Hegemonic stability theory
Hegemonic Stability Theory is a theory developed by many political scientists including George Modelski, Robert Gilpin, Robert Keohane and Stephen Krasner. A hegemon is a state that has the capacity and the will to lead and overpower other states in the international system. Krasner defines two states to be the hegemons, especially when looked from an international political economy perspective: the British Empire until the beginning of the 20th century, and the United States from that point onwards. Krasner uses a systemic approach to empirically test this theory, and his main hypothesis is that the presence of a hegemonic power in the international system creates incentives for other states to accept the openness of trade; thus, the world becomes more open and globalized in the presence of a hegemonic power. He gives examples of various international systems and decides that there are two cases in which free trade would be beneficial: when there are many small states with similar power (similar to the case of Benelux states pioneering European construction/monetary integration) and the existence of a hegemon overpowering other smaller states.
He goes on to test this argument in his article on "State Power and the Structure of International Trade." In this case, his dependent variable is economic openness, and his independent variables are the distribution of potential economic power: national income, per capita income, military power and geopolitical position. Krasner tests his theory for different time periods, and then we see that this theory "fails;" although the theory is valid for 1820-1880 (the begininng of the era of first globalization), 1900-1914 (British hegemonic power falling) and 1945-1960 (post WWII era), it is not for the other periods tested. Thus, Krasner amends this theory, arguing that there is a time lag on the dependent variable. In other words, it might take some time for the hegemon to realize the benefits of globalization and open trade and its role in promotng them.
Problems with Hegemonic Stability Theory
Although Hegemonic Stability Theory is one of the most useful tools to identify and analyze cooperation between states in the international systems, the theory has shortcomings. Beyond Krasner’s explanation of his theory’s failings through the lagging of the dependent variable, several other issues appear to be prevalent throughout his work.
As explained above the dependent variable in this theory is economic openness. Krasner discusses how tariff levels would be the most obvious and practical way to measure economic openness but identifies the difficulty in this task. First, it should be noted that tariff levels are subjective due to the difference in price elasticity between various products. For instance, a 2% tariff on a certain good, like milk, would not have the same deterring effect as a 2% tariff on another good, like a yacht. Tariff levels are not the only way to control barriers to trade. Differing tax rates, labor and social costs, and exchange rates can act as indirect tariffs that give one state a trading advantage over other states.
Krasner’s independent variable requires some attention as well. The issue with the independent variable is that during his paper Krasner switches from one interpretation of the variable to another. Krasner at times identifies the independent variable as the distribution of power, giving it the possibility of having many intricate levels. However, at other times he identifies this variable simply as whether or not there is a hegemonic power present, essentially turning the independent variable into a binary variable.
Another lag may exist on a social level. The state entity may take time to realize that it wields the power on an international scale, but just as importantly, the citizens of the state may not notice the power they wield. Alternatively, citizens may think their state wields more power on an international scale, or that their power is still ascending on an international scale while in reality it may have stalled or begun to decline. This sort of lag can have equally serious implications in international markets and trade, and it is not thoroughly discussed in Krasner's theory.