Bureaucracies and International Politics (2021)

Bureaucracies can be daunting and haunting, as literary and cinematic works such as Franz Kafka’s Trial, Ken Kesey’s One Flew Over the Cuckoo’s Nest, Cool Hand Luke with Paul Newman, or Anthony Trollope’s Barchester Towers will attest. Joseph Heller’s Yossarian had his fair share of issues with the USAF bureaucracy during World War Two: you could only get out of flying combat missions by claiming to be crazy; but anybody who wanted to get out of combat duty was clearly not crazy. At their worst, bureaucracies can be inhumane and unforgiving, focused on rules and compliance rather than efficiency and outcomes (or even output). At their best, they provide stability, often by creating redundancy, and help  further desirable social, political and economic objectives. Bureaucracies are easily ridiculed, yet essential. Oscar Wilde, passing US customs, told the officer that he had nothing but his genius to declare. The officer let him enter, presumably not finding the item the playwright was refering to on the list of items subject to duties.

Max Weber identified legal-rational authority – as opposed to traditional and charismatic authority – as an important aspect of modernity. Legal-rational authority was embodied in a rational, rule-governed and impersonal bureaucracy. Ludwig von Mises analyzed and compared the logic and performance of markets versus bureaucracies, while Karl Marx contended that the state and its bureaucracy were the handmaiden of the bourgeoisie. These analyses coincided with the rapid development (or differentiation, technically speaking) of government activities beyond the traditional confines of tax collection and the provision of domestic and external security. Bureaucracies, at least in the European context, were also becoming more “public” and more interventionist. Previously, the sovereign had often delegated the discharge of government functions to – what we today would call – the private sector. Tax farming, for example, was very common in pre-revolutionary France, and Fallstaff in Shakespeare’s Henry IV seemingly raises his own recruits before heading to war for the king (Slemrod & Keen 2021). The emergence of a rational bureaucracy and the rise of the modern state are synonymous.

Taxation is a central feature of, particularly, the modern state, and indeed a necessary condition for its existence. Taxation requires a bureaucracy. Without the ability to extract economic resources from its population, a state cannot exist. Surplus appropriation is also necessary in order to withstand international competition. Military bureaucracies and the necessary undergirding fiscal bureaucracy have played an important role in state formation, state development and inter-state competition (Giddens 1987, Tilly 1992). And the military itself is, of course, a bureaucracy. Like other bureaucracies, modern military organizations are characterized by a wide array of formal rules governing domestic processes and external behavior. Military bureaucracies also find it difficult to innovate (Rosen 1994, Murray and Millett 1998). Often – but admittedly not always – bureaucratic failure in the form of military defeat is required for innovation and adaptation to occur. By comparison, domestically oriented bureaucracies are rarely faced with a comparable challenge given their typically quasi-monopolistic position. After World War One, the German army was more adept at innovation than the victorious French military – though geography and resource constraints may also have played a role. 

Military defeat can be conducive to bureaucratic innovation in a way victory is not. Wedded to Mahanian doctrine, the pre-World War Two Japanese navy remained centered on the battleship, failing to grasp the full extent of the operational-naval revolution brought about by aircraft carriers. After defeating the Russian navy in 1905 in a classic and decisive fleet-on-fleet engagement in Tsushima, perhaps little need was felt to make major changes to capabilities and doctrine. Moreover, senior officers who had fought at Tsushima and went on to command large battleships in the 1930s also resisted a more forceful shift towards aircraft carriers. Perhaps Upton Sinclair’s quip that it is difficult to get a man to understand something when his salary (or prestige, for that matter) depends upon not understanding may apply here. 

Bringing about innovation in hierarchical organizations like the military is difficult, absent a major setback or catastrophe. It is no coincidence that 19th century military reform in Prussia occurred right after the catastrophic defeats in the Napoleonic Wars. Bureaucratic innovation often requires “young Turks”, willing and able to challenge the conventional wisdom (like Mitchell in the USN or Guderian in the Wehrmacht), though occasionally vital innovation is instigated from the top (Trenchard in the RAF). Relatedly, bureaucracies often select and socialize their members so that the organization foregoes the “wisdom of the crowds” (Surowiecki 2004) and cognitive diversity bonuses (Page 2017). In this case, bureaucracies, if left to their own devices, may even become outright risks requiring civilian or extra-bureaucratic monitoring (Ellsberg 2018). After all, bureaucratic control and oversight are invariably characterized by the principal-agent and asymmetry of information problematic.

As for international politics and foreign policy analysis, “bureaucratic politics” featured more prominently in the academic discourse during the 1970s when a number of scholars – many of them scholar-practitioners – dedicated their research to the role that bureaucracies play in foreign-policy making. Ground-breaking works like Bureaucratic Politics and Foreign Policy (Halperin 1974) and The Essence of Decision by Graham (Allison 1971) shed light on the internal workings of governments, the compromises between governmental actors as well as bureaucratic actions and standard operating procedures – and how all of these factors might affect major (and minor) foreign policy decisions. From this analytical vantage point, the hitherto dominant rational actor model looked too simplistic, too parsimonious. Although elected leaders can and do on occasion overrule bureaucracies (Krasner 1972), the bureaucratic politics is today widely accepted as a useful way to analyze foreign policy decision-making (Rodman 2008, Haass 1999, Wilson 1989). After all, Miles’ law also applies to government bureaucracies: “Where one stands depends on where one sits”. (Just watch an episode of Yes, Minister). So governmental and bureaucratic interests and bargaining can lead to decisions that deviate from the rational-actor assumption.

What bureaucracies do, how they do and why they do it is crucial to understanding many types of government actions (incl. both outputs and outcomes), big and small, including – on occasion and perhaps frequently – foreign policy decisions. No serious analyst of foreign policy can therefore afford not to be familiar with the works of the likes of Merton (1940), Downs (1964), Niskanen (1971), Luhmann (1984), Wilson (1989), March and Olsen (1989), and Tullock (2005), and of course von Mises (1944) and Weber (1921).

Germany in the Face of US-Chinese Technology Competition (2021)

Technology is the application of scientific knowledge for practical purposes. National technology policy involves or affects a wide range of issues and areas, including innovation and research, infrastructure, commercialization, standards, rules, and regulations, intellectual property rights, trade and investment policies, and so on. Today’s debate about technology in the context of intensifying US-Chinese geostrategic competition is primarily focused on so-called critical and emerging technologies such as quantum computing, artificial intelligence, nanotechnology, robotics, semiconductors, biotech, cloud computing, 5G networks – to name just the most important and most promising technologies. 

Technological competition has always been a salient feature of international politics. After all, technological superiority can have dramatic effects. New technologies like gunpowder, tanks and nuclear weapons have often proved decisive in military conflicts that helped reorder international politics. A small group of Spanish adventurers carrying “guns, germs and steel” was able to destroy the mighty Inca Empire. Gunboats forced Japan to open up to the outside world. Meanwhile, the rapid adoption of foreign technologies allowed relatively less advanced economies to catch up rapidly and wield international influence in their own right, as Japan demonstrated when it destroyed the Russian navy in 1905. Technology is a (or rather the) major source of economic prosperity and international political-military power (Kennedy 2013). 

Technological competition arguably matters even more today than in the past. If today’s emerging technologies turn out to be “winner-take-all” technologies (as some analysts have suggested), that is, provide the first adaptor with an unassailable advantage, the next round of technological breakthroughs might have even more dramatic effects than previous technological revolutions. And even if most technologies, in the end, prove to be buy-able, license-able, reverse-engineerable or steal-able, a temporary technological advantage might yet have far-reaching consequences as far as international economic and security relations are concerned. In light of an accelerating, exponential rate of technological progress, the importance of technology is likely to increase further (West 2017). 

Technology matters. In strategic terms: to the extent that it provides a country with a temporary or permanent edge, it has the potential to quickly alter the dynamics of international political-military competition advantage. In economic terms: a technological monopoly helps generate economic rents; it can help enhance “comprehensive” national competitiveness by putting an economy on an accelerated development, innovation and productivity path; and it can provide a country with leverage by virtue of its ability to offer or restrict access to its own technology. In short, technology has the potential to create decisive strategic advantage (or disadvantage) as well as geo-economic leverage (or vulnerabilities). Not surprisingly, geopolitical competition invariably engenders technological competition, as is the case today with respect to US-Chinese competition and conflict.

Economics and politics of technology diffusion and competition

Liberal economics posits that technological advancement occurs thanks to market competition. In reality, technological development is often furthered by government policies, and frequently occurs in the context of geopolitical competition (e.g., space race, nuclear weapons, radar, sonar). Liberal economics assumes that technology will be diffused through market forces. In reality, governments often prevent technological diffusion, or at least restrict access to indigenous technology, particularly in the case of “dual use” technologies with their implications for national security. But even if technology can be acquired commercially by another state, it frequently gives rise to dependencies and hence political-economic vulnerabilities. These often provide the seller with coercive power (Farrell and Newman 2019, Drezner, Farrell and Newman 2021).

It is with the help of this political-economic conceptual framework that US-Chinese technological competition and its implications for third countries needs to be analyzed. Technology cooperation and (inter)dependence may help generate efficiency gains and allow for economies of scale, while technological autarky does not. But autarky helps limit technological vulnerabilities. The trade-off between efficiency and vulnerability becomes more acute in the context of intensifying security competition. Here it becomes imperative not only to retain technological superiority, but also to limit one’s technological dependence on competitors, and especially adversaries, due to the potential vulnerabilities it creates (e.g. Chinese dependence on US-licensed semiconductors). It is this dilemma that is bound to lead both Washington and Beijing to push for technological decoupling. 

Decoupling is bound to affect third countries, which will end up in the crossfire of US-Chinese geo-economic and geo-technological competition and conflict. Not only will they find it difficult to compete technologically given the two major powers’ greater scale and available resources. They will also face increasing geo-economic pressure to align themselves with one or the other tech power and face geo-economic sanctions in case they adopt technological standards or technologies controlled by the other tech power (e.g. dispute over Huawei). Moreover, in light of the geopolitical stakes, the US and China will go to great lengths to win the technology race deploying all (fair and unfair) means available. This combination of challenges has spurred the German government to adopt reform at the national level and support various measures at the EU level.

Increasing German concerns in the face of international technological competition

Germany is an adherent of so-called ordo-liberalism. Ordo-liberalism is committed to creating a stable macroeconomic environment as well as institutions geared towards safeguarding competition. It is generally skeptical with respect to – even opposed to – industrial policy or, at least, heavy-handed government intervention, including in the technological realm. German economic and technology policies have generally been characterized by openness and competition rather than large-scale government intervention, guidance or protectionism. Policies with respect to technology transfer, the foreign acquisition of indigenous technologies, and the export of technology have been mostly guided by market forces. Technological leadership, allies’ and economic partners’ respect for intellectual property rights and market-based competition as well as favorable security externalities gave Germany little reason to intervene significantly in the functioning of private markets – export control measures pertaining to national security risks excepted. Germany is among the most open economies in terms of inward FDI and trade.

Germany has begun to modify its approach to technology-related foreign, that is, extra-EU competition, investment and trade, ostensibly triggered by the acquisition of a leading German robotics firm by a Chinese company in 2017 as well as underpinned by increasing concerns about an uneven level playing field with respect to China. Official and corporate Germany (and Europe) are increasingly regarding China’s economic behavior as violating ordo-liberal principles and as creating “unfair competition”. German concerns are no different from the concerns of other leading economies, including the US. China’s failure to grant German companies reciprocal access to the Chinese market in terms of trade and investment, China’s mercantilist, strategic, state-guided and -supported policies, including the acquisition of strategic (incl. technological) assets overseas, the violation and theft of intellectual property rights and technology, formal and informal technology sharing and transfer requirements, informal regulatory discrimination of German companies in China and so on have led to tangible criticism and skepticism in Germany. The lack of a level playing field and the advantages China derives from a strategic, government-backed policy are also increasingly seen as eroding German industrial and technological leadership. 

Meanwhile, Germany is also facing increased pressure from the US to align itself with US geo-economic and geo-tech policies vis-à-vis China (e.g. 5G network buildout). There are also bilateral tensions with respect to competition and taxation issues related to US tech giants like Google, Facebook and Amazon as well as long-standing trade disputes, including data. In this context, intensifying US-Chinese geopolitical tensions and geo-technological competition have led to significant worries in Berlin about being squeezed by both US and Chinese geo-economic policies (as well as being outcompeted by China). Given Germany’s economic dependence on both the US and China, particularly in terms of trade and employment, this is a very undesirable prospect. 

Germany’s response to intensifying global technological and geo-technological competition

In light of concerns about an uneven level playing and unfair competition, Germany has adopted a range of new initiatives and policies. First, Germany reformed and tightened inward FDI legislation by broadening and tightening the national security review process, now including investment in “critical infrastructure”. The regime remains fairly open and largely non-discriminatory. But it now does provide the authorities with greater legal authority (and, in effect, political discretion) to scrutinize foreign direct investment by extra-EU companies in sensitive sectors and companies. Second, Germany is also a strong supporter of the newly created EU-level FDI screening mechanism. The mechanism primarily seeks to share information among the EU-27 without providing the EU with the authority to intervene in national government’s FDI decisions. Third, Germany is also supportive of an EU initiative to oblige non-EU companies to abide by the same competition rules as EU companies with respect to subsidies, government procurement and M&A. Largely, this measure targets Chinese companies. Fourth, and relatedly, so-called trade defense measures and anti-coercion tools are being readied by the EU and supported by the German government. These measures are meant to provide the EU with instruments to retaliate against other states pursuing trade policies not compliant with WTO rules. Effectively this provides the EU with the tools to respond more directly and immediately to what it regards as “unfair” competition (Chinese subsidies) and outright illegal trade policies (Trump tariffs). Fifth, in spite of its ordo-liberal tradition, Germany has put forward an industrial strategy called Made in Germany: Industrial Strategy 2030. At least semantically, this is a direct response to Made in China 2025. The policy is meant to help preserve German technological leadership. Mindful of technological competition and concerned about losing out in the context of government-sponsored technological and innovation policies in both China (China Standards 2035) and the US (China Competition Act), Germany, at the bureaucratic level, has not just edged away somewhat from ordo-liberal principles. Recognizing the importance of state-supported technological competition, it has, for example, created federal innovation agencies in both the civilian and military realm modelled on the Pentagon’s DARPA. 

Taken together, all these measures and initiatives reflect German concerns about technological competition and technological leadership as well as need to reduce its geo-economic vulnerability vis-à-vis China and the US. The challenge posed by China is generally seen as more serious given China’s tendency to violate – if not the letter than the spirit of – international rules and agreements. Nonetheless, EU-US conflict does exist. In addition to conflicts with respect to digital taxes, the regulation of tech companies, and trade, including data – hence European calls for “digital sovereignty” –, Germany has faced calls to align itself with US with respect to, for example, technology infrastructure. US secondary sanctions with respect to semiconductors has also led to concerns, if not in Germany, then in other European countries. However, the fact that the US remains a vital security partner often (but not always) keeps a lid on Germany’s ability and willingness to push back against US geo-tech policies. 

Germany supports quest for European “autonomy” and “sovereignty”

In view of prospective Chinese and US geo-economic and geo-tech pressure, Germany has supported other important EU-level initiatives and strategies. The European Commission today considers China both an “economic competitor” and a “systemic rival” (European Commision 2019). Technological competition and geo-economic pressure have led the EU to talk about “strategic autonomy” (or so-called Europäische Handlungsfähigkeit), digital sovereignty and so on. There is today an increasing realization that the EU needs to put in place policies and implement reforms aimed at reducing EU’s economic and technological dependence and vulnerabilities vis-à-vis both the US and China. After all, in view of intensifying geopolitical rivalry between Washington and Beijing, the EU, and especially Germany, is bound to experience intensifying diplomatic and geo-economic pressure to align itself with one side or the other.

Germany supports this goal in principle. After all, geo-economically Germany finds itself in a particularly sticky situation. The US and China are Germany’s most important economic partners, and German companies have become particularly dependent on the fast-growing Chinese market. It is no surprise that the Comprehensive Agreement on Investment (CAI) largely reflects Germany’s priorities and preferences. Trade-wise, the US is as important as China, but it remains much more important as a destination for German foreign direct investment than China for now. This makes Germany vulnerable to geo-economic and geo-tech pressure from both Washington and Beijing. And this is precisely why intensifying US-Chinese technology competition and likely technological decoupling would only increase the pressure on Germany to pick a side, and incur substantial costs.

Most likely scenario - geo-tech alliance and intra-alliance tech cooperation

From a political-economic point of view, national tech policy ought to strike an acceptable balance between vulnerability, on the one hand, and reaping the economic benefits from economic cooperation, on the other hand. This is where geopolitical rivalry tilts the balance in favor of limiting vulnerability and technological cooperation within, rather than across, security alliances. After all, technological cooperation, like economic cooperation, generates favorable security externalities. Across security alliances, it makes sense to limit cooperation so as to avoid undesirable vulnerabilities, or to give security competitors access to key technology. In short, not only does providing access to technology enhance the relative position of the competitor (even though it may also help create political-economic leverage). Relying on technology of a competitor creates vulnerabilities. 

Allies are less likely to abuse their technological superiority and even if they do, the harm to national security is typically limited given shared security interests. And often there is (some) diplomatic or even legal recourse, at least within the reasonably rules-based US-led alliance, to mitigate such risks. This suggests that as US-Chinese geopolitical and geo-economic competition intensifies, with-alliance technology cooperation becomes more desirable, while across-alliance cooperation is likely to be severed (or decoupled). While selective cooperation remains possible in areas of mutual interest but limited mutual vulnerability, it will be unlikely, broadly defined, with respect to critical and emerging technologies.

This why the initiatives such as the envisioned US-EU Trade and Technology Council (aka geo-tech alliance) stands a good chance of success. The initiative foresees the coordination of 5G, semiconductors, supply chains, exports controls as well as rules and standards in attempt to limit economic and security vulnerabilities vis-à-vis potential or actual rivals. It will also emphasize innovation and data security. Such a cooperative agreement lays down rules for access, and credible safeguards and so on, thereby laying the foundation for intra-alliance coordination, while at the same, effectively, driving technological decoupling. Aligning themselves with one side or the other will nonetheless generate costs, particularly for middle powers such as Korean and Germany.

Korea and Germany – between a rock and a hard place

Germany and Korea find themselves in broadly similar positions. Undoubtedly, Korea’s challenges are far greater than Germany’s with respect to US-Chinese competition. Both countries are sensitive to Chinese economic geo-economic measures due to their extensive trade and investment relationships. But both countries are also vulnerable in view of US geo-economic and geo-technological pressure. This vulnerability is further enhanced by both countries’ security dependence on the US. Both countries also face increased economic competition from China, including in the technological realm, and both countries face an uneven level playing field with respect to China. Economically, Korea is much more dependent on China than Germany. And Korea is more dependent on Washington for its security than Germany. Extensive and intensive geo-political, geo-economic and geo-tech rivalry will therefore have more far-reaching consequences for Seoul than Berlin. 

Germany also finds itself in a less difficult position due to it being an EU-member. EU-level coordination and responses make it easier to deflect US and Chinese geo-economic pressure given the cover the EU-27 provide. This is one reason why Berlin is broadly supportive of EU-level initiatives aimed at leveling the playing field vis-à-vis China and becoming “autonomous” and “sovereign” vis-à-vis both China and the US. Nonetheless, as security trumps economics, both Korea and Germany will have only limited choice in terms of siding with the US in terms of strategically important technologies.

Korean-German cooperation in view of Sino-US competition

Germany and Korea undoubtedly have incentives to collaborate and cooperate, economically and technologically. They are both highly dependent on international trade and benefit from international economic cooperation. In this sense, they face similar challenges and can be thought to have similar interests. However, a splintering of the global economy into potentially mutually exclusive blocks and geo-tech spheres is real prospect. The emergence of a bipolar geo-tech structure would limit the benefits of bilateral German-Korean cooperation, particularly if, as appears likely, the EU will struggle to become a third force in the global tech races. Therefore, Korean-German cooperation will arguably make little difference. Coordinating policies of common interests in the context of a broader US-led geo-tech alliance is likely to be a more reasonable, sensible and attainable goal. 

(To Be Published by ROK's National Assembly Futures Institute (NAFI))