Academic journal article Political Research Quarterly

Outside Options and Burden Sharing in Nonbinding Alliances

Academic journal article Political Research Quarterly

Outside Options and Burden Sharing in Nonbinding Alliances

Article excerpt

The authors develop a model of alliances with outside options to study burden sharing in nonbinding alliance agreements. The analysis provides an explanation for the variation in ally contributions to NATO over time and why the post-Cold War period has seen an increase in the use of coalitions of the willing. Additionally, the analysis reveals something of an initiator's disadvantage in burden sharing-the initiator of an alliance action pays a disproportionate cost of the military burden. The authors' argument provides an alternative explanation for why the United States has been consistently the largest contributor to NATO.

Keywords: alliances; political economy

(ProQuest: ... denotes formulae omitted.)

In 1981, the U.S. Congress included in its annual Defense Authorization Act a call for U.S. allies to increase their contribution to the common defense. Since then, the secretary of defense has provided an annual report that describes disparities between the United States and ally contributions to various joint security endeavors and proposes policies aimed at eliminating inequalities. Such concerns about burden sharing have never gone away from American foreign policy debate and are reflected in voluminous scholarly work on alliances.

The starting point for much of the literature on the economics of alliances is Olson and Zeckhauser's (1966) An Economic Theory of Alliances. Olson and Zeckhauser argue that to understand alliance behavior, we must begin with a recognition of its purpose. Alliances coordinate offensive policies, such as wars or peacekeeping, or encourage collaboration to protect the members from aggression by a common enemy. Olson and Zeckhauser suggest that the common interest, which defines the alliance relationship, imbues such an agreement with the characteristics of a collective good. Note that Olson and Zeckhauser's collective good is similar to but not the same as a public good. Collective goods are closely related to club goods. That is, goods that are nonrival but excludable for nonclub or nonalliance members. For consistency, however, we use the collective good rather than club good terminology.1 Applying the logic of collective goods to alliances, Olson and Zeckhauser find that the level of contribution of any member depends on its relative size. That is, larger and richer members tend to contribute more to joint pursuits, while smaller and poorer members contribute less, thus creating disproportionate defense burdens.

The economic theory of alliances, however, leaves unexplained three empirical puzzles. First, while the theory explains some alliance behavior, such as NATO burden sharing in the 1950s and 1960s, it does not explain well the distribution of military burdens in pre-Cold War alliances, such as the Triple Alliance and Triple Entente just prior to World War I. In these cases, the wealthier Great Britain and Germany contributed less than the poorer Austria-Hungary and Russia. The Anglo-French Treaty is a similar counterexample from the interwar period. This alliance was based on a mutual recognition by Great Britain and France that their fates were closely connected to defending the Rhine, but throughout most of the interwar years, the French bore most of the burden defending it. Second, the economic theory of alliances struggles to explain the change in non-U.S. NATO spending in the 1970s and 1980s. In the 1970s, U.S. NATO spending went down with détente, but non-U.S. NATO spending increased. By 1980, the old pattern of higher U.S. burdens was reestablished. Finally, in the post-Cold War era, there has been another disproportionate change in burden sharing within NATO, with European countries decreasing defense spending and contributions to NATO activities in larger proportions than the United States.

These puzzles have led to a significant literature that generalizes and extends Olson and Zeckhauser's (1966) basic economic theory of alliances. …

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