Confronted with a growing mismatch between international commitments and available resources, states can reduce their commitments or mobilise additional resources, or both. Hegemonic powers are particularly prone to facing such a trade-off sooner or later due to what has been termed imperial (or strategic) overstretch (Kennedy 1987). It is in fact the central factor underpinning hegemonic decline (Gilpin 1981). A failure to bring commitments in line with available resources, or to bring resources up to the level required to sustain commitments, will invariably lead to gradual or, in the event of war, precipitous strategic decline. While a timely reduction of international commitments (retrenchment) may fail to prevent strategic decline in the long-term, it may help a state retreat to a position that is at least temporarily more defensible and it may help buy time, giving the state time to “regroup”. If the necessary resources cannot be mobilised, the choice is between almost certain secular strategic decline and the uncertain strategic outcome of retrenchment. An unenviable choice.
Imbalances of power in the international system and concomitant commitment-resource mismatches faced by individual states used to get resolved through hegemonic war, less often through strategic retrenchment (Gilpin 1981, Organski 1958). The existence of nuclear weapons may have made hegemonic war less likely. But this does not mean that imbalances and mismatches have ceased to be important and that great powers can simply dodge the strategic choice between retrenchment and status quo defence. It also does not let them off the hook in terms of either mobilising additional resources to defend the status quo or implementing a strategic retrenchment if they cannot or do not want to mobilise the additional resources necessary to maintain commitments. After all, even powers with substantial nuclear arsenals can suffer strategic defeat (e.g. USSR).
The link between resource mobilisation and international strategic choice is of crucial theoretical and practical concern. Traditional IR theory postulates that a coalition of lesser states will balance against the most powerful state (or coalition of states) in the international system (Waltz 1979). This leaves largely unexplained the sources of the underlying shift in the balance of power and the change in individual states’ relative ad absolute power. Not only is the concept of power complex and multidimensional. Even if one settles on a definition, power remains often difficult to measure. Things like technology, ideology, organisational skills, quality of leadership, military assets, economic resources, geographic position all impact the power of a state. To the extent that power is relational, any measure of comprehensive national power would need to be set against the comprehensive national power of others states. This difficult notwithstanding, it is clear that state power in the long-term requires a solid economic foundation. While short-term mobilisation may give economically weak-ish states a military edge, long-term a state’s international power is based on economic strength.
What accounts for the relative economic decline of the dominant state and the widening gap between resources and commitments? Robert Gilpin (1981) suggests that a country’s economic growth is characterised by diminishing returns. [Economists would say that generating rapid economic growth near the technological frontier is more difficult than generating growth as a so-called “late developer” (Gerschenkron 1962).] A hegemonic state is also bound to have significant defence commitments (and related outlays) at the same time as technology diffusion benefits potential challengers. Actual and potential adversaries are often able to acquire key technologies, whether through theft or reverse engineering, without having to spend resources on research and development. Moreover, consumption tends to increase as a state becomes wealthier, leaving – all other things equal – fewer resources to sustain international commitments, while the corrupting influence of wealth may make states less inclined to make the material sacrifices required to fend off peer competitors. A combination of slower growth, increasing (non-productive) defence spending, higher consumption and loss (or diminution) of technological leadership ultimately weakens a state’s hegemonic position and leads to “imperial” overstretch.
Slower economic growth makes the guns or butter trade-off more acute in political-economy terms. As sluggish growth combines with an increased need for (unproductive) military expenditure and increased political demands for increased consumption, fewer resources are available to for investment in growth-enhancing infrastructure, education and new technologies. Less rapid growth in turn leads to fiercer domestic distributional conflict, while the emergence of vested rentier interests makes it harder to pursue growth-enhancing economic policies (Olson 1982, Phlippon 2019). By contrast, the rising power with a rapidly growing economy experiences very little or no domestic distributional conflict given rapidly increasing incomes and expanding resources.
Militarily, the hegemonic power typically finds itself in a position where it has to maintain global defense commitments. The challenger can focus its rapidly expanding resources on a narrower geography. China, for example, can focus its security efforts on its “near abroad”, while the US needs to maintain a more extensive and expensive global military posture. Moreover, asymmetric defence capabilities can also make it easier to upset to the military balance (e.g. inexpensive Chinese anti-ship missiles vs expensive US aircraft carriers). The benefits of being a military as opposed to an economic latecomer has not been written enough about.
A rising power whose existing commitments are relatively limited and whose available economic resources are expanding rapidly is a very different position than the hegemonic power. A rising power has generally more flexibility whether or not to expand its international commitments, even if expanding interests do create significant incentives to do so (e.g. trade/ protection of sea lanes). A declining state that faces overstretch is forced to take action, for if the trend continues, it will suffer strategic decline and perhaps even defeat at the hands of the rising power. By contrast, the rising state, given the reverse commitment-resource mismatch, can decide where, when and how to deploy its rapidly increasing resources. The declining hegemonic power facing overstretch needs to mobilise additional resources to sustain its position or else is forced into strategic retrenchment. Mobilising additional resources is rarely easy, as it is bound to provoke provoke and exacerbate domestic distributional conflict.
Domestic distributional conflict is closely related to what economists call the “production-possibility frontier”. That is, the total productive capacity of an economy is assumed to be fixed so that producing more guns necessarily means producing less butter, and vice versa. Analytically, it makes more sense to break down the problem into a short-term (guns-versus-butter) trade-off and a longer-term (consumption-versus-investment) trade-off. In the short run, the productive capacity is fixed. Over the longer term, the production possibility frontier can be pushed out through increased investment and other productivity-enhancing policies. The short and the long term are nonetheless linked. In order to increase the productive capacity of the economy tomorrow, resources need to be shifted from consumption to savings and investment today. The problem faced by economically advanced hegemons is that its international commitments limit the resources available to produce even more guns or to increase investment today. Distributional conflict arises primarily because both the short- and long-term trade-off require an absolute (or relative) decline in domestic consumption and economic well-being.
International strategic choice and domestic economic wealth are closely linked. Mercantilists have long held that wealth and power are complementary. By contrast, economists have generally taken the view that the quest for power tends to erode economic wealth, mainly due to the need to increase economically unproductive military spending. Extensive international commitments reduce a country’s economic growth potential. Miles Kahler (1988) has suggested that the relationship between external ambition and economic performance varies depending on whether a state is a leading or a middle-ranking power. In the latter case, external ambition and economic performance may be complementary; in the former, they are not. More sensibly, however, the relevant distinction is to be drawn between states whose economy operates near the technological frontier and economically less advanced states who benefit from a greater catch-up growth potential. Moreover, if per Kahler Japan is to be an example of the compatibility of rising economic wealth and increasing military power, then such a claim needs to control for the fact that the economic performance of Imperial Japan (and Nazi Germany) benefitted hugely from predatory policies that exploited the economic resources of occupied countries (Klemann 2019) as well as military Keynesianism, at least during the thirties. The consumption-investment trade-off postulated by economists remains pertinent and relevant.
In principle, a state can mobilise greater resources domestically as well as procure them externally. Daniel Drezner (2013) has raised the issue to what extent military primacy allows states to recover their military outlays through (1) geo-economic favouritism (attracting foreign private capital), (2) direct geo-political favouritism (voluntary transfers from official financial resources) or (3) public goods benefits (roughly: efficiency gains through free trade). Economically, this is not a straightforward calculation. No doubt, hegemonic states have often imposed a form of taxation or tribute on their allies. The Delian League under Athens’s leadership required members to contribute ships or treasure to collective defence. In practice, Athens ended up fielding a navy supported by the financial contributions of its allies. Disputes between the United States and Germany over so-called offset payments during the sixties and, more recently, between the United States and other NATO members over defence expenditure suggest how difficult it can be to "monetise" military primacy (Zimmermann 2002).
Relying on external resources to maintain international commitments is an option, but it tends to be of limited usefulness, at least for great powers and hegemonic states. External support helps. If the United States runs a current account deficit of 4% of GDP, it is able to generate additional resources worth, well, 4% of GDP. This is not trivial, but even if it can be sustained over the long term, it represents only 1/25 of national output. Moreover, relying on external resources involves greater uncertainty. Capital inflows may diminish forcing the current account deficit to shrink. Official financial support is typically more difficult to extract and is often tied to specific issues (e.g. status-of-forces agreements). The United States, for example, found it extremely difficult to mobilise alliance support for the Vietnam War. External support rarely offers a substitute for increased resource mobilisation. The hegemonic power is typically significantly larger than its allies and the resources transfer that these allies are able to provide is generally small compared to the hegemon’s actual and potential resource base. Last but not least, given that the support from allies represents an intra-alliance resource transfer, it does nothing to strengthen the overall position of the hegemon vis-a-vis its potential or actual challenger.
Regardless of whether a state decides to mobilise additional resources or to retrench, decision-makers need to be able to overcome a variety of potential domestic obstacles. This may explain why strategic retrenchment is quite rare and rarely takes places in a timely manner (Parent & MacDonald 2018). Strategic retrenchment is made difficult by (1) cognitive biases (e.g. sunk cost effect, status quo bias), (2) domestic hawks finding easier to rally support than doves, (3) inaction being considered less risky than action from a bureaucratic and political point of view, (4) domestic institutions or coalitions favouring the status quo and a reluctance or even inability to adapt to the changing strategic reality (Snyder 1993). Neither the Bank of England nor the Imperial War Staff, for example, were prepared, institutionally and culturally, to adjust to the new strategic reality Britain faced after WWI (Brawley 1999).
Finding domestic support in favour of increased resource mobilisation and strategic competition can be equally difficult. Increased domestic resource mobilisation is bound to encounter opposition, as it necessarily lowers domestic consumption, regardless of whether resource mobilisation is geared towards more guns or more investment. Not surprisingly, states typically impose these losses in a surreptitious manner (Tooze 2006). The German Reichstag, for example, refused to increase taxes to finance the navy and instead forced the government into additional borrowing, thus indirectly curtailing the resources that otherwise could have been raised to fund the army (Rosencrance 1993).
A failure to retrench may of course also be due to good, old-fashioned strategic reasons. Like what? (1) States are concerned about being perceived as weak and fear further exploitation by the direct adversary or by third states, (2) retrenchment often confers greater power to the adversary, (3) retrenchment risks having a adverse consequences if allies come to doubt the retrenching state's commitment to their security, (4) relatedly, states may use a policy of no-retrenchment as a way to send "costly" signals in the hope of convincing the adversary that they are willing to “bear any burden, any cost”. (Whether this can be done credibly is another matter.), (5) credibility, reputation and prestige may be at stake in case of retrenchment (see (1)). The failure of the Stresa Front to confront Germany over the re-militarisation of the Rhineland shows how detrimental not upholding one's commitments can be. On the other hand, the US war in Vietnam serves as an example of the nefarious consequences of not retrenching can have. No wonder that states, if they believe they can mobilise resources to maintain their commitments, will tend to avoid retrenchment. .
A mismatch between international commitments and available resources offers states, and especially great powers and hegemonic powers, an unpalatable choice: increase resources or retrench. Increasing the resources to sustain international commitments requires states to resolve domestic distributional conflict. This conflict is bound to be particularly acute in the economically advanced hegemon (and there is no guarantee that the government will prevail). Decreasing commitments to bring them in line with available resources, while allowing states to sidestep domestic distributional conflict, is a similarly unpalatable choice from a strategic point of view, not least because it rarely offers a guarantee that strategic decline or defeat will in the end be avoided. Not to make a choice, however, is not a viable option, either, for it is likely to invite almost certain strategic decline, if not outright defeat. Maybe this is the real tragedy of international politics.