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Why do states sometimes discriminate in favor of certain states and at other times choose to pursue nondiscriminatory policies? In answering these questions, Lars S. Skålnes stresses the international political importance of foreign economic policy, arguing that trade, foreign investment, and foreign aid policies are strategic instruments great powers use to manage political and military relations with allies and adversaries.
Skålnes explains changes in foreign economic policy in terms of shifting strategic assessments regarding the importance of military support from allies. When states need military support from their allies to meet threats to their security, they will adopt discriminatory foreign economic policies in an attempt to strengthen alliance relations. When states can go it alone without military support, by contrast, they will not pursue foreign economic policies that discriminate in favor of either allies or other countries. Discriminatory policies, Skalnes argues, are important strategic instruments for several reasons. First, they can be used to tie countries to a military alliance. Second, they are useful as signals of intention. Third, discriminatory policies may strengthen an ally militarily by increasing the economic resources available for military purposes.
Skålnes provides detailed accounts of the grand strategies of Germany (1879-1914), France (1887-1914), Great Britain (1919-1939), and the United States (1945-1967).
Politics, Markets, and Grand Strategy will be important reading for scholars and students in the fields of national security studies, international political economy, and economic history, and to economists working on problems associated with foreign investment and trade generally and customs union theory and discriminatory trade agreements specifically.