Thursday, January 26, 2017

History of Trade and Peace

Apparently there is a thing called Capitalist Peace Theory, drawing on the insight that nations with substantial ties of mutual trade and investment tend not to go to war with each other. The classic summary, I guess, is "No two countries with McDonald's outlets have ever gone to war"  -- a maxim since disproved (Russia/Ukraine comes to mind), but still with a certain appeal.

In the current Policy Options, Andrew Smith argues that an early version of capitalist peace was established between two potential adversaries, the United States and Canada, in the immediate post-confederation years, when Canada opted for harmonious trade relations with the United States rather than a massive military buildup for defensive purposes.
Eliminating border defences made Canada more rather than less safe. In the four decades after Confederation, pressure from business leaders and other taxpayers kept the federal government from creating a substantial military.
Smith draws a contemporary lesson from the confederation-era example. Trade can still avert conflict
 First, trade deals with potential adversary nations should be prioritized. The recently concluded trade deal between Canada and the EU will bring certain economic benefits, but it is probably superfluous from a human security point of view, since war between Canada and the EU is already most unlikely. In contrast, investing Canada’s limited diplomatic resources in reaching agreements with Asian nations, particularly China, could help to build peace by promoting commercial and social exchanges with these countries.
Well, maybe.  As it happens, I have recently been reading Bill Browder's bestselling memoir Red Notice. Browder is the American investment dealer who founded Hermitage Capital to invest in the Russian economy after the collapse of the Soviet Union, and then had the whole thing stolen from him by Russian state thieves under the close protection of Vladimir Putin. In the aftermath, Sergei Magnitski, the Moscow lawyer Browder hired to represent his surviving interests, was jailed and beaten to death, provoking an early round of sanctions against Russia by Western powers.

There was, let us say, a whole lot of cultural and political congruence providing a strong basis for harmonious trade relations between the United States and Canada around 1870. It may be a bit more of a stretch to assume that trade will as easily soothe the authoritarian kleptocrats in China, or for that matter, Saudi Arabia. Maybe even the new Fortress America....

BTW, Browder is either a capitalist who can tell a story, or he has a craftsman ghostwriter who knows the craft.  Red Notice reads easy, and has a hell of a story.

Update, January 29: Andrew Smith replies:
Red Notice is a great book. The case of Putin certainly illustrates the limits of the peace through trade theory, but there are many softer authoritarian regimes to which it applies. Certainly the business community in Iran pushed the regime there to accept Obama's nuclear weapons deal and Western business interests that favour the deal appear to be trying to restrain Trump... not with much success yet though!
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