The rise of transactionalism and how middle powers might reverse it

A coalition of middle powers, similar to the NAM, may be the only viable path to reviving collective action on global challenges

International affairs scholars describe the foreign policy behaviour of nations in the present era as being “transactionalist”. This reflects the erosion of the rules-based international order that was the legacy of the post-Second World War period. 

This order, for all its shortcomings and inequities, enjoyed a high degree of international consensus. It was underpinned by empowered international institutions such as the United Nations, as well as participation in multilateral processes to deal with issues that had cross-national and cross-domain consequences.  

There was sanctity attached to the corpus of international law, developed in stages since the 17th century. Bilateral relations between states remained the primary equation but they would be pursued within the overall context of an ordered political environment. Power had to be balanced with legitimacy. Under a transactional approach to international relations, power itself becomes the source of legitimacy and is not constrained by it.  

Under transactionalism, primacy is accorded to bilateral dealmaking, where leverage is direct and outcomes immediate, visible and tangible. There is an insistence on reciprocity, and concessions are contingent and conditional. In multilateral settings, outcomes may be diffused, benefits may be socialised and spread over a longer-term.  

Even if multilateral forums survive and nations gather to negotiate on global issues such as climate change or cybersecurity, the dynamics are different. These forums are no longer the setting for achieving collaborative outcomes. They have instead become platforms for geopolitical contestation. If each country has a transactional brief, which is to give as little as possible and extract as much as possible at the expense of others, then the result is inevitably the least common denominator. Multilateralism demands a shared sense of common humanity and international solidarity. Transactionalism considers these as dispensable constraints on the pursuit of national interests.  

Another feature of transactionalism is the premium it puts on agility and speed in the conduct of inter-state relations. Swiftness of reaction to an international event takes precedence over a more deliberative and carefully considered response. This is because social media has shrunk political time horizons and, like in business decisions, competitors must be bested in the geopolitical stakes. Diplomacy itself has adopted the language of the marketplace, setting out assets and liabilities in a national balance-sheet. Some scholars term this the commodification of the state.  

Transactionalism is often associated with a leader-driven foreign policy whose priority is domestic political power. While domestic politics will always influence foreign policy, under transactionalism, foreign policy often becomes an instrument in domestic politics. Thus, creating a larger-than-life persona of the leader internationally may become an important objective of foreign policy, unrelated to the pursuit of any national interest. 

This is manifest in its most acute form in  Donald Trump’s America but is by no means confined to it. There is a profound contradiction at the very heart of global governance. We are living in an era when the salience of cross-cutting, cross-national issues with a global dimension has increased significantly. We confront a global challenge in climate change. We have witnessed the human toll taken by the Covid-19 pandemic, which recognised no national or regional boundaries. Vaccine nationalism was a manifestation of transactionalism, a refusal to acknowledge that no one was safe unless everyone was safe. 

Cybersecurity is likewise a global challenge and only international collaboration could put guardrails on artificial intelligence, which may upend life as we know it. These are truly global challenges that can only be tackled through global, collaborative responses. Precisely at a time when there is the most pressing need for empowered international institutions and effective multilateral processes to deliver such responses, the world is moving in the reverse direction.  

What explains this contradiction? Is it a failure of understanding among political leaders and policymakers or are there deeper structural forces at work that override acknowledgement, at a rational level, of the compulsion of collective and coordinated action?  

At the macro level, most political leaders recognise the logic of such policy action, but there are incentives at the micro level that pull them in the reverse direction. Climate change, pandemic preparedness and cyber resilience operate on a longer time horizon than the domestic political cycle. A leader who sacrifices political capital to serve longer term global objectives is often punished by electorates whose time horizons are the near and the now. What should have been a race to deal with such global challenges through collective action based on equitable burden sharing has instead become an exercise in burden-shifting. This burden-shifting is self-defeating transactionalism. 

Is there a likelihood that some loose coalition of middle powers could bring attention back to what in reality is a challenge of the global commons and lead action through a renewed sense of solidarity and global responsibility? They have greater agency in global forums and much to lose in an order-less world. One usually thinks of the large emerging economies of the Global South as middle powers, and this may include India, Indonesia, Brazil, South Africa, Egypt and eventually Iran. However, with the fragmentation of the United States-led Western alliance, even European powers like France and Germany, and Canada and Mexico in the Americas are pursuing strategic autonomy. Japan and South Korea are also feeling untethered.  

This is potentially a group of countries that could together craft an international movement that engenders a sense of international solidarity and leads common action that eventually gathers momentum.  

We must wait and see whether being part of a multinational or bilateral military alliance even in its diminished form would still constrain their freedom of action. One cannot expect the prevailing grip of transactionalism to give way to a different, more positive set of norms unless a critical number of influential powers take the lead. But a middle power with a degree of credibility will have to convene such a coalition. India could be that power, but it would have to consciously move away from the transactional leanings of its foreign policy.  

There is a historical parallel in the Non-Aligned Movement during the Cold War, when a group of newly independent and decolonised countries tried to carve out an independent space to safeguard and promote their interests in a polarised geopolitical landscape not dissimilar to our current, disorderly and dangerous world. 

In any event, transactionalism is the path to a dead end in a world so densely inter-connected and interdependent.

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The author is a former foreign secretary