U.S. Grand Strategy and the Origins of the Developmental State

Abstract         Scholars have credited a model of state-led capitalism called the “developmental state” with producing the economic miracles of Japan, South Korea, and Taiwan. In accounting for the origins of this model of political economy, previous studies have emphasized domestic politics or the legacy of Japanese colonialism in these cases. While those factors were undoubtedly important, they only tell half of the story. Using historical case studies based on extensive archival research, this article examines how the developmental state was shaped by the international politics of the Cold War. Contrary to the conventional association of the United States with free-market policies, the United States fostered state-led capitalism in Japan, South Korea, and Taiwan as part of a long-term strategy for containing Communism in Northeast Asia. Acting on the belief that Communist China and North Korea were highly aggressive adversaries that could not be neutralized through U.S. military force, American strategy focused on changing the distribution of capabilities by accelerating the process of economic development among allies that were under the greatest threat from Beijing and Pyongyang. In the pursuit of this objective, U.S. aid agencies became deeply involved in the process of state-building in Japan, South Korea, and Taiwan and enhanced the capacity of U.S. allies to engage in economic planning. I verify this claim by demonstrating that the perception of a severe Communist threat led the United States to support the creation of a developmental state on Taiwan. In contrast, U.S. officials believed that the Communist threat to the Philippine government was comparatively weak and short-lived, leading the United States to forego supporting the creation of a developmental state in the Philippines. This finding highlights the legacy of statism in American foreign economic policy and the role of foreign aid and economic development in grand strategy.

Economic Aid and U.S. Strategic Interests in the Cold War

Abstract         There is a prevalent view in the literature on aid policy that geopolitical goals are distinct from developmental goals. However, some of the most successful aid programs in history, such as the Marshall Plan, were fundamentally political in nature. This paper argues that strategic goals can reinforce developmental goals depending on the nature of the international system and the geopolitical alignment of the aid recipient. Under bipolarity, clients (allies and security partners) are subject to security threats from a great power donor’s geopolitical adversary, leading the donor to have a strategic interest in using aid to support their development. In contrast, the donor uses aid to purchase the political support of non-allies whose geopolitical alignment is uncertain. During the Cold War, the United States adopted this latter strategy toward the uncommitted (neutral and Non-Aligned) countries of the developing world. As a result, uncommitted countries received aid with fewer strings attached compared to clients. I verify this claim using an original dataset that employs a disaggregated measure of aid as well a novel measure of geopolitical alignment. These data are based on extensive analysis of American diplomatic papers that reveal the decision-making process behind the provision of foreign aid. I find that compared to American allies and security partners, neutral and Non-Aligned countries received a higher proportion of aid in the form of general budget support that had no strings attached. This type of aid was designed to be effective at purchasing political support but not at promoting economic development. This finding sheds light on the relationship between economic development and geopolitical motives in aid policy, and more generally on the role of economic development in grand strategy.

American Diplomacy and Export-Oriented Industrialization on Taiwan

Abstract         Scholars have pointed to the late 1950s as the beginning of Taiwan’s transition to export-oriented industrialization. Although the Chinese Nationalist Party (KMT) had traditionally supported state socialism, the KMT oversaw economic reforms beginning in the late 1950s that set Taiwan on the course of export-led growth under a capitalist model. Using archival materials from both the United States and Taiwan, I argue that the reforms should be understood in the context of U.S. influence on how the KMT understood the role of economic development in its grand strategy. In the early years after they retreated to Taiwan, many KMT officials believed that investing resources in the long-term development of Taiwan would come at the expense of the KMT’s paramount political objective of defending the claim that it was the sole legitimate government of all of China. U.S. officials claimed that economic reform would enable the party to pursue its political objectives by showcasing Taiwan’s prosperity in an ideological competition with the Chinese Communists and by reducing the KMT’s dependence on the United States. U.S. arguments succeeded in creating political support at the highest levels of the Nationalist leadership for a reform-oriented faction in the economic bureaucracy, which eventually led to the implementation of reform measures by the late 1950s.

Did Thucydides Believe in Thucydides’ Trap? The History of the Peloponnesian War and Its Relevance to U.S.-China Relations

Abstract         The Greek historian Thucydides has been cited as an early proponent of the power transition model of war. In a recent work that follows in this tradition, Graham Allison has referred to “Thucydides’ Trap” to emphasize how structural forces are leading to instability in U.S.-China relations. This paper questions the association of Thucydides with structural explanations of war. Drawing on the original Greek text of the History of the Peloponnesian War, I argue that Thucydides attributed the conflict to the expansion of the Athenian Empire rather than structural change. In the absence of clear evidence to date that China harbors imperialistic designs on its neighbors, contemporary U.S.-China relations should not be understood through the lens of the Athenian-Spartan rivalry of the fifth century BCE. Structural change is making conflict between the United States and China more likely, but not because of an abstract competition for hegemony. Rather, the source of instability is how the rise of China has affected the delicate balance in the Washington-Taipei-Beijing strategic triangle, which has no analogue in Thucydides. The United States’ One-China policy, which has served as the basis of stability in both U.S.-China relations and cross-strait relations, was not formulated at a time when the United States expected long-term trends in economic development to heavily favor Beijing over Taipei. It is now becoming apparent that the One-China policy is vulnerable to structural pressure. Beijing’s growing economic and military power has resulted in a growing threat to Taipei, which, in turn, has led the United States to affirm its commitment to Taiwan’s security in ways that are inconsistent with the One-China policy. The language of the 2018 Taiwan Travel Act implies (though it does not explicitly state) that the United States now considers Taiwan to be a country, which is at odds with the traditional U.S. position that the status of Taiwan is undetermined. If this trend continues, it will increase the likelihood of instability across the Taiwan Strait and raise the potential for a military confrontation between the United States and the People’s Republic of China.