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Relative gains are (mostly) bunk

I helped to teach a course on international institutions last term. The course included an overview of the debates from the 1980s and early 1990s over multilateral agreements and the possibility of mutually beneficial cooperation between states. According to most IR textbooks, these debates established an enduring point of contention between Realist and Liberal Institutionalist perspectives – the latter focusing on absolute gains (welfare improvements) and the former on relative gains (share of power resources). I am not sure this is a very accurate summary of current debates in the discipline, I don’t think that there has been much research on relative and absolute gains in quite some time (this and this were the only articles I could find from the last decade). If my grasp on the recent history of the discipline is correct, that this is likely because the initial research programme on relative gains initiated by Mastanduno and Grieco fizzled out pretty fast when the empirical evidence proved to be mixed and inconclusive. More hardcore rational choice theorists demonstrated that the claims made about relative gains being a barrier to cooperation did not really stand up to scrutiny. Liberal Institutionalism won the argument to a large extent, but then mutated into a pretty generic rational choice institutionalism concerned with the same sort of problems of credible commitment and collective action as much mainstream economics and political science – losing touch with discipline-defining debates. So relative vs. absolute gains provides a neat way for textbook writers to distinguish between two ‘paradigms’, but it’s not a division that provides much of a guide to current research in journals like International Organization.

But the division does appear in textbooks, so it’s part of the education of many thousands of students every year. Unfortunately, the argument that if states are concerned with relative gains (share of power resources) they will forgo the benefits of cooperation is bunk and can be shown to be so very easily. In writing this up I discovered that this argument may have been made by Duncan Snidal 25 years ago, no doubt more rigorously. But the fact that its not hard for people like me who lack Prof. Snidal’s expertise in game theory to show flaws in the relative gains argument demonstrates how flimsy the argument is, even granting all the assumptions made by its Hobbist proponents.

Let’s adopt the same soft rational choice approach of many 80s and 90s IR theorists. I’m not convinced by this approach, with its contextless hypothetical examples and stereotyped, oversimplified scenarios, but it’s the ground on which proponents of the relative gains argument chose to pitch.

Suppose states A, B, C and D are states, each with a GDP of 10 trillion dollars. Let’s use GDP as a measure of material capabilities, as many neo-realists do (and with good reason). Each state therefore controls 25% of the material capabilities in the system. If (offensive) neo-realism is correct, each desires to increase their share. They are expected to forgo economic gains if it would also involve larger gains for another state, as this would lead to a reduction in their relative power. Logically, if they are rational as defined within rational choice theory, they would even accept a lower absolute income in order to have a greater share of power resources. It seems, therefore, that asymmetric trade deals that benefit some of our actors more than others would never be struck. This is not the case, however.

Let’s say A offers B a take-it-or-leave-it trade deal that will benefit A by $2trn and B by $1trn. This example follows the discussion on page 105 of Theory of International Politics where Waltz explicitly discusses an imaginary deal skewed 2:1 in favour of one state. If B is concerned with relative gains, should they take this seemingly unfair deal? Contra neo-realism, yes: it increases B’s share of power resources in the system by 0.6% and puts it ahead of C and D in terms of their power ranking. So concern with relative gains will lead towards cooperation even though the terms are unequal. Let’s say that B can offer a similar deal to C and C to D. Assuming that each deal really is a take-it-or-leave it offer in which no better alternative is available, each offer will be accepted because each time it will increase the share of power of both states involved – providing relative gains.

Finally, after this chain of deals, if D can offer A a similar asymmetric deal, will A take it? Unless A is very concerned with a very specific sort of relative gain (i.e. gains or losses relative to the most powerful in the system), then it will. The deals that A and D were not involved in reduced their share of material power, and making a deal – even if it benefits D more – will increase A’s share of power resources.

At the end of the chain of deals, each actor will have $13trn GDP and so the same 25% share of power resources that they started with. Even if they cared only about relative gains, each state has ended up better off and participating in mutually advantageous cooperation.

So under this scenario, relative gains are not a barrier to cooperation. It should be easy to see that under more realistic conditions, the same will apply. A state is unlikely to want to be left out of a multilateral trade deal that provides benefits to others, even if the deal is skewed. In his book Ruling the World  Lloyd Gruber argues that something similar to this process created the clamour to join the WTO in the 1990s – even though many states in the global South preferred its forerunner the GATT. It’s only when the number of states is very small and the distribution of benefits very skewed that we should expect relative gains to matter and to prevent cooperation.

Alternatively, if we abandon the idea that all states are threatening to each other and acknowledge that states are primarily focused on certain specific rivals  then relative gains considerations might be relevant. There’s real world evidence for this: witness concern over French arms exports to Russia in the aftermath of its annexation of the Crimea. As pointed out by my students, one of the most compelling examples of relative gains presenting a barrier to cooperation comes from international environmental negotiations, where the US seems to have been concerned to avoid any agreement that would disadvantage it relative to China.

But in the scenario that neo-realism posits, where all states are rivals, somewhat counter-intuitively relative gains considerations will no longer be relevant as a loss of relative power compared to the other contracting state may be compensated by the relative gain compared to others. 

Starting with broadly Hobbist assumptions, there are other reasons why states might avoid entering into positive-sum multilateral agreements with each other. Waltz notes that states may be concerned with the vulnerability that dependence on a potential enemy or rival might bring. States might guard their sovereignty jealously and be wary of any loss of de jure or de facto independence. But whilst the issue of relative gains might prevent cooperation in some special cases, it isn’t a general barrier to cooperation under conditions of anarchy – even if the system is characterised by competition and aggression. Glancing at the historical record, this should have been fairly obvious: transnational capitalism emerged coterminously with the turbulent European state-system.

Mistaking Realism for Idealism

This academic year, I’ve been wondering why IR students frequently develop the mistaken belief that they are realists (in the IR theory sense). I say mistaken belief because I think that some of them are not actually realists at all, and if they understood realism as an IR theory and political tradition better they would realise this too. There are clearly students who really are realists, who grasp the theory and believe that it provides a good account of what goes on in world politics – and fair enough. But a sizeable number of students seem to suffer from a sort of false consciousness in which they mistake their own views for the realist perspective.

Previously on the blog, I’ve described neo-realism as a squatter in IR theory textbooks and introductory courses – occupying the role of the power-politics theory of IR even though it is not a very good theory of power-politics. Some theory of power-politics probably needs to be part of the debate in any academic discussion of international relations, and so neo-realism gets undue limelight because it is so familiar and so well-sedimented in teaching materials.  Some students latch onto neo-realism because it is the only theory of power-politics they are familiar with. The evidence for this is that such students tend to think that every power-political explanation is a neo-realist explanation (in fairness neo-realists have often tried to claim this, which led to accusations that neo-realism was a degenerating research programme) and that these students become confused when they are introduced to alternative theories such as Marxism that make very similar claims about the self-aggrandising nature of states.

I don’t think that this is the only reason why students think they are realists or neo-realists even when they might not be. This is because that I don’t think it’s just the specific claims about the operation of the balance of power, for example, that they would disagree with – but the underlying outlook and the normative and explanatory core at the heart of most realist perspectives. What students sometimes miss, I think, is that realism provides an endorsement rather than just a description of the use of power politics. To condemn a state’s behaviour as narrowly self-interested and power-seeking is to depart from a conventional realist perspective (although to condemn it as reckless is not). Realism doesn’t offer a critique of power politics: ruthless behavior is rational and necessary, given the way that the international system is organised.

It’s my hunch that a lot of students that think themselves realists are actually the opposite, they are outraged by the selfish use of power politics by major states – and again, this is an entirely reasonably position to hold. But mainstream IR realism doesn’t provide any foundations for this outrage, it offers a shrug and the insistence that this is the way that things have always been and always will be.

This conflation of realism and its opposite, idealism, is also why Noam Chomsky retains appeal and why he crops up to support ‘realist’ arguments in essays. Like many people encountering debates on international relations for the first time, he assumes that there is a robust framework of rights and duties beyond the state, and that self-aggrandisement is the product of the malfeasance of particular actors. Although Chomsky’s perspective anticipates that important states will act in a self-aggrandising power-political fashion, it is utterly different from mainstream IR realism in how it conceives of the international system. There’s not nothing in Chomsky’s viewpoint, just as there is something of value in some neo-realist arguments, but it’s a limited and reductionist perspective.

It’s not a Marxist or a critical materialist perspective either, as these perspectives reject the idea that the international system is governed by a set of universalistic legal principles that for some reason particular states keep trampling over. Rather, they hold that the rules are fixed from the very outset.

That Chomsky is unable to grasp this argument was revealed in a little spat with Matthew Yglesias from a few years ago that I missed at the time. Yglesias argued that many dubious actions of the US and other greater powers comply with international law, but that this is no great endorsement as these powers get to decide what international law is in the first place. Chomsky accused Yglesias of endorsing law-breaking by the US, to which Yglesias replied that Chomsky had missed the point and that the issue is that the deck is stacked – the US and others make the laws through the Security Council and through other means. Somewhat heroically, Chomsky misunderstood and misrepresented Yglesias again, presenting him as offering an endorsement of American law breaking. The fundamental problem is that Chomsky imagines that international law, and other norms and rules governing international relations, comply with what Chomsky would wish them to be. As Yglesias states, very clearly:

International law, as it exists, was not written by pacifists, political radicals, or grassroots communities in small or weak states. It was, rather, written by political elites who are not committed to pacifism or radical politics via a process in which militarily strong states have disproportionate weight. Therefore, people who are committed to pacifism or radical politics shouldn’t be surprised to find that the existing body of international law often fails to support their policy ideas.

Yglesias’s position is much closer to a critical perspective, but because it doesn’t conform to Chomsky’s idealism he misidentifies Yglesias’s argument as realist. For a realist, it really is silly and naive to think that great powers will (or should) submit themselves to the same rules that they impose on others.

So realist scholars are misidentified as idealists, idealists as realists, and critiques mistaken for apologias.