Economic Ties Among Nations Spur Peace. Or Do They?

on Mar5
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Russia’s war in Ukraine is not only reshaping the strategic and political order in Europe, it is also upending long-held assumptions about the intricate connections that are a signature of the global economy.

Millions of times a day, far-flung exchanges of money and goods crisscross land borders and oceans, creating enormous wealth, however unequally distributed. But those connections have also exposed economies to financial upheaval and crippling shortages when the flows are interrupted.

The snarled supply lines and shortfalls caused by the pandemic created a wide awareness of these vulnerabilities. Now, the invasion has delivered a bracing new spur to governments in Europe and elsewhere to reassess how to balance the desire for efficiency and growth with the need for self-sufficiency and national security.

And it is calling into question a tenet of liberal capitalism — that shared economic interests help prevent military conflicts.

It is an idea that stretches back over the centuries and has been endorsed by romantic idealists and steely realists. The philosophers John Stuart Mill and Immanuel Kant wrote about it in treatises. The British politicians Richard Cobden and John Bright invoked it in the 19th century to repeal the protectionist Corn Laws, the tariffs and restrictions imposed on imported grains that shielded landowners from competition and stifled free trade.

Later, Norman Angell was awarded the Nobel Peace Prize for writing that world leaders were under “A Great Illusion” that armed conflict and conquest would bring greater wealth. During the Cold War, it was an element of the rationale for détente with the Soviet Union — to, as Henry Kissinger said, “create links that will provide incentive for moderation.”

There are good reasons for the European Union to believe that economic ties would bind potential combatants more closely together, said Richard Haass, president of the Council on Foreign Relations. The proof was the European Union itself. The organization’s roots go back to the creation after World War II of the European Coal and Steel Community, a pact among six nations meant to avert conflict by pooling control of these two essential commodities.

“The idea was that if you knit together the French and German economies, they wouldn’t be able to go to war,” Mr. Haass said. The aim was to prevent World War III.

Scholars have attempted to prove that the theory worked in the real world — studying tens of thousands of trade relations and military conflicts over several decades — and have come to different conclusions.

In terms of the current crisis, Mr. Haass argued, in some ways the economic benefits were not mutual enough. “The Germans needed Russian gas much more than Russia needs exports, because they can make up for lost revenue with higher prices,” he said.

“That’s where Europe handled the relationship all wrong,” Mr. Haass added. “The leverage wasn’t reciprocal.”

Despite its huge land mass, nuclear arsenal and energy exports, Russia is otherwise relatively insulated from the global economy, accounting for 1.7 percent of global output. And since Russia’s invasion of Crimea in 2014, Mr. Putin has moved to isolate the economy even more to protect against retaliation.

Adam Posen, president of the Peterson Institute for International Economics, said that the willingness to impose such devastating sanctions against Russia may point to the flaw in that strategy. If Russia’s financial system was more integrated with those of the allies, they might have been more hesitant to take measures that could provoke a financial crisis.

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