The Development–Foreign Policy Nexus: A Regime Coherence Framework

This chapter posits that critical engagement with institutional political economy and developmental state scholarship offers new theoretical insights at a time when both development regimes and foreign policy paradigms are in flux. It provides a broad conceptual framework which links national development and foreign policy regimes through institutional complementarities among economic governance, state-business relations, and financial statecraft. It proposes that if the domestic development regime does not chime with the foreign policy orientation of a country, and it is less likely that foreign policy will feed into a nation’s long-term development performance—and vice versa.

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Notes

Paul Krugman, “Is This the End of Peace Through Trade?” The New York Times, 13 December 2022. For more on the intense competition to control the global micro-chip market, see Miller, Chip War.

Cheng Ting-Fang and Lauly Li, “The Resilience Myth: Fatal Flaws in the Push to Secure Chip Supply Chains,” Financial Times, 4 August 2022.

The ongoing retreat of the American-led liberal international order and the move toward multipolarity constitutes the new “big debate” in global politics. On the multiple crises of the liberal international order, see Lake, Martin, and Risse, “Challenges to the Liberal Order”; Acharya, The End of American World Order; Flockhart, “The Coming Multi-Order World”; Öniş and Kutlay, “The New Age of Hybridity and Clash of Norms.” For a review essay, see Layne, “The Waning of U. S. Hegemony—Myth or Reality?” For a counter argument claiming that “the world is neither bipolar nor multipolar, and it is not about to become either”, see Brooks and Wohlforth, “The Myth of Multipolarity: American Power’s Staying Power.”

For an assessment, see Posen, “Emerging Multipolarity.”

Jamil Anderlini and Clea Caulcutt, “Europe Must Resist Pressure to Become ‘America’s Followers,’ Says Macron,” Politico, 9 April 2023. For more on Emmanuel Macron’s ideas on “strategic autonomy” for Europe and how it is received by other Western policymakers with suspicion, see Leila Abboud and Ben Hall, “Macron at Odds with the World,” Financial Times, 15/16 April 2023.

Data cover state acts since November 2008. World Bank database, available at https://data.worldbank.org/indicator/NE.TRD.GNFS.ZS.

IMF, World Economic Outlook: A Rocky Recovery (Washington, DC: International Monetary Fund, Publication Services, 2023), p. 92; see also data file for Chapter 4.

Babic, “State Capital in a Geoeconomic World,” 201.

Helleiner, “The Return of National Self-Sufficiency?” On the intellectual roots of economic nationalism in the global political economy, see Helleiner, The Neomercantilists.

The United States has been the by far largest provider of military support to Ukraine, with $32.5 billion between February 2022 and March 2023. This is followed by the UK with £2.3 billion as of March 2023. For details and information on the military assistance of other NATO and non-NATO countries to Ukraine, see Mills, “Military Assistance to Ukraine since the Russian Invasion.”

Amable, “Institutional Complementarities in the Dynamic Comparative Analysis of Capitalism.” Emphasis in the original. We should note, however, that this book does not intend to apply the institutional complementarities approach highlighted by the varieties of capitalism literature. We refer to the idea of “institutional complementarities” only to demonstrate the relevance and importance of different institutional pillars complementing one another (or the lack thereof) in building a development-oriented foreign policy.

Mastanduno, “Economic Statecraft,” 204. For a classic work on economic statecraft, see Baldwin, Economic Statecraft.

Mastanduno, “Economic Statecraft,” 219–20.

For a recent review, see Drezner, “How Not to Sanction.” Miroslav Nincic, examining the cases of North Korea, Iran, and Libya, has suggested that “positive inducements” should also be considered more seriously, as “negative pressures” remain mostly ineffective. See Nincic, “Getting What You Want.” For a comprehensive overview on the emergence of sanctions in international politics, see Mulder, The Economic Weapon.

Hiscox, “The Domestic Sources of Foreign Economic Policies,” 78.

For a rich collection of essays covering conceptual discussions and case-studies of different countries in terms of economic diplomacy, see Bayne and Woolcock, The New Economic Diplomacy.

Crescenzi, “Economic Exit, Interdependence, and Conflict”; Hegre, Oneal, and Russett, “Trade Does Promote Peace”; Kim and Rousseau, “The Classical Liberals Were Half Right (or Half Wrong)”; Maoz, “The Effects of Strategic and Economic Interdependence on International Conflict Across Levels of Analysis.”

Waltz, “The Myth of National Interdependence,” 205.

Gilpin, The Political Economy of International Relations; Hirschman, National Power and the Structure of Foreign Trade; Barbieri and Schneider, “Globalization and Peace.”

Oneal and Russett, Triangulating Peace; Polachek, “Conflict and Trade”; Pollins, “Does Trade Still Follow the Flag?”

Oneal and Russett, “The Kantian Peace”; Oneal and Russett, Triangulating Peace. Rosecrance, Rise of the Trading State, 13–25.

Ho, Rethinking Trade and Commercial Policy Theories. Ho, in this book, offers a critical analysis of mainstream trade and development approaches.

Johnson, MITI and the Japanese Miracle; Amsden, Asia’s Next Giant; Öniş, “The Logic of the Developmental State.”

For more on the return of industrial policy, see Chang and Andreoni, “Industrial Policy in the 21st Century.” For an overview of the similarities and differences between the “old” and “new” industrial policy, see Naudé, “Industrial Policy.”

Chatterjee, “New Developmentalism and Its Discontents.” See also Khan and Christiansen, Towards New Developmentalism.

For more on new state capitalism, see Alami and Dixon, “State Capitalism(s) Redux?”

Landsberg and Georghiou, “The Foreign Policy and Diplomatic Attributes of a Developmental State,” 480.

Crescenzi, “Economic Exit, Interdependence, and Conflict,” 811. Crescenzi, 812.

Evans, Embedded Autonomy; Öniş, “The Logic of the Developmental State”; Wade, “The Developmental State”; Weiss, The Myth of the Powerless State.

Baru, “Geo-Economics and Strategy.”

Chang, “Breaking the Mould”; Öniş, “The Logic of the Developmental State”; Wade, “The Developmental State”; Weiss, The Myth of the Powerless State.

Landsberg and Georghiou, “The Foreign Policy and Diplomatic Attributes of a Developmental State,” 481.

Landsberg and Georghiou, 488. Evans, Embedded Autonomy.

Landsberg and Georghiou, “The Foreign Policy and Diplomatic Attributes of a Developmental State,” 482.

Mansfield and Pollins, “The Study of Interdependence and Conflict”; Milner, “The Political Economy of International Trade.”

Evans, Embedded Autonomy. Weiss, The Myth of the Powerless State, 38.

On the key role of the state in disciplining business actors in Asian developmental states, with reference to the case of South Korea, see Amsden, Asia’s Next Giant.

Babic, “State Capital in a Geoeconomic World.” Babic has provided a comprehensive analysis of the geoeconomic drivers of state capital and its political reverberations in the global political economy. See also Babic, The Rise of State Capital.

Armijo and Katada, “Theorizing the Financial Statecraft of Emerging Powers.” Drezner, “Sanctions Sometimes Smart.”

Valentina Pop, Sam Fleming, and James Politi, “Weaponisation of Finance: How the West Unleashed ‘Shock and Awe’ on Russia,” Financial Times, 6 April 2022.

For more on the privileged position of the US dollar as a de facto world currency, see Eichengreen, Exorbitant Privilege.

Drezner, “How Not to Sanction,” 1540. Armijo and Katada, “Theorizing the Financial Statecraft of Emerging Powers,” 47. Dent, “Transnational Capital, the State and Foreign Economic Policy,” 264, 261.

Adam Tooze, “Washington Isn’t Listening to Business on China Any More,” Financial Times, 6–7 May 2023.

For a comprehensive assessment and a set of recommendations in this direction, see Rodrik and Walt, “How to Construct a New Global Order.”

References

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Authors and Affiliations

  1. International Politics, City, University of London, London, UK Mustafa Kutlay
  2. International Relations, Kadir Has University, Istanbul, Türkiye H. Emrah Karaoğuz
  1. Mustafa Kutlay