How America Might Yet Prove LKY Wrong: Why Offshore Balancing is Economically Sensible But Can Do Even Better

A story that circulates around Joseph Nye’s Is the American Century Over? relates how Lee Kuan Yew once told Nye that on the grand chessboard of world order, America would always be ahead of China. This was because while China might boast a population of 1.3 billion people, America could draw on the talents and goodwill of the more than seven billion in all of humanity.

world-war-iii-chessboard /

Image source: The Grand Chessboard of WWIII (Part Two)

The success of America in the American Century is when America’s pursuit of self-interests inadvertently also raises humanity’s goodwill towards it. China might doggedly advance its self-interests in the rest of East Asia, but without a compelling narrative to draw goodwill, China will fail to get ahead of America. By the same token, America’s decline will be when it fails both in furthering its self-interest and in attracting external goodwill.

One of the most powerful themes in a July 2016 Foreign Affairs article by John Mearsheimer and Stephen Walt is the authors’ description of how America, in deploying a grand strategy of engagement with the rest of world, has ended up instead sacrificing what goodwill it might have previously enjoyed. In pursuit of a safer world, America had sought to promote a world order based on “international institutions, representative governments, open markets, and respect for human rights”. But the reality instead is:

“No one knows if a world composed solely of liberal democracies would in fact prove peaceful, but spreading democracy at the point of a gun rarely works, and fledgling democracies are especially prone to conflict.”

To be clear, this is not an argument against letting others have the good things that come with liberal democracy. It is an argument against a particular strategy:

“If the American people want to encourage the spread of liberal democracy, the best way to do so is to set a good example. Other countries will likely emulate the US if they see it as a just, prosperous, and open society. And that means doing more to improve conditions at home and less to manipulate politics abroad.”

In Mearsheimer and Walt’s view, that America sought to make a world order in its own image, together with America’s seeking to solve the world’s problems are two planks of a US grand strategy, liberal hegemony, now revealed to be a misguided costly failure. Mearsheimer and Walt argue America should adopt instead an alternative grand strategy, offshore balancing, defined as “preserving US dominance in the Western Hemisphere and countering potential hegemons in Europe, Northeast Asia, and the Persian Gulf”. Offshore balancing does not mean retreating to isolationism or relinquishing America’s position as the only global superpower. Indeed, this grand strategy continues to mean sustaining US primacy abroad – not least hegemony in the Western Hemisphere – and preserving freedom within the US. Only, abroad doesn’t mean everywhere. America should pick and choose. If Southeast Asia succumbs to some other superpower’s circle of influence, America should not respond, as long as there is no direct threat to America itself. If, in the Middle East, competition between Iran and Iraq maintains the regional balance of power without negative spillover to America, then America should remain offshore. In this view, promoting peace should not be a US imperative, except to the extent that doing so advances the cause of offshore balancing.

There is much to recommend in offshore balancing, not least in a world with limited resources, and where the potential for error is huge and potentially disastrous when one tries to re-make others as oneself. The cost-benefit calculation is an intricate one, in my view, on how to distribute a finite pool of military resources around the world: zero quantity in a particular location might well be part of the right allocation. Or some small epsilon might be the right amount, rather than what America now deploys. And, certainly, American strategic thinking should leave alone those nations that seek alternative pathways of development. If parts of Asia decide to go the way of, say, authoritarian capitalism or market-based socialism, let them be. It’s not for America to impose its version of universality –  America’s understanding of human rights, democracy, transparency, or rule of law – elsewhere in the world.

In such situations, economists find it useful to study a so-called Ramsey Problem: Suppose the world faces the challenge of deploying around the planet finite strategic, military, economic, and intellectual resources, in a situation of considerable uncertainty. For the sake of argument, imagine trying to achieve the best developmental outcome for everyone. Economists do this not because they immediately see the Ramsey solution being implementable. Instead, we use that solution as a baseline, to rank and compare different outcomes that are themselves achievable. That is, after all, what the debate is between liberal hegemony, on the one hand, and offshore balancing, on the other.

What is the solution to a Ramsey Problem for the actual political and economic landscape, when an analyst seeks an optimal outcome, not just for America, but for the entire world? The remarkable possibility is that that solution might well carry features strikingly similar to the Mearsheimer-Walt proposal. Global polity partitions into regional hegemonic collectives that do not directly challenge each other, but within each cell of the partition regional behemoths maintain regional balance of power. In this way of thinking, the grand strategy of offshore balancing could well be an outcome that is good not just for America, but inadvertently for the entire world. Pursuing America’s self interests, through offshore balancing, solves the global Ramsey problem, not as a matter of design, but as a matter of course. Put another way, offshore balancing would achieve what liberal internationalism says it seeks.

Only, there is no guarantee that that will be indeed the case. Indeed, we already know it is not. Why? Because the earlier grand strategy, liberal hegemony, is not just about re-making the world in America’s own image. Under liberal hegemony, America – the only global superpower – also sought to solve the world’s problems. This never meant ferreting out someone else’s problem somewhere – anywhere – and then seeking to do something about it. Solving the world’s problems means addressing the challenge of global public goods. Public goods externalities rewire the Ramsey problem and almost always make only individual-directed action no longer the baseline optimal solution. The invisible hand fails.

It is sometimes believed that economic logic teaches self-interested agents to free-ride, in the sense of doing absolutely nothing to provide public goods. Realists then think they simply follow sound economic principles when they say self-interested nations will disengage from such activity. Not so. The right lesson from economics is that self-interested agents will still serve up some quantity of public goods – just too little relative to what the community overall would prefer. But doing even just a little bit helps. That unilateral action, while insufficient relative to optimum, helps not just oneself, but others as well. Arguably, it has always been this that attracted for America the goodwill of Lee Kuan Yew’s 7 billion. Providing global public goods is not an act of selfless generosity that benefits only the rest of the world; it is as much a matter of US self-preservation as it is an act of doing good for the world. Retreating from this through offshore balancing will degrade US interests, security, and power in the longer-term.

That part of liberal hegemony has certainly been a costly failure that took on the arrogance of seeking to make the world in one’s own image, whether or not one agrees with Mearsheimer and Walt that reversing liberal hegemony “would reduce the risk of terrorism”. But an American grand strategy is likely more successful for America itself when it recognizes that important elements of it need to remain global and need actively to seek to do good, i.e., America needs to continue to take on solving the world’s problems. (Everyone needs to – but few others will be as good at it as America.)

Such a grand strategy still needs to be judicious in how it selects what is global and what isn’t. Doing so, however, makes for an offshore balancing that does not reject but blends in all the good that remains of liberal hegemony. Without this latter element, America will indeed have proven Lee Kuan Yew wrong: America could well become even more powerful but it would no longer be ahead.

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