founded upon commercial motives" and that "spirit of commerce in many instances administered new incentives" for conflict. Another prominent early pessimist is Frederick List, who argued during the middle of the nineteenth century that reducing participation in international commerce is, in the absence of a universal republic, the surest route to enhancing a state's security. At the dawn of the twentieth century, John Hobson famously maintained that the business activities of firms led to imperialism; a few years later, Lenin then took one step further, emphasizing that not just imperialism but eventually war among capitalist states would be the inevitable result of capitalism.
The belief that international commerce can strongly shape security relations is reflected not just in the writings of scholars over the centuries, but in policy discussions and governmental decisions. Over the years, the optimistic perspective on commerce and security has most strongly and directly shaped policy. David Lloyd George, Cordell Hull, Woodrow Wilson, Richard Cobden, William Gladstone, and Bill Clinton are prominent examples of politicians who have advanced policies premised on the notion that international commerce can promote peace. As we move into the twenty-first century, this view continues to significantly influence important aspects of policy. In the United States, the decision to push for China's entry into the World Trade Organization is the most prominent recent example. In his 28 January 2000 State of Union Address, President Bill Clinton exhorted: "Congress should support the agreement we negotiated to bring China into the WTO, by passing Permanent Normal Trade Relations with China as soon as possible ... [because] it will plainly advance the cause of peace in Asia." While the foreign policy approaches of the Clinton and George W. Bush administrations differ greatly on many issues, a key common theme is the notion that promoting economic globalization throughout the world can foster a stable security environment.
Despite the prominence of the view among scholars and policymakers that international commerce significantly influences security relations, up until the 1990s essentially no empirical analysis of this issue existed. In the final phase of the Cold War, prominent scholars such as Richard Rosecrance and Kenneth Waltz continued the centuries-old debate on the effects of commerce on peace, but this discussion was confined to the level of theory. The rapidly growing scope of international economic integration, termed "globalization," has over the past decade led international relations scholars to renew their attention to how shifts in the international economy affect states' security behavior. Unlike almost all previous scholarship on this general subject, the most recent wave of investigations was empirically focused. The general finding emerging from this literature-that trade linkages between states reduce the likelihood of conflict-is important in its own right and, more generally, indicates that the centuries-old contention that the business activities of firms can significantly shape security affairs is, in fact, valid.
BRINGING IN THE GLOBALIZATION OF PRODUCTION
Given the great importance of economic globalization in the international environment, it is crucial to carefully evaluate its influence on security. The recent literature examining how the international economy influences security has produced important new insights, but it suffers from a major limitation: it neglects the most significant feature of today's global economy. Over the centuries, scholars have generally treated the questions "Does international commerce influence security?" and "Do trade flows influence security?" as synonymous. Not surprisingly, virtually all studies in this recent wave of scholarship examine the security repercussions of international trade flows. In the past, such an overarching focus on the security implications of trade made sense. It no longer does. Until recently, trade was "the primary means of organizing international economic transactions." Today, however, trade is a second-order phenomenon: where and how multinational corporations (MNCs) organize their production activities is now the key integrating force in global commerce.
MNC international production strategies have changed in a variety of fundamental ways over the past three decades. These new strategies are characterized by an increased cross-border dispersion of production. For this reason, analysts commonly use the short-hand term globalization of production as a descriptor of these recent changes in MNC production-a practice I will also adopt here. As will be shown in chapter 2, MNCs are geographically dispersing production activities both internally and externally-that is, within the firm itself as well as through the development of more extensive interfirm linkages across borders. More specifically, MNCs have greatly enhanced the intrafirm international division of the production process through a new role for foreign affiliates; at the same time, they have pursued deeper relationships with foreign suppliers and cooperative partners located abroad through international subcontracting and international interfirm alliances.
Although analysts use the language of globalization in describing these shifts, the geographic dispersion of MNC production activities is not truly global in scope. These shifts in MNC production have had powerful effects on some states, but have largely bypassed many others. Specifically, it is among the economically most advanced states that the geographic dispersion of MNC production has been most prominent; the rise of international interfirm alliances, for example, is a trend largely restricted to North America, Western Europe, and Japan. It is also important to recognize that the geographic dispersion of MNC production is not occurring equally across all industries. As will be shown in chapter 2, internationalization strategies have become prominent only in certain sectors.
The unprecedented nature of the globalization of production is a key feature distinguishing it from international trade. Many analysts argue that what we call economic globalization resembles the international economy during the "golden age" of capitalism from 1870 to 1914. However, this similarity is strong only if we treat economic globalization as an aggregate; when we break economic globalization into its constituent parts, we reach a very different answer. The globalization of production clearly represents an ongoing qualitative change in the international economy; trying to advance the same claim about the other two economic globalization trends-of international trade and international financial markets, respectively-is more problematic. In the end, the geographic dispersion of MNC production is the most historically novel aspect of contemporary economic globalization.
Despite the substantive significance and historical novelty of the globalization of production, there has so far been no systematic empirical analysis of its implications for security relations among states. The last detailed empirical examination of how international production by MNCs can influence security affairs was written in 1935. A number of prominent analysts have recently noted that changes in MNC production strategies may have significant repercussions for security affairs, but this is not a primary focus of their analysis, and they do not empirically evaluate the notions they advance. Because systematic data on the geographic dispersion of MNC production does not exist, there is a dearth of quantitative studies of international conflict that use measures of this global production shift. A significant literature did develop in the middle and late 1980s that analyzed the United States' increased reliance upon foreign suppliers for parts and components of military weapons systems. However, this literature, as well as the studies following in its wake, focuses almost exclusively on the consequences of the globalization of production for U.S. defense policy or the structure of the U.S. economy rather than upon the repercussions for international security more generally. This literature also centers upon increases in international subcontracting, which is only one element of the geographic dispersion of MNC production.
Empirical analyses of the security repercussions of trade flows can no longer eclipse examinations of how the globalization of production affects security relations. This book is the first systematic study of how this unprecedented change in the global economy influences international security. Since the geographic dispersion of MNC production is a novel and dramatic shift in the international environment, it is critical to know how it changes the prospects for peace. This analysis shows that the globalization of production has led to major changes in the global security environment that collectively improve the security climate in some regions while decreasing it in others.
THE GLOBALIZATION OF PRODUCTION LEADS TO CHANGES IN CAPABILITIES, INCENTIVES, AND ACTORS
Within the literature that examines how the international economy can influence security, scholars outline a wide variety of arguments. In practice, these disparate arguments can be boiled down to three general mechanisms: the global economy can influence security by changing capabilities, incentives, and the nature of the actors. This book shows that the globalization of production has reshaped the global security environment via each of these three general mechanisms.
Regarding capabilities, the key puzzle is whether the globalization of production has fundamentally changed the parameters of weapons production. As Richard Bitzinger notes, throughout history, "most countries traditionally have preferred to be self-sufficient in arms production." The reasons are straightforward: "going it alone" in defense production makes it possible to guard against vulnerability to supply interruptions and to ensure that strategic competitors do not have easy access to the same vital military technologies. States continue to have a preference for relying on their own resources for weapons production; the key question is how capable they are of pursuing this strategy. Analysts agree that going it alone has become harder in defense production in recent years. Until now, however, we have lacked an understanding of exactly how much more difficult it has become. The analysis in this book reveals that the scales have decisively shifted against a strategy of autarkic defense production: no state, including the great powers, can now effectively remain on the cutting edge in military technology if it does not pursue significant internationalization in the production of weaponry.
Concerning incentives, the key unanswered question is whether the geographic dispersion of MNC production has changed the economic benefits of conquest. Economic gain has historically been a significant motivating force for conflict, and wars of conquest unfortunately still occur, as is demonstrated by Iraq's 1991 invasion of Kuwait and the occupation of western Congo by Uganda, Burundi, and Rwanda from 1998 to 2002. Irrespective of the motivation for war, the prospects for stability-that is, peacefulness-will decrease if aggressors are able to extract significant economic resources from newly occupied territory. The current benchmark study of the economic benefits of conquest concludes that conquerors are still in a position to effectively extract economic resources from vanquished wealthy countries. In order to determine whether this is truly the case, we need to investigate how recent economic transformations within the most advanced countries affect the economic benefits of conquest. Until now, this key issue has been neglected in the literature. This analysis reveals that while conquerors are still in a position to effectively extract economic resources from a subset of wealthy countries, they can no longer do so from most. Specifically, I find that the globalization of production has greatly reduced the economic benefits of military conquest among the most advanced countries.
With respect to shifts in the nature of the actors, the primary puzzle is whether the geographic dispersion of MNC production can reshape security by influencing the prospects for regional economic integration. Because regional integration can alter the interests of the group's respective members, scholars conclude that such institutions can play a significant role in the development of stable, peaceful security relationships. Although this line of argument is compelling, a key question remains: under what conditions will states with security tensions be able to consolidate integration in the first place? All the theory we have indicates that it is the consolidation of deep regional economic integration, and not simply the formation of an agreement, that has significant positive security repercussions. And yet, scholars who study international cooperation generally agree that states with security tensions will be least likely to engage in deep economic cooperation. We need to examine whether the globalization of production can exert sufficient pressure to induce even those states with a history of security rivalry to consolidate regional integration. The analysis here shows that it can. I find that this global production shift can, under certain conditions, enhance the prospects for peace by contributing to the consolidation of deep regional economic integration among long-standing security rivals.
The globalization of production has significant ramifications for security affairs by virtue of the fact that it has altered the parameters of weapons development, the economic benefits of conquest, and the prospects for regional economic integration among security rivals. These three mechanisms are the focus of this book both because of their significance in the literature and because they can be directly examined empirically. However, these mechanisms are not the only means by which the geographic dispersion of MNC production can potentially influence security; in total, there are five other mechanisms, all of which I analyze in this book. Two of these additional mechanisms are briefly discussed in chapter 3, while the remaining three are examined in detail in chapter 8. As will be seen, these five other mechanisms are all prospective in nature: they have the potential to influence security relations in the future, but do not appear to have yet played a role. The bottom line is that the globalization of production has already reshaped the international security environment in dramatic ways and may have an even greater influence in the years ahead.
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Excerpted from Producing Security by Stephen G. Brooks Copyright © 2005 by Princeton University Press . Excerpted by permission.
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