Measuring Strategic Hedging Capability of Second-Tier States Under Unipolarity

Chin. Polit. Sci. Rev. (2016) 1:60–80 DOI 10.1007/s41111-016-0010-6 ORIGINAL ARTICLE Measuring Strategic Hedging Capability of Second-Tier States Under Unipolarity Gustaaf Geeraerts1 • Mohammad Salman2 Received: 1 October 2015 / Accepted: 16 December 2015 / Published online: 24 February 2016 Ó Fudan University and Springer Science+Business Media Singapore 2016 Abstract Background Strategic hedging is a form of behavior used by states wanting to improve their competitiveness while at the same time avoiding direct confrontation with main contenders. It is an appealing option for states facing uncertainty due to structural changes in the international system such as the present unipolarity giving way to a process of power diffusion. Under such conditions, strategic hedging becomes an attractive alternative for other strategies like balancing, bandwagoning, and buckpassing. Especially for second-tier states, it becomes a behavior of choice vis-à-vis the system leader. Aims The strategic hedging research program, however, is in its early stages. Previous research on strategic hedging developed without a clear account of national hedging capabilities, making it difficult to understand key reasons for successful hedging in some cases and its failure in others. This study represents the first attempt to measure the core components of a state’s strategic hedging capability and as such provides a comparative snapshot of those components by means of a composite index. Methods The index comprises three core dimensions (economic capability, military power and decision-making capability), which are broken down into six sub-indicators: gross domestic product (GDP), foreign exchange and gold reserves, government debt, military expenditure, growth of military arsenal, and democracy. Because second-tier states in the international system are likely to have the greatest incentives to engage in & Gustaaf Geeraerts ; Mohammad Salman 1 School of International Relations and Public Administration, Fudan University, Shanghai, China 2 Department of Political Science, Vrije Universiteit Brussel (VUB), Brussels, Belgium 123 Chin. Polit. Sci. Rev. (2016) 1:60–80 61 strategic hedging, the composite index developed in this study is applied to a sample of seven leading second-tier states in a comparative case study. Results The results indicate that for states to score high on strategic hedging capability, they need to score high on all core dimensions. Negligence of one of the components leads to a significant decline in total hedging capacity. Such results show why China tops the strategic hedging capability index and scores significantly higher than the other second-tier states. Keywords Strategic hedging  Strategic Hedging Capability Index  Second-tier States  Unipolarity  Power diffusion 1 Introduction According to Nye (1990, 2004), a nation’s power comprises both hard power and soft power. In recent years scholars have tried to better understand the relationship between hard power and soft power. For instance, in his study about China’s policy in the Middle East, Alterman (2009: 75) stated: ‘‘Chinese power in the region is destined to become more balanced between hard and soft power over time’’. In 2011, a more articulated effort was undertaken applying the concept of strategic hedging to China’s energy security strategy (Tessman and Wolfe 2011). In this study strategic hedging (by China) was interpreted as a type of second-tier states’ behavior against the system leader in a unipolar system, where the hedging state attempts to improve its competitive ability (military and economic) while avoiding direct confrontation with the system leader. What makes the strategic hedging approach particularly interesting is that it addresses a wider range of strategies than hard balancing and also has a much stronger connection to system structure than the soft balancing concept (Tessman and Wolfe 2011; Tessman 2012; Wolfe 2013). The strategic hedging research program is in its early stages and in need of progressive development. Previous research on strategic hedging has evolved without a clear account of national hedging capabilities, making it difficult to understand the key reasons for successful hedging in some cases and its failure in others. This article discerns the core components that contribute to a state’s strategic hedging capability and develops a composite index that provides a comparative snapshot of those components. The potential of this composite index is illustrated by a comparative case study of the leading seven second-tier states, namely China, France, Germany, India, Japan, Russia, and UK.1 In the following, we first review the meaning of strategic hedging in International Relations and articulate it specifically with regard to second-tier states. Secondly, we present three dimensions together with six sub-indicators that capture a state’s strategic hedging capability. In the third section, we present the specification of the model and datasets after which we examine the leading seven second-tier states as comparative case study for the year 2013. In the last section, we analyze the results, 1 The seven leading second-tier states were selected on the basis of their relative economic and/or military weight (except the system leader; the United States). 123 62 Chin. Polit. Sci. Rev. (2016) 1:60–80 offer some conclusions, and outline ways to improve the measurement of strategic hedging in the future. 2 What is Strategic Hedging? Since the end of the Cold War, several second-tier states have attempted to transform the international system from unipolarity to multipolarity (Layne 1993: 9–10; Monteiro 2011: 10). These included efforts to improve competitiveness while avoiding direct confrontation with the system leader. For example, the BRICs (Brazil, Russia, India, and China) evolved from a mere concept into a more formal political grouping to maximize leverage, and to avoid negative attention by hiding in a group (Glosny 2010: 100). In response to this development, the soft balancing concept was introduced to capture uses of nonmilitary tools to delay, frustrate, confront, and undermine the system leader, for instance, using ‘‘international institutions, economic statecraft, and diplomatic arrangements’’ (Pape 2005: 10). Recently, the concept of strategic hedging has been introduced in an effort to improve upon the concept of soft balancing. Strategic hedging is a form behavior used by states wanting to improve their competitiveness while at the same time avoiding direct confrontation with main contenders. It is an appealing option for states facing uncertainty due to structural changes in the international system such as the present unipolarity giving way to a process of power diffusion (Geeraerts 2011). Under such conditions, strategic hedging becomes an attractive alternative for other strategies like balancing, bandwagoning, and buckpassing (see, Tessman (...truncated)