State Of Art

Review Paper Group Assignment VI (Group IV)

Ahmad Nashrulloh – 10020220029

Nia Pratama Putri – 10010220011

Wahyu Nindar Diah Permata Santi - 10010220024

Introduction

Hegemonic Stability Theory is important in understanding stability and instability in the

international political economy. This theory is a program consisting of two different theories.
Leadership Theory is built on the model of public goods and seeks to explain the production of
international economic infrastructure. AndHegemony Theory,which subjugats three independent
analytical traditions, focuses on various state structurally derived trade policy preferences and
efforts to explain international economic openness. According to hegemonic stability theory, the
role played by hegemonic forces is very important in creating stability in international politics
and economy. Without strong hegemony, the creation of international stability is impossible. The
study concluded that hegemonic power is essential in creating stability in the international
political economy. Political instability and economic depression in the decades before the
Second World War were closely linked to the absence of strong hegemonic forces in the
international system. Because international institutions are unlikely to run smoothly without
strong support by hegemonic forces. As well as without a strong hegemony as well, the forces of
economic and political stability would surely be highly unlikely.

Hegemony, Stability, And Public Goods Theory

The Theory of Hegemonic Stabilityis an important theory for understanding the role of
hegemonic power and its relationship to economic development and political stability in
international structures. The key point of hegemonic stability theory is that it must be a
hegemonic force, which is the sole dominant force in the international system to ensure
 1
international economic and political stability. The theory of hegemonic stability, both in the
liberal and realist versions, received critical acclaim from scholars. 2 This theory was attacked on
the basis of theory, history, and politics. Theoretical criticism emphasizes the possibility of
cooperative solutions among nonhegemonic countries to problems related to the creation and
maintenance of a liberal international economy. While it is possible to create a stable liberal
international order through cooperation but without hegemony, this would never have happened,
and without counterfactual examples, neither theory nor its criticism could be proven wrong.

After World War I, until the outbreak of World War II in 1939 (1919-1939), the
international political and economic system changed. The Germans were defeated in World War
I, but the British were too weak to play a hegemonic role. During this period, international
relations and international economic politics experienced instability due to a lack of hegemony
rules and standardization of the international system. The United States refused to take on the
role of new hegemony from 1919 to 1939. Therefore, from the beginning of the 20th century to
the end of the Second World War, the emergence of new hegemony was a place where there was
no hegemony to control international stability.

Hegemonic power has an incentive to provide 'public goods' / Public Goods (a shared
value that benefits everyone who has access to it, even if not everyone contributes to their
preservation or creation), because it has the greatest power in preserving the existing
international system. which gives him a dominant status. Public goods or safe and stable
conditions can only be provided by hegemonic state; He has the ability to provide the 'public
interest' because he is in the strongest position and has the ability in the military, economy, and
politics. The power of hegemony can provide public goods, guarantee order and security. Stable
security and economic and political stability are made possible with strong hegemonic forces.
Public goods here are provided in a very different way from the main strands of hegemonic

1 Kindleberger, C. P. (1981). Dominance and Leadership in the International Economy: Exploitation, Public Goods,
and Free Rides. International Studies Quarterly, 25(2), 247. https://doi.org/10.2307/2600355

2 Conybeare, J. A.C. (1984). Public Goods, Prisoners' Dilemmas and the International Political Economy.
International Studies Quarterly, 28(1), 5-22. https://doi.org/10.2307/2600395
theory. In the original formulation, the provision was decentralized; This argument is based on
the inability of hegemonic actors either to persuade others to share the costs or to take them out
of the good. Subordinate actors make use of hegemony actors even though actors are more
dominant. On the contrary, in this alternative version, the power of hegemony is effective in
forcing other countries. It solves the problem of provision by imposing itself as a centralized
authority capable of extracting equal taxes. The theoretical focus shifts from the ability to
provide the public well to the ability to force other states

The theory of hegemonic stability rests on the logic of the provision of public goods. Public
Goods is defined by two characteristics: non-Excludability and non-Rivaly. Non-Excludability
means that; if the item once there has been provided, nothing can be prevented from enjoying its
benefits. Non-Rivaly means that goods consumed by one individual do not reduce the number of
items available to others. Public Goods tends to lack supply relative to the value that society
gives it. The lack of supply is a result of a phenomenon called Free Riding. Free Riding
describes a situation where individuals rely on others to pay for public goods. 3

To keep the system stable, hegemon must prevent cheating, exploitation, and freedom of
driving from other states. Dominant powers also need to enforce the rules of the liberal system
and encourage other countries to share the cost of maintaining the system and for example to
remove their trade barriers to enlarge and stabilize the world economic order. The main source of
hegemon influence can be found in its capital controls (it can borrow cheaply, give or reject
credit) and in its relatively large market (it can be opened to friends or access can be denied to
4
others). Hegemon's economic strength lies in its flexibility and mobility. It also required
hegemonic military power to protect the international political economy that benefited many
countries.

3 Knight, J. (1993). Collective Action: Theory and Applications. By Todd Sandler. Ann Arbor: University of Michigan
Press, 1992. 237. American Political Science Review, 87(3), 776–777. https://doi.org/10.2307/2938766

4 Gilpin, R., & Gilpin, J.M. (2006). Global political economy : understanding the international economic order.
Princeton University Press. p.77
Leadership Theory

According to Kindleberger (1973, 1981, 1986a, 1986b), the example ofleadership

theory,states are rational selfish who seek to maximize their own well-being, implicitly defined
in materialist terms. Because of the issue of free-riders,he thinks a single leader is necessary for
the provision of the public interest of international stability.

In addition, Kindleberger has identified five functions to be performed to "stabilize" the

international economy: providing markets for depressed goods, generating stable (if not opposed)
capital flows, and maintaining rediskon mechanisms sequentially until when the following
situation occurs, monetary systems that provide liquidity become panicked, manage exchange
rate structures, and provide a level of coordination of domestic monetary policy. These functions
can also be redefined in simpler terms and are known to the public.

Kindleberger's contribution is simply to extend these functions to the international

economy and to remind us that no attribute of international stability arises naturally or on its own
volition. Instead, it should be actively created and maintained. Kindleberger also rightly suggests
that this international economic infrastructure, like its domestic partners, is public goods, which
at least generate enough positive externalities so that we can treat it as if it were public goods.
Currency, liquidity, and proprietary systems, once provided, may be provided to others for little
or no fee. In addition, a country may be excluded from the use of exchange instruments, and
therefore affected by the level of liquidity in the system, only if all market participants collude
and impose a perfect foreign exchange embargo against the country; any leakage will allow
excluded countries to enjoy (at the appropriate exchange rate) the benefits provided by others. As
the history of economic sanctions shows, such a perfect embargo is very expensive to implement
and practically impossible. 5

Recent work on the international system has reinforced the conclusion, at least to the
post-hegemonic system, if not more commonly. Although different systems may have
substantive distributional influences, for this theory, the substantive content of the international

5 Baldwin (1985) presents the most optimistic view of the efficacy of sanctions. He does not discuss foreign
exchange embargoes at length.
economic infrastructure to some extent varies, since the true nature of the exchange or a set of
property rights is not as much as that in the Media or this kind of right is important. As a result,
the hegemonic regime can resolve the issue of the next focus deal, thereby reducing the
bargaining problem that exists in a "no regime" environment. Just as the clock at Grand Central
Station provides a natural meeting place, the US dollar also provides "natural" reserve assets in
our post-hegemony world. Keohane even suggested that even in the absence of leaders, countries
can form institutions to encourage cooperation. 6

In short, both the theory of public goods and the regime clearly implies that a leader is
not a necessary requirement for internal production in the national economic infrastructure. In
theory, at least many countries can provide leadership. For the provision of international
economic infrastructure, a leader seems unnecessary or inadequate. It is always possible to
define any country that can effectively produce stability as a "leader" and any country other than
"non-leader" as a "leader." Indeed, this is a fairly common trend in literature. But in the end of
course this magic does not leave a trace of the plane, but tautology. The task before us is to go
beyond the definition of leadership and determine the necessary and sufficient conditions for the
production of international economic infrastructure.

Conclusion

Theoretical criticism emphasizes the possibility of cooperation between non-hegemonic

countries to solve problems related to the establishment and maintenance of a free international
economy. Although a stable and free international order can be built through cooperation,
without hegemony, this will never happen, and if there are no counterfactual examples, neither
theory nor criticism can be denied. Hegemony has the motivation to provide "public goods"
because it has the greatest power in maintaining the existing international system. It gives him
dominance. Strong hegemony can ensure a safe and stable economy and politics. The public
good here is completely different from the main content of hegemony theory. It solves the supply
problem by imposing itself as a central institution capable of attracting the same taxes. Not only
that, Leaderships Theory According to Kindleberger, an example of leadership theory, countries

6 Robert Owen Keohane. (2005). After hegemony : cooperation and discord in the world political economy : with a
new preface by the author. Princeton University Press.
are rational selfish who seek to maximize their own well-being, implicitly defined in
materialistic terms. Because of the issue of free-ridership, he thinks a single leader is necessary
for the provision of the public interest of international stability.

References

Conybeare, J. A.C. (1984). Public Goods, Prisoners' Dilemmas and the International Political
Economy. International Studies Quarterly, 28(1), 5. https://doi.org/10.2307/2600395

Gilpin, R., & Gilpin, J.M. (2006). Global political economy : understanding the international
economic order. Princeton University Press.

Kindleberger, C. P. (1981). Dominance and Leadership in the International Economy:

Exploitation, Public Goods, and Free Rides. International Studies Quarterly, 25(2), 242.
https://doi.org/10.2307/2600355

Knight, J. (1993). Collective Action: Theory and Applications. By Todd Sandler. Ann Arbor:
University of Michigan Press, 1992. 237 paper. American Political Science Review,
87(3), 776–777. https://doi.org/10.2307/2938766

Oatley, T. H. (2019). International political economy : international student edition. Routledge,

Taylor & Francis Ltd.

Robert Owen Keohane. (2005). After hegemony : cooperation and discord in the world political
economy : with a new preface by the author. Princeton University Press.

Schubert, J. (2003). GRIN - Hegemonic Stability Theory: The Rise and Fall of the US-
Leadership in World Economic Relations. Www.grin.com.
https://www.grin.com/document/22451