Is Economic Hegemony Necessary for Maintaining Open Trade? an Empirical Challenge to the Hegemonic Stability Theory

Old international relations theories never die. They don’t even fade away. Perhaps the most tenacious of them all is hegemonic stability theory (HST), which is the argument that a hegemonic power is necessary to maintain a stable, open international economic order because only a hegemon is able and potentially willing to do what is needed to preserve openness. Despite repeated criticism over four decades, HST – like James Cameron’s terminator – keeps coming back. Two things explain HST’s enduring popularity. First, many scholars find discussing US perceived hegemony – and its ostensive demise – intellectually irresistible. Second, and perhaps more important, HST has proved devilishly difficult to specify and to assess empirically. This paper strives to surmount those challenges by producing the first ever assessment of HST using inferential statistics. It models HST with both a single hegemon and an alternative variant involving collective hegemony by a relatively small number of leading economies. Results show significant correlations between hegemony and openness, but the sign is always the opposite of what hegemonic stability theorists anticipate. That is, economic diffusion rather than hegemony is associated with openness. Similarly, the data do not indicate that the United States has been willing to play a key role that Kindleberger ascribes to the hegemon: serving as a market for distress goods. We offer an alternative explanation for contemporary economic openness rooted in microeconomic theories of competition. These findings suggest that observers should not necessarily take a decline in the concentration of economic power, either of the United States or the world’s leading economies, to be a harbinger of a reversal of economic openness