| Review of: |
Economic Instruments of Security Policy: Influencing Choices of Leaders by Gary M. Shiffman
Palgrave MacMillan, Basingstoke, UK, 2006
Pages: 256. $75.00 |
| Reviewed By: |
Kimberly Ann Elliott |
| Reviewed in: |
International Studies Review |
| Date accepted online: |
10/04/2008 |
| Published in print: |
Volume 09, Issue 02, Pages 280-282 |
Reining in Rogues: The Role of Economic Tools
Despite the slim size of Economic Instruments of Security Policy, Gary Shiffman promises readers that he will undertake a "thorough examination" of (1) basic economic behavior at the level of the individual; (2) decision making under different political systems; and (3) the utility of a range of economic tools in promoting national security. Shiffman's basic theses are that individuals, not states, make decisions, that dictators behave differently than democrats, and that economic tools can be used to promote national security by influencing those individuals.
Each of these elements is discussed separately. Unfortunately, Shiffman's efforts to connect them in a coherent and systematic way are largely unsuccessful. Economic Instruments of Security Policy reads like a series of loosely connected university lectures, which Shiffman says was in fact the genesis for the project. As one would expect under these circumstances, Shiffman draws selectively on the existing literature in various areas and breaks little new ground. As a result, undergraduate college students interested in international economic policy are the book's most likely audience, not the policymakers that Shiffman seeks to reach.
The effort to stitch together and amplify a series of lectures on international trade and finance also results in a confusing structure. Shiffman begins Economic Instruments of Security Policy with brief chapters discussing the economic behavior of the individual and various types of autocracies. He then jumps to a case study of Cuba that combines an application of his model for predicting the behavior of dictators with a truncated summary of the literature on economic sanctions. Shiffman then jumps back to "principles for policy," before getting to the analysis of decision making in democracies, with a focus on trade policy. The combined discussion of democratic decision making and trade as a tool is followed by chapters on the financial instruments that Shiffman believes could be useful in advancing a nation's security. Even Shiffman seems to have been undecided about how to structure the first part of the book, given that the end of Chapter 4, on principles for policy, refers to Chapters 2 and 3 (on modeling dictators and sanctions) as though they are upcoming rather than just past.
The principles that Shiffman discusses are generally sound as elements of a framework for analyzing the utility of economic leverage. They underline the importance of understanding opportunity costs and incentives, the role of information in perceptions about incentives, and the subjectivity involved in assessing various alternative policy responses. But they are also not very original. In the introduction, Shiffman promises a "new approach," but, in fact, he draws selectively on existing literatures related to the economics of dictators, bargaining, sanctions, and the political economy of US trade policy without ever finding a way to integrate them systematically or coherently.
The first four chapters of Economic Instruments of Security Policy are grouped as Part I and appear to be intended to set the analytical framework for the chapters on economic instruments that follow in Part II. But then Chapter 5 begins with a discussion of trade policy decision making in the United States that would appear to fit better in the framework-setting section of the book. The analytical section of the chapter is followed by illustrations from US experience showing how trade policy can be used to influence other countries. However, the discussion makes no clear distinction between cases with clear links to foreign policy and those that involve more mundane commercial policies. Moreover, the analysis of trade as a tool is incomplete because it ignores the international institutional environment within which US trade policy is embedded, which many would argue constrains policymakers' freedom of action. For example, in their final chapter, Thomas Bayard and Kimberly Ann Elliott (1994) discuss how the creation of the World Trade Organization has affected the costs and benefits that US policymakers face when using trade threats and sanctions. These potential constraints have arguably become even more important since China joined the World Trade Organization in 2001.
In reality, the chapter on trade, along with the three that follow (which describe the basics of money and inflation, exchange rates, and international lending and investment, respectively) do little more than describe in simple terms how these economic instruments provide potential leverage over other countries. But little effort is made to link these chapters back to the earlier discussion of sanctions. In part, this appears to be because Shiffman wants to explore how economic relations can be used as positive incentives to influence foreign governments as well as how they create diffuse leverage. But this goal is never explicitly explained. Often, the links between the discussion of these core economic instruments and how they can serve national security are weak at best. Moreover, the economic and other costs of using these tools for security purposes are given short shrift. For example, unilateral US controls on exports of dual-use technologies disadvantage US firms in international markets. Recent actions against Iranian banks and a Macau bank holding North Korean assets could also discourage foreigners from investing in US financial markets. (For an analysis of some of these costs during the Cold War, see Richardson 1993; more recent examples can be found at http://www.usaengage.org, a business coalition advocating reform of US sanctions policy.)
Shiffman uses the last three chapters of the book to focus on economic tools that might be used to address the national security threats posed by terrorism. He begins with a detour into the economic growth literature to argue that poverty eradication contributes to national security. Yet, even though aid is presumably a key tool available to policymakers to address economic growth and poverty, the chapter largely ignores the vast literature on aid effectiveness. A brief discussion focuses on the Bush Administration's Millenium Challenge Account aid initiative, but this program is much too new to allow analysts to draw firm conclusions, as Shiffman notes. (For a taste of the provocative and wide ranging views on this issue, see Easterly 2002; Clemens, Radelet, and Bhavnani 2004; Sachs 2004; and Radelet 2006. For analysis of the early experience with the Millenium Challenge Account, see the MCA Monitor on the Center for Global Development website at http://www.cgdev.org/section/initiatives/_active/mcamonitor.)
Shiffman follows this general discussion with two chapters on recent policies aimed at blocking financing for terrorist organizations and at imposing costs on governments supporting terrorism by allowing victims or their families to sue for compensation. The latter chapter is a prominent example of Shiffman's repeated failure to fully analyze the potential costs as well as benefits of using these economic tools. He writes approvingly of allowing individual victims or family members to sue in US courts for compensation for losses due to acts of terrorism, drawing on financial assets or other property blocked by US authorities as part of sanctions programs against, for example, Cuba and Iran. He argues that this imposes a cost on the regimes in these countries that might cause them to change their behavior. But little evidence of such changes in behavior is presented, and a more thorough analysis of the incentives facing various parties in these cases would help explain why. The target country's immediate access to the blocked assets is unchanged by using some for compensation, so no new cost is created. On the other hand, redistribution of these assets means that they are no longer available to the government to use as a carrot when negotiating with the target regime to resolve disputes.
In sum, undergraduate students may find Economic Instruments of Security Policy a useful introduction to selected international economic issues. However, policymakers and scholars will find little here that is new. Many readers are also likely to be frustrated by the confusing organization and the simplistic nature of much of the analysis.
