Hegemonic Stability Theory

The hegemonic stability theory (HST) is a realist tradition that offers a power-based explanation for the actual instances of long-lasting cooperation, such as the post-World War II US-led comprehensive multilateral architecture or the 19th UK-led century Gold Standard. According to HST, a sophisticated multilateral architecture can only be held together by a leader, a hegemonic power that secures ‘global public goods’ for the sake of global political and economic stability. The hegemon can go a long way providing some goods unilaterally from its own resources, such as a reliable trade and reserve currency; a stable monetary system; almost limitless credit to the world economy backed by a very strong and highly liquid domestic financial market; a big open market where surplus goods can still be sold; protection of property rights; international security. But several of these goods are best provided through multilateral cooperation, in which the hegemonic power also takes the lead (Kindleberger, 1981). Thus, the US as the most powerful victor of the Second World War took the initiative in 1944-1949 to found the Bretton Woods institutions, UN and General Agreement on Tariffs and Trade (GATT), launched the Marshall Plan for Western Europe, accepted to be the largest funder of the North Atlantic Treaty Organization (NATO), and continued this leadership of the capitalist world in the bipolar structure of the Cold War. In these scenarios, a good deal of freeriding by smaller powers is well possible.

Apart from unilateral contributions to global public goods and underpinning multilateral institutions, the hegemonic power can also use soft power to convince, or hard power to coerce, other states into joining – thus overcoming the problems of conflicting interests, relative gains calculations, free riding and cheating.

The hegemonic power invests in global public goods in its best interests. As the largest economy in the world, it has a great stake in an open and stable world economy. For this objective, leadership is needed, and if the hegemon does not assume it, nobody will. This also implies that when the hegemonic power declines, the multilateral architecture it used to underpin, will erode and implode.

Several realist-inspired scholars have perceived hegemonic cycles throughout history (Gilpin, 1981). Unlike Waltz, they appreciate the cyclical occurrence of hegemonic leadership that can last a few decades (in the case of US hegemony after the Second World War, they de facto consider the Soviet Union as a secondary power, or accept that then the world was ‘bipolar’). But by supporting an open world economy, the hegemonic powers paradoxically provide opportunities to challengers to export, to copy technology and to grow. Moreover, maintaining a hegemonic position entails enormous costs in terms of funding global public goods, military presence around the world and military interventions, which after a while cumulate into ‘imperial overstretch’ (Kennedy, 1987). In this context, some challengers rise to the point that they undo the incumbent’s hegemonic position. This hegemonic transition usually sparks great power wars, as illustrated by the period 1914-1945 between UK and US hegemony.