In their new article, Doron Ella and Galia Press Barnathan examine the connection between great power rivalries and international institutions, focusing on how great powers use institutional deals to coopt rising powers. Specifically, the article analyzes US-China relations within the context of development finance institutions. The analysis suggests that these relations are anchored in an early cooptation deal, made when the US coopted China into the World Bank, granting it significant benefits and a seat at the table. In return, China supported the US-led liberal international order. This deal set the stage for ongoing Sino-American relations in development finance, alongside other issue-areas, including security.
The article explores the impact of changing power disparities and the evolution of institutional structures on this original deal. It identifies two main pressures threatening the stability of the deal: China’s growing expectations for a better deal reflecting its increased power and the US’s concerns over intensifying rivalry, and changes in the institutional environment, such as the establishment of new multilateral development banks and China’s improved position in these banks. These changes offer China new avenues to influence and renegotiate the original cooptation deal. Overall, the article argues that the increasing complexity of the development finance regime complex provides states with new strategies to advance their goals, likely destabilizing earlier cooptation deals. Understanding these dynamics is crucial for grasping both the historical and future trajectory of US-China relations.
To demonstrate this interplay between the power distribution and the nature of great power rivalry, and the evolving structure of the regime complex, we trace the changing relations between the US and China across three periods.
Phase One: The Cold War
From its inception, throughout the Cold War, the cooptation deal between the US and China remained stable since China had no suitable outside options for alternative development finance other than the World Bank. Additionally, the power asymmetry between China and the US was rather wide, and China perceived its privileges in the World Bank as adequate. During the Cold War, the US and the Soviet Union were in a midst of an intense great power rivalry, and the US benefited from having a former ally of the Soviet Union approaching the West and becoming a potential ally.
Phase Two: The Unipolar Moment through the Financial Crisis of 2008-09
After the fall of the Soviet Union in December 1991, great power rivalries seemed to have receded before a new rivalry would emerge in the following decade between the US and China. During the 1990s and 2000s China had increasingly integrated into the US-led liberal international order and its economic interests slowly converged with those of the liberal West. Yet, by the second decade of the 21st century the cooptation deal between China and the US within the World Bank had started to show signs of destabilization. This had happened due to two main reasons: 1. As China become stronger and richer, it started perceiving its current privileges in the World Bank as inadequate, and especially in relation to the moral and material support it had given the Bank. 2. As China joined other multilateral development banks, its outside options have increased, offering China new opportunities to gain similar or even better privileges in those banks, and also grant its increasingly important support to these institutions, improving its position as a significant actor in development finance. As a result, China started to undercut the influence of the World Bank in an attempt to gain negotiation leverage that will pressure the US into granting it a better deal, which will reflect its growing power and status. In China’s perception, a better deal should mainly include structural reforms within the World Bank. Such reforms will grant China, and other developing countries, more voting power, as well as reflect its own norms and principles, rather than exclusively rely on those of the liberal West. However, in the second phase, China was still not able to gain additional leverage in its negotiations for a better deal since the World Bank remained the most important institution in development finance, and China’s increasing participation in other Banks was not enough to meaningfully undermine the deal.
Phase Three: The Establishment of the Asian Infrastructure Investment Bank (AIIB) in 2015 and onward
The third phase is marked by the establishment of the AIIB in 2015 – a regional multilateral development bank created and dominated by China as its most influential member. Scholars generally agree that China established the AIIB in light of its frustration with American reluctance to grant it with more power over decision-making in the World Bank, among other international institutions. Therefore, China decided to establish its own Bank that could, in the future, compete with the World Bank and other financial institutions. By doing that, China believed it could increase its negotiation leverage in the World Bank, while also offer its own cooptation deals to other states, whether they are developing or developed, via the AIIB, resulting in further destabilization of its original cooptation deal within the World Bank.
Where do we go from here?
The unraveling of this cooptation deal, which is still at the core of China’s engagement with the World Bank and the US, is daunting because it will imply the demise of an important component holding together and constraining this intense great power rivalry. Indeed, we trace the growing Chinese rhetorical expressions of dissatisfaction with the current deal and suggest that these offer worrying signs of destabilization. At the same time, however, one may argue that the fact that the intensifying rivalry between the two states is taking place within a dense institutional environment, while generating instability within the institutional complex, also helps to manage this rivalry and contain it, and reduces the danger of escalation to violence.
Contemporary Security Policy has published a special issue on The Transformation of Targeted Killing and International Order edited by Martin Senn and Jodok Troy.
Forum: African security
In September 2016, Stephan Frühling and Andrew O’Neil submitted a manuscript to Contemporary Security Policy entitled “
