(Note to readers: this post has been updated as it reflects my deeper engagement with the subject within the confines of a short blog post. It may seem academic but I post it here as a first swipe at an extremely policy-relevant subject).
We are living in an international transitional moment. Transitional moments are the periods of time that occur during the change from one status quo to another. Transitional moments are, by definition, one of flux where outcomes are uncertain. Even if attempts are made to “manage” the transition, the outcome is more likely than not to be different than what was envisioned by the “managers” when the process began. This is as true for national regime change as it is for international regime change. Consider the leadership succession process in North Korea that I mentioned in a previous post–whatever the desires of the contending elites, it is likely that none of them will get exactly what they want. Or consider the post 1990 US attempts to remake the global community in its preferred image. Moreover, most transitional moments are not managed. Instead they happen, punctuated by critical choices (including paths and actions not taken), tipping points and precipitating events, all of which steer an uncertain course to an unknown outcome that cannot be determined apriori. It is only after the fact that the fluid dynamics of the shift from one status quo to another can be discerned.
As such transitional moments are inherently uncertain. What is the best defense against uncertainty? Hedging. Hedging is the practice of keeping one’s options open and balancing strategic choices until such a time as the new status quo is apparent. Hedging is more than fence-straddling, although that is one strategic option. The point is that hedging plays a vital role in transitional moments and has several modalities.
The transitional international system that began its life in 1990 is characterised by three dimensions of change. On an economic level it has seen the shift from state-centred economics to market-driven economics to, most recently as a result of the failure of largely unregulated financial systems, Â a move towards increased state oversight of national macroeconomic management within a larger system of international exchange and trade. On the security dimension it has seen a shift from notions of conventional collective security amongst states to multinational cooperative security back to a asymmetric and unconventional collective security between states and non-state actors. On a systemic level it has moved from a bipolar balance of power to a unipolar world to an emerging multipolar balance of power led by the so-called “BRIC” nations and in which US preeminence is being challenged on a number of fronts.
The response to these multidimensional changes has come in the form of broad acceptance of hedging strategies as a nation’s best option. It is largely true of small and medium strength states given the power asymmetries between them and the bigger global players. But large powers also hedge, albeit in different ways than their weaker counterparts. Thus, while the preeminent strategic role of hedging is universal in the transitional international system, its specific modalities differ amongst states depending on the specific attributes, location and power capabilities. What works as a hedging strategy for Peru or South Africa may not be appropriate for Viet Nam or New Zealand. Let me give some examples of the variance using the concept of a “horizontal” Asia as a case sample (“horizontal Asia” refers to a geopolitical view of Asia as extending from the Western Pacific to Western India, south to Australia and New Zealand and North to Siberia).
One hedging strategy is power maximisation and internal (regional) balancing. States seek to maximise their power projection capabilities in order to ward off hostile intent. However, the quest for power maximisation leads to a security dilemma whereby one state’s move to acquire more power (usually by improving its military capabilities) leads neighbouring states to fear its intentions and arm themselves in response. That leads to arms races and the possibility of unanticipated conflicts due to misperception or inadvertent offense, particularly in regions with simmering border disputes and lacking in collective security institutions focused on conflict resolution. That is exactly the case with Southeast Asia at the moment, where most states are spending more than 3 percent of GDP on weapons upgrading amid ongoing territorial conflicts (including in the South China Sea) that have not been mitigated by the presence of multinational forums like ASEAN. In this instance what is individually rational as a hedging response to an uncertain and insecure security environment is collective suboptimal because it increases rather than lessens the possibility of regional conflict.
Another hedging strategy is to engage in hard (re)alingment or bandwagoning with a more powerful state or states (alignment is with one state, bandwagoning is with a number of states on specific issues). The (re) alignment strategy sees weaker states align themselves more firmly with a new or traditional stronger partner, under the assumption that an alliance with a stronger actor will dissuade potential aggressors from pressing the advantage in a regional context. This strategy has been used by Bangladesh, the Phillippines and Indonesia among others. The bandwagoning strategy is designed to combine forces with other like-minded states on given issues such as trade or diplomatic approach as a type of “force multiplier” or megaphone for a specific national interest. Brunei’s approach to trade is an example of the latter.
Then there are hybrid hedging strategies. Countries may develop economic linkages to one state or group of states while pursuing military alignments with others. New Zealand is a case in point in that it has shifted its trading focus to non-Western regions while maintaining (and under National, strengthening) defense and security ties to its traditional patrons in the West (although the priority has shifted from reliance on the UK to reliance on Australia and the US in the first instance). Another hybrid strategy is to go for power maximisation and hard (re) alignment. This is arguably what has happened with Australia, Japan, Singapore, Thailand, Taiwan, Viet Nam (in the case of alignment with the US) and Burma, Laos and North Korea (in the case of alignment with the PRC).
Another hedging option is to play non-aligned or to engage in issue-balancing (where a nation’s stance on any given issue is driven by immediate strategic priorities rather than broader commitments). This strategy usually can only be played by countries with significant resource bases such as India and Russia today (and indeed, both of these nations are playing the issue-balancing strategy).
A less used by nevertheless feasible hedging option is to place priority on international or regional institution-building in the area of conflict resolution and defense and security relations. By being vehicles of first recourse when it comes to resolving potentially armed disputes, such institutions act as collectively self-limiting agencies. Although much has been said about moving forward on institutionalising regional security-building projects (such as at the annual Shangri-La Dialogue attended by Defense Ministers from the Asia-Pacific region), little concrete work has been done in Asia to date in translating the high-minded words into action.
Great powers such as the PRC and the US also hedge, but on a grander scale. The PRC has expanded its diplomatic and economic reach into Sub-Saharan Africa and the South Pacific as a means of filling the power vacuum left by US disinterest. It has begun to assert a stronger military presence in the Western Pacific region while at the same time trying to gain diplomatic leverage via multilateral fora, particularly in South Asia. Seeing that its hard power has limited utility and generates so-called “blowback,” the US is attempting to use trade negotiations as a strategic wedge against Chinese expansion (primarily via investment) in the Pacific Rim. Current negotiations over expanding the Transpacific Partnership (TPP, which includes Brunei, Chile, New Zealand and Singapore) to include Australia, Viet Nam Peru and the US are being used by the US as a strategic hedge rather than out of an interest in trade per se.
Needless to say there are more types of strategic hedging. The larger point is that in times of international transition and uncertainty, hedging becomes the most dominant geo-strategic approach adopted by nation-states as well as many non-state actors. If successful, a hedging strategy may turn into a longer term foreign policy stance, depending on the nature of the emerging international status quo. But successful or not, hedging is an immediate solution to a temporary problem born of the uncertainty of transitional moment. Â It is not a long-term strategy of itself.
Like longer term perspectives, hedging strategies may be based on principle, realpolitik or some combination thereof.  However, they may not always result in a more secure geopolitical environment, especially when allies and adversaries see them for what they are and respond in non-cooperative or incongruous ways. Counterpoised hedging strategies can lead to increased rather than diminished conflict, and this is exactly the conundrum of “horizontal” Asia at the  moment. Which is precisely why the role and modalities of hedging during times of international flux need to be understood by policy-makers and the informed public alike.
