Keohane state and international organization. Keohane and Nye

Keohane and
Nye (20)2) in the book ‘Power and Interdependence’ defined interdependence as situations
characterized by reciprocal effects among actors resulting from ‘international
transactions – flows of money, goods, people and messages across international
boundaries. They explore the importance of interaction among private actors in
world politics, as distinct from state and international organization. Keohane
and Nye developed the term complex interdependence and described it as where policy
processes are complex, pluralistic and fragmented and stresses its contrast
with realist ideals where world politics is observed through pure interstate
relations dominated by zero-sum conflict. Moreover, Keohane characterized
complex interdependence with high societal interdependence, intense
trans-governmental relations, and complex domestic politics. In my opinion,
Keohane provides a comprehensive depiction of the workings of complex
interdependence, as to analyze a nation state’s policy processes from a wider
lens.

Crescenzi (2005)
in the book titled ‘Economic Interdependence and Conflict in World Politics’
developed on the concept economic interdependence and defined it as a function of the potential exit costs states incur by
breaking economic ties. Interdependence is set apart from other qualities of
interstate economic relations by these exit costs. While economic interaction can
be thought of simply as the transaction of goods or services between states,
economic interdependence carries with it a connotation of constraint and tanglement
of commitments that are costly to break.

Genest
(2004) defined interdependence as “An economic transnationalist concept that
assumes that states are not the only important actors, social welfare issues
share center stage with security issues on the global agenda, and cooperation
is as dominant a characteristic of international politics as conflict.” In this
system of ‘Interdependence’, states cooperate due to their own common interest
and perceived is prosperity and stability in the international system as direct
result of this cooperation.

According
to the journal article titled ‘Economic Interdependence and Strategic Interest:
China, India, and the United States in the New Global Order’ (2015) by John Echeveri
and April Herlevi, economic interdependence have consequences to the strategic
interest of a state. Strategic interest was defined as the perceived needs and
desires of one sovereign state in relative to other sovereign states comprising
the external environment. Echeveri and Herlevi (2015) holds that presently,
global markets have decentralized the structure of exchange. One of the
arguments was the rapidly growing South to South exchange. During Cold War,
strategic alliances and colonial ties frequently constrained the possibilities
of economic transactions. Today, states are more self-interested and act
according to strategic interests. The writers also argued that complex
interdependence imposes costs even on powers that dominate issue arenas, as
states interact through multiple channels that may create contending actors
within the country..

Hence, this
paper will refer to the term “complex interdependence” in accordance with the
definition of interdependence given by Keohane and Nye (2012). Keohane and
Nye’s work on the term complex interdependence provides a wider lens as to
assess the interdependency nature of the relationship between China and the
participating countries, particularly, Central Asian countries.

 

 

Hegemony

According
to O’Callaghan (2017), hegemony comprises of the possession and leadership of a
multifaceted set of power resources. All hegemonic states share one common
characteristic: they enjoy ‘structural power’. In this context for China, Belt
Road Initiative can be seen as a form of mechanism for China to attain this
structural power. all hegemonic
states share one common characteristic: they enjoy ‘structural power’. It is this
structural power that permits the hegemon to occupy a central position within
its own system, and, if it so chooses, to play a leading role in it. Indeed,
the ability to shape other states’ preferences and interests is just as
important as the hegemon’s ability to command power resources, for the exercise
of structural power makes it far less likely that the hegemon will have to mobilise
its resources in a directand coercive manner.

Italian
intellectual Antonio Gramsci broadened materialist Marxist theory into the
realm of ideology. Gramsci (1994) defined hegemony as “the Nexus of material
and ideological instruments through which the dominant classes maintain their
power.”  The material in this context is
the is a “structure” that is allied with superstructure of ideas. He exerted
that the dominant classes preserve their position not merely through act of
coercion but also through symbolic action, and further described hegemony as “intellectual
and moral leadership.” where the ideals of a hegemonic country is applied
throughout other countries such as in the legislatures and systems.

Lull
defined hegemony as the power or dominance that one social group holds over
others. This can refer to the “asymmetrical interdependence” of
political-economic-cultural relations. Hegemony implies a willing agreement by
people to be governed by principles, rules, and laws they believe operate in
their best interests, even though in actual practice they may not. Social
consent can be a more effective means of control than coercion or force between
and among nation-states

Thus, this
paper uses the concept hegemony referring to the definition of hegemony by
Griffiths and O’Callaghan particularly in analysing China’s interests in BRI.

International Financial
Institutions

According
to Bhargava (2017), IFIs are institutions that provide financial support and
professional advice for economic and social development activities in
developing countries and promote international economic cooperation and
stability. The term international financial institution typically refers to the
International Monetary Fund (IMF) and the five multilateral development banks
(MDBs): the World Bank Group, the African Development Bank, the Asian
Development Bank, the Inter-American Development Bank, and the European Bank
for Reconstruction and Development. All IFIs admit only sovereign countries as
owner-members, but they are characterized by a broad country membership, comprising
both borrowing developing countries and developed donor countries. Furthermore,
membership in the regional development banks is not limited to countries from
the region.

A standard
feature of the loans provided by IFIs is conditionality. It refers to the
actions that a borrower must take in order to obtain the loan; failure to
comply with these conditions may result in suspension, cancellation, or recall
of the loan. The purpose of conditionality is to ensure that borrowers take the
necessary actions—in terms of policies, provision of technical inputs, nimplementation,
and safeguard measures—to produce the intended development results.

Al-Ameen
(2016) defined international financial institution as inter-governmental
organisation (and service providers) dedicated to or engaged in the
prescription, assessment, operationalization, and enforcement of policies and
decisions pertaining to economic, trade, and/or financial issues. Al-Ameen
mainly focused on the building of the accountability concept with regards of
IFIs. The distinct differences between international regimes and national
regimes are mainly in terms of the former’s lack of robustness in institutional
authority and constitutional scrutiny. The weakness of the oversight mechanism
in the former relative to the latter thus requires special attention to the
accountability of international economic organization.

According to
Martin (2008), international financial institutions is defined as institutions
that structure trade and financial relationships between countries, which in
the book “The Oxford Handbook on Political Institutions” considered upon
General Agreement on Tariffs and Trade (GATT), World Trade Organization (WTO)
and regional trade organization.

Hence, this
paper applies the definition of international financial institution according
to that of  Bhargava (2017) as to refer
to the Asian Infrastructure Investment Bank (AIIB), and to be applied in analysing
the role of AIIB in China’s Belt and Road Initiative.

 

Foreign Direct Investment

            Griffiths
and O’Callaghan defined foreign direct investment as the transfer of capital,
personnel, know-how, and technology from one country to another for the purpose
of establishing or acquiring income-generating assets. There are two main types
of FDI; fixed asset investment, in which the investing company preserves a substantial
level of physical control over the asset (such as a manufacturing plant) during
the life of the investment, and secondly is portfolio investment – the
acquisition of shares and stocks located in foreign countries. Griffiths and
O’Callaghan pointed out the consequences of FDI of which, it is in fact a channel
for wealth extraction rather than for domestic development, and how it
maintains the host country in a dependent position. Nonetheless, it was argued
that FDI also create jobs, increases the revenue and tax bases of the host
government, facilitates the transfer of technology and human capital, and
ultimately promotes development, economic growth, and prosperity.

OECD (2008)
defined Foreign Direct investment as a category of cross-border investment made
by a resident in one economy (the direct investor) with the objective of
establishing a lasting interest in an enterprise (the direct investment
enterprise) that is resident in an economy other than that of the direct
investor. The direct investor’s motivation is a strategic long-term
relationship with the direct investment enterprise to make sure a paramount
degree of influence by the direct investor in the management of the direct
investment enterprise. The “lasting interest” is evidenced when the direct
investor owns at least 10% of the voting power of the direct investment
enterprise.

OECD
acknowledges foreign direct investment (FDI) is a key element in globalisation
through provision of means in creating direct, stable and long-lasting links
between economies. It also potentially serve as a vital vehicle for local
enterprise development as well as in improving the competitiveness of both the
recipient (“host”) and the investing (“home”) economy. In particular, FDI
encourages the transfer of technology and know-how between economies.

According
to United Nations Conference on Trade and Development (2008), foreign direct
investment (FDI) is defined as an investment involving a long-term relationship
and reflecting a lasting interest and control by a resident entity in one economy
(foreign direct investor or parent enterprise) in an enterprise resident in an economy
other than that of the foreign direct investor (FDI enterprise or affiliate
enterprise or foreign affiliate). FDI implies that the investor exerts a significant
degree of influence on the management of the enterprise resident in the other
economy.

This paper
applies the concept foreign direct investment referring to the standardized
definition provided by OECD.

Free
Trade

Free trade
is defined as a policy of unrestricted foreign trade with no tariffs or
subsidies on imports or exports and no quotas or other trade restrictions. A
free trade policy can be adopted unilaterally or on a bilateral basis by
joining a free-trade area which is a group of countries without any tariffs or
other trade restrictions between them, but remaining free to control their
trade with non-members of the area. Trade
can be a powerful force for constructive developments, but it can also bring
problems and uncertainties. The main task is to liberalise trade reasonably and
avoid as many drawbacks as possible. The literature analysis revealed that the
most significant impact of trade liberalisation is observed at country’s level.
Open market access, trade creation leads to faster economic growth, which is
the main factor of welfare increase. It also creates favourable conditions for
business start-up and development, which is additional impetus for investments
and production growth.

 

 

 

 

 

 

References

Al-Ameen,
A. (2016). International Economic Institutions: Developing the Concept of
Substantive Accountability. Journal of Civil & Legal Sciences, 05(02).

Bhargava,
V. (n.d.). The Role of International
Financial Institutions in addressing Global Issues Publication. In The World Bank. Retrieved December 15,
2017, from
http://siteresources.worldbank.org/EXTABOUTUS/Resources/Chapter20.pdf

Crescenzi,
M. J. (2005). Economic interdependence and conflict in world politics. Lanham:
Lexington Books.

Genest, M.
A. (2004). Conflict and cooperation: evolving theories of international
relations. Belmont: Thomson/Wadsworth.

Gramsci,
A., Bellamy, R., & Cox, V. (1994). Antonio Gramsci: pre-prison writings.
Cambridge: Cambridge University Press.

Griffiths,
M., & O’Callaghan, T. (2002). International Relations: the Key Concepts.
Florence: Taylor and Francis.

Keohane, R.,
& Nye, J. S. (2012). Power and interdependence. Boston, MA: Longman.

Martin, L.
L. (2015). Introduction. The Oxford
Handbook of the Political Economy of International Trade.

OECD
benchmark definition of foreign direct investment. (2008). Paris: OECD.

UNCTAD
(2008). World Investment Report 2007: Transnational Corporations, Extractive
Industries and Development (pp. 243-249, Rep.)

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