The Risk of Appeasement to Relative Power

In late 1938 Europe stood on the brink of war. British Prime Minister Neville Chamberlain received a hero’s welcome on his return from Munich. His efforts to save the peace in Europe were greeted by fanfare and relief. Intent on preserving peace in Europe, Chamberlain had made all allowable concessions to Hitler. He was convinced that the United States was unreliable, France was weak, and the British army could not undertake operations on the continent. He and many others believed that the First World War had occurred because European leaders had not taken all possible steps to maintain the peace and avoid war. He feared that another war would subordinate Britain to the United States. Above all, he sincerely believed Hitler’s protestations of peaceful intent.

It was a division of responses from Western powers to the German challenge that caused a failure of the post-Versailles international system during the 1920s and 1930s. The policy of appeasement; making concessions to competitors in order to avoid conflict, led the world to war.

Hitler concluded from the Munich Conference that the Western powers were weak and lacked the will to fight. Stalin also concluded that the West was weak. He was angry that the Soviet Union had been excluded from the Munich conference and was convinced that the West sought to channel Nazi expansionism eastward.

On the 1st of September 1939, Germany invaded Poland and the rest is history.

It is now 2019 and the Indo-Pacific potentially stands on the brink of war. Economic competition and the race for influence over the region is getting closer to breaking through the conflict threshold. Major powers are seeking to tip the balance of relative power in their favour. Australia has a front row seat to the action and is carefully managing her relationships in order to continue ‘pursuing national interests’ through these turbulent times. But the overwhelming tendency for Australia and its allies seems to be to focus on their own growth and cooperation, rather than to undermine their competitors.

The thing about relative economic power is that if your competitor continues to grow at a greater rate than you do, then your power is actually in decline.

There are only two ways to enhance relative economic power. First, you can outperform your competitors; grow at a greater rate than they do. Second, you can ensure that your competitor’s power declines at a greater rate than your own. Of course, you could do both simultaneously; further enhancing your own relative growth. A policy of appeasement achieves neither.

For example, if Pepsi’s market share of the cola industry has a sudden spike in growth, you can bet that Coca-Cola is going to do something about it, even if it costs them in terms of real growth. A policy of simply putting up with Pepsi’s growth in order to focus on internal business processes is of little use unless it’s combined with an anti-Pepsi campaign. Some would argue that so long as Pepsi and Coca-Cola are making more profit than they did previously, then there is no need for conflict. But unfortunately those fantasies don’t hold together long when Pepsi conducts an invasion of Coca-Cola with 141 Armoured Divisions.

There is no evidence to suggest that Australia or her allies have been successful in competing for economic ‘market share’ against other significant regional powers over the last 20 years. Although it has been a peaceful affair, the rise of major Asian powers could be better explained in relative terms as a decline of Australian power. I accept, of course, that there are numerous metrics to measure economic growth and that current glide paths of growth are not a reliable indicator for the future.

One thing is certain; the consequences related to the risk of appeasement are far greater that the consequences associated with significant competition, or even conflict, with our competitors

Cooperation is a wonderful pursuit, but if we assume the retention of state sovereignty in future the bottom line remains that we will ultimately either have more or less market share than others – regardless of whether they are friends or foes.

Seeking to save the peace while our competitors power continues to grow is simply creating a bigger problem for the future. Australia would do well to be cautious not to believe our competitors protestations of peaceful intent in the same way that Chamberlin did. Both the statesmen and the generals of the future will surely thank us for doing everything possible to enhance our relative power now.