Free Trade

Free Trade Still Promotes Peace, Despite Putin's Reckless War

‘Peace through commerce’ didn’t prevent war in Ukraine, but that doesn’t mean the theory is invalid.

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Russian President Vladimir Putin has not just destroyed the international order and tens of thousands of lives, he has also damaged one of the most sacred classical liberal beliefs: Trade fosters peace. It's nearly canon that "if goods don't cross borders, soldiers will," but now it seems that they are perfectly capable of moving in tandem.

In a Bloomberg opinion piece, John Micklethwait and Adrian Wooldridge mock Norman Angell's 1910 book The Great Illusion, which "argued that war was impossible given the interconnectedness of the world." Yet today, Micklethwait and Wooldridge write, "the Capitalist Grand Illusion is under assault in Kyiv — just as Norman Angell's version was machine-gunned on the Western Front."

In The New York Times, Paul Krugman similarly claims that Putin's invasion of Ukraine has exposed the illusory nature of the belief that "international trade would help lay the foundations for peace." On the contrary, by making democracies dependent on Russia's supply of energy, trade can be "a force for coercion, not peace." Immanuel Kant's hope that trade would usher in "perpetual peace" has perished in the suburbs outside Kyiv.

The theory of "peace through commerce" has been voiced by Enlightenment thinkers and classical liberals like Immanuel Kant, Montesquieu, Voltaire, Jeremy Bentham, Richard Cobden, Herbert Spencer, and Frédéric Bastiat, as well as modern peace activists and free traders like Norman Angell and Ludwig von Mises.

They witnessed borderlands where traders made secret peace agreements while their kings called for war. They observed that Jews, Christians, and Muslims negotiated peacefully at the London Stock Exchange and only applied the word infidel to those who went bankrupt. Some of them called the tendency of exchange to civilize people and moderate prejudice doux commerce (gentle commerce). Make money—not war.

These intellectuals proposed that international trade made it possible to get resources through nonaggressive means. Bentham and others focused on how countries' interests converge as they become economically interdependent, making the destruction of trade partners counterproductive. Some, like Spencer, discussed how growing middle classes and businesses engaged in peaceful, international exchange acted as counterweights to imperialists and arms suppliers. 

But none of these great thinkers believed that trade made war "impossible." 

The title of his 1795 essay "Perpetual Peace" might give the impression that Kant thought so, but he makes clear that the title is meant somewhat sarcastically. Rather, he writes that war is the natural state of mankind, and it would take heroic efforts just to reduce its ubiquity. Countries must use the spirit of commerce to undermine man's normal "state of war," but they also had to get rid of despots and develop republican institutions.

Angell, the English liberal Labour politician who admired John Stuart Mill and Spencer, had a similar view. Angell has gone down in history as a naive Edwardian writer who incomprehensibly ignored that the forces of death and destruction were amassing outside his window as he wrote. But that's the wrong interpretation of his work.

On the contrary, the whole starting point of Angell's book is the imminent risk of a savage war between Great Britain and Germany. His closing chapter does not express the joy in dancing your cares away but the fear that Europe's leaders would soon be "spilling oceans of blood, wasting mountains of treasure."

However, it's that reference to wasted mountains of treasure that summarizes his case. Angell didn't think that war was impossible, but that it was futile. It's illogical and uneconomical, even from the invader's perspective. In a modern, globalized economy, countries do not benefit from wars of conquest anymore. Countries don't grow richer just because they have more land or a bigger military. In fact, small, peaceful countries like Switzerland and Norway were richer than mighty empires like Britain and Germany, Angell pointed out.

War would be costly even for the aggressor. Integrated financial markets would unleash chaos back home. If you lay your neighbor in ruins, you also destroy your own suppliers and markets. As Mises put it, if the tailor goes to war against the baker, he must henceforth bake his own bread. There's a cheap way to satisfy the craving for another country's natural resources: Buy them.

Angell did not deny irrational national passions and the madness of leaders. The fact that Europe's leaders chose madness in 1914 did not refute his thesis. The fact that no one came out of the war in an improved state rather validates it.

What about the invasion of Ukraine? Does it refute this liberal peace theory? Well, the kind of exchanges in which Russia engages are not the types of free and open trade that enrich a broad segment of independent entrepreneurs. On the contrary, it is mostly trade in natural resources managed by monopolies, controlled by the government. The so-called oligarchs are not so much powerful business leaders as they are Putin's poodles, safe in their positions only as long as they fall in step and line his pockets.

Despite this, it seems like most Russian oligarchs and businesses were opposed, and remain opposed, to the war, even though they don't advertise it for obvious reasons. It doesn't take independent entrepreneurs to understand that upending the relationship with the West would be an economic disaster. An energy system that makes Germany dependent on Russian energy might be terrible for Germany, but it would be self-immolation for Russia to end it.

It seems like the really enthusiastic pro-war constituency in Russia (before February 24) was limited to one man, give or take. And that's precisely what Kant had in mind when he wrote that the spirit of commerce is not enough to deter the spirit of war, you also need republican institutions that channel that spirit and bind leaders.

In a despotic state, wrote Kant, thinking of all the Putin-like leaders of the late 18th century, the ruler is not affected by doux commerce. While the people suffer, "he goes on enjoying the delights of his table or sport, or of his pleasure palaces and gala days. He can therefore decide on war for the most trifling reasons, as if it were a kind of pleasure party."

This is a reason why Thomas Friedman's bastardized liberal peace theory—that countries with a McDonald's don't wage war on each other—has fared slightly less well. You can order a Big Mac without a side order of free markets and rule of law.

Invading Ukraine was not "genius" or "very smart" as former President Donald Trump has suggested. Even if the war wasn't such an utter humiliation for the Russian military, it's difficult to think of a scenario where it wouldn't have been much cheaper for Putin just to buy all of Ukraine's aluminum oxide and hot-rolled iron.

It was irrational and self-destructive and not much will be left of Russia and perhaps not even of Putin himself when this is over. But the fact that something is irrational and self-destructive does not preclude it from happening, especially not in a world of dictators surrounded by yes-men. It makes it less tempting, though, for most people, most of the time. That's the case the classical liberals made, and that case still stands.

We are in the longest stretch of peace between major powers for 1,800 years, the old archenemies France and Germany almost cozy up too much to one another, and Putin's invasion is the first attempt to launch a major war of conquest since Saddam Hussein invaded Kuwait in 1990. In a world where peace used to be just a brief interlude while everybody rearmed, something has gone right in the post–World War II era. If you want the whole story, read Steven Pinker's The Better Angels of Our Nature, but clearly doux commerce has something to do with it.

Proximity and interdependence are not always deterrents, especially if different groups share one pool of resources that they all want the largest share of. Additionally, not all cultures and communities are happily harmonious, and civil wars are often the most vicious. However, the general relationship between trade and peace is a strong one.

By analyzing thousands of country pairs over several decades, many researchers have found that increasing trade between two countries lowers the risk of war between them. They have also found that countries that are more dependent on international trade have fewer conflicts than self-reliant ones, which provides us all with a security interest in other countries' global integration as well.

It's not just trade though; it's free trade. A series of statistical analyses by the political scientist Patrick McDonald show that the level of free trade between two countries has a larger effect on peace. Countries that engage in free trade are less likely to attack or be attacked than protectionist countries. Free trade removes the barriers and privileges that enhance the domestic power of groups that generally support authoritarian leaders and an aggressive foreign policy.

It has long been known that democracies are more peaceful. According to McDonald's study, the risk of a war between two countries is reduced by almost 30 percent if they move from little democracy to the highest level of democracy. But in fact, liberal, capitalist peace is even more powerful than democratic peace. If two countries move to the highest level of free trade, the risk of war is reduced by as much as 70 percent. Forget about the golden arches, this is the real McDonald's theory of peace.

In an era of decoupling and trade wars, there are other authoritarian powers, like China, worth worrying about. It's not just current trade relations that inform decisions over war and peace but also expectations of future relations. The historical pattern is that countries that expect the international order will stay open mostly prefer to be at peace with it, to reap the rewards, but when they feel that it is closing time, they start fearing the loss of access to resources and markets. Some even go to war to secure them.

If authoritarians lose all commercial, cultural, and personal relationships with the outside world, they have nothing left to lose. They are suddenly free to act according to their own character. And that is scary.

If goods cross borders, it might not always stop soldiers from doing so. But if goods suddenly stop moving across borders, history suggests that soldiers won't be far behind.

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  1. Wondering. Are we to resume buying Russian oil? If not now, are we ever to resume trade with Russia? What if Putin kills off one third of the Ukrainian population and enslaves the rest?
    Any resumption of trade with Russia now will not only help fund the war, but probably will be seen by Putin as weakness and encourage him to look at other 'lost provinces.'

    1. I am staunchly free trade, but at the same time, staunchy anti-war. I say no trade with Russia until Putin is out of power.

      It's silly to close oneself off from the entirety of the world and pretend that isolationism is prosperity. But closing off trade with one solitary belligerent bully is not insensible.

      If I have a store that serves the whole community, except that one bully that I banned from my store because he wouldn't stop getting into fights with my customers, I am still a free marketplace.

      1. If I have a store that serves the whole community, except that one bully that I banned from my store because he wouldn't stop getting into fights with my customers, I am still a free marketplace.

        Interesting way to put it.

      2. If the government bans you from serving the bully, is that still free trade?

        1. No it's not, because it's no longer my choice.

          But it was an analogy to governments. Can a government restrict trade with a belligerent like Russia and still be considered a government that favors international trade? Yes. It's not free trade of course, because the government is still there micromanaging what the individual citizens can or cannot import from all the other countries, but at the analogy level it is like the shopkeeper.

      3. I am staunchly free trade, but at the same time, staunchy anti-war. I say no trade with Russia until Putin is out of power.

        The federal government does not have the power to tell me who I can buy my oil from. Never has. Trade embargoes for the political purposes of the elites are an abomination against the very notion of free association and liberty in general.

        No libertarian could support a trade embargo.

        1. > The federal government does not have the power to tell me who I can buy my oil from.

          Actually they do. Whether they should have that power is another thing. I generally don't think they should. I think what you meant to say was "The federal government does not have the moral right to tell me who I can buy my oil from.'

          1. Morality is not at issue here. If FedGov mandate whom I may buy from/sell to on ANY basis they are then outside of morality.

            You are talking about energy..... fine. Let's TALK about energy.
            Anyone else remember back to about twenty ought fourteen or so, as Bidens and Clintons were making millions via Burisma and Uranium One, and at the same time selling our own uranium down the river without Congress'approval? SOMEONE in the Ukraine government took steps to end that corrupt profiteering. That some one got removed from government at the hands of the same administrationi whose personal coffers were being greatly enriched from these "deals". You STILL wanna talk about "free trade"? OR morality, for that matter?
            Any serious examination of Putin's current actions in the Ukraine MUST go back to those and other examples of corruption for personal gain of massive wealth. Once that government head was removed, thigns began to trun quickly in that naiton. Seems the new admin were bent heaviy upon pressuring those citizens of the Ukraine who, prior to the formation of that nation, had been part of Russia politicaly, economically, culturally linguistically, religiously. . The current joke of a "president" is the close equal to our own current "president". Both are fiugureheads and puppets for the stringpullers playing just outside the camera frame. both have their goon squads. Anyone hinting at standing against the current goals and direction can be moderated out of power and influence.

            None of this even got near to Puin's MAIN and legitmiate issue: NATO was encroaching upon Russian soverreignty in their own territor WHY were so many olish troops so active in the eastern part of the Ukraine as Putin commenced his uncursion? Bioweapons labs, missile bases, soldiers on Ukraine uniformes speaking native polish carrying NATO weapons deployng US made jissiles, etc and persecuting those in the eastern provinces of the Ukraine because they still speak Russian.. and have on those lands for centuries........

            don't play your free trade games until THOSE issues aare dealt with. Remember, the Crimea held free and fair elections to seceded from the Ukraine and rejoin their Motherland Russua, and in the Donetsk region they voted to secede from the Ukraine and remain autonomous and neutral. For thos both regioins have been attacked. by UKRAINIAN troops.

            And you want me to bleive Putin is the root of the mess there? I don't have enough fools-coin to buy that one.

          2. BRAVO. Not a lot of people know the difference between power (time derivative of capacity to kill) and rights moral claims to freedom of action).

        2. Then you are okay with buying from Iran or Venezuela?

      4. Whether or not Putin thinks anything is really immaterial. That cat fucking hairless mole is going to either think he has won if we trade or that we grievously wronged him if we don't trade. Because he is going to do what he is going to do regardless, and will invent a justification.

        OTOH, interfering with americans' rights to trade with whomevbecer they want is an asshole move- especially if you are trying to punish someone else.

        I am currently trying to get a datacenter leased in Saudi Arabia, because the government hates AWS because it is run by Amazon, which was run by Bezos who owns WaPo who embarrassed them by reporting on their butchery work on a local journalist. As evil as Putin is, this shit never stops when you allow a government to interfere with free trade. Better to just let people do their own thing.

        1. you know - MS has Azure. if its that big a trouble just switch

      5. It's silly to close oneself off from the entirety of the world and pretend that isolationism is prosperity.

        Not any sillier than becoming dependent for essential goods on your military rivals and calling it freedom.

        But closing off trade with one solitary belligerent bully is not insensible.

        And having presented one reason for curtailing trade, does it not stand to reason there might be others?

      6. Just like your staunchly free speech except for when non progressives talk

    2. Please. Keep your armchair foreign policy analysis at home.

  2. Norberg is right once again. Trade is not an absolute guarantee of peace, but it sure does help. The war was not started by people trading, it was started by one dude with almost autocratic control of a nation, who had a chip on his shoulder.

    It is trade that is now punishing him for it. International trade with Russia has all but dried up. Breadlines have returned. A nation that had to slowly crawl it's way back up from the poverty of Soviet communism has found itself suddenly back in that same pit.

    The anti-trade types in the US need to learn from this. Cutting off trade does not enrich a nation, it impoverishes it. Being the big bully does not engender love from the world, it creates disdain. War is not the glorious ideal. It doesn't prove you are the strong man.

    1. "trade with Russia has all but dried up"

      Except it hasn't in all cases because of blackmail. The international firms who opened factories in Russia put their operations at the mercy of a dictator. Putin is now blackmailing them and in turn some of those businesses are succumbing to the blackmail and working against the interest of western democracies. China is gonna do the same shit. We need to cold war these mfers.

    2. Trade is not an absolute guarantee of peace, but it sure does help.

      It helps because it establishes dependancies. See Europe's purchase of Russian oil for example. Then explain to me how being dependent on Russian oil makes Europe more free.

      This is not feature, it's a bug! Yes, you may have prevented a war, because you can't attack an enemy you're dependent on. But being unable to act in your own best interest because your enemy has you by the short hairs doesn't strike me as an ideal situation. And like it or not, there are times when going to war is in your best interest.

    3. LMAO..... You were starting to sound like there was a brain in there until this one...

      A nation that had to slowly crawl it's way back up from the poverty of Soviet communism..
      The anti-trade types in the US need to learn from this. Cutting off trade does not enrich a nation..

      Did you just dismiss the *communism* and go straight to embargo's??? Omg; you're Boehm huh???

      Do you think Anti-Trade with Communist countries = Communism or what?

  3. Invading Ukraine was not "genius" or "very smart" as former President Donald Trump has suggested.

    Well, that is an outright lie. Reason actually solicits this dogshit. Glad I scanned it before bothering to read.

    It made me laugh to see Brandybuck can't resist showing off the nicely polished turd he found.

    1. Russian ruble is trading higher than before the war started.

      Russian energy companies have doubled their profits.

      Little to no inflation in Russia right now.

      The west is doing everything they can to instigate a nuclear war with Russia for some reason. Let's hope they fail. The neocons want war.

      1. And that's to say nothing about what free trade has done to empower the CCP.

        50+ years later and China is still a tryanny, one which we keep feeding.

        1. "we"?

          1. Do you not buy anything from that country? I'll exclude you from that "we".

        2. Is it the same level of tyranny that it was 50+ years ago? Should we look at these things in terms of gradations or mutually exclusive categories?

          1. You're right. It's gotten substantially worse.

    2. In 2017 Kevin McCarthy expressed his belief that Trump was in Putin's pay. If Putin's paying you say nice things, true or not.

      1. Nice try to keep the lie alive by shifting the goalposts.

        I am not fond of DJT. I wouldn't care to have him serve a second term excepting he ends up the only alternative to the current PO(tu)S. But he never even remotely suggested that invading Ukraine was genius. He clearly stated that the propaganda Putin issued regarding troops being mobilized only for peacekeeping purposes was genius. I wouldn't call it genius, but it was a wicked mockery of the way NATO countries have spuriously justified wading into the internal conflicts of other nations over the last 30+ years.

        Norberg is an asshat. Any salient point in this article is completely undermined by his inability to suppress his TDS, evidence of either stunning dishonesty or a severe deficit of critical thinking.

        Why do CATO and Reason tolerate such brown journalism under their banners?

  4. Unfortunately, the idea of peace through trade doesn't account for the authoritarian leader. In this case it was Ukraine's free trade with the west that threaten Putin. He saw Russia's influence in Ukraine lessening as trade with the west increased. The idea of Ukraine in the EU was unthinkable to Putin.

    Free trade as a tool of peace still makes sense, but men like Putin will be obstacles.

    1. Jesus christ you really do eat up the regime's messaging dont you?

      "Ukraine's free trade with the west" is what is threatening Putin? I'm stunned someone could be so ignorant of what's really been going on in that region. amazing.

      1. Not JUST Ukraine's trade with the West, but its generally more pro-European outlook, compared to the previous leadership. That is a big part of what has Putin so angry, it seems to me.

    2. +

    3. "it was Ukraine's free trade with the west that threaten Putin"

      Peaceful free trade made Putin a mad man!

      But sending money, delivering weapons, and orchestrating a coup was of only minor concern?

      1. If you are a dictator and your control is achieved through economic means, then free trade does threaten you.

        If you look you will see than the Chinese leadership is also cracking down and getting control of the economy. The days of the independent Chinese business are coming to a close if that is not already happened.

  5. By analyzing thousands of country pairs over several decades, many researchers have found that increasing trade between two countries lowers the risk of war between them. They have also found that countries that are more dependent on international trade have fewer conflicts than self-reliant ones, which provides us all with a security interest in other countries' global integration as well.

    Yes, exactly! Now from a libertarian perspective, explain how becoming more dependent makes one more free.

    Newsflash: being in a position of dependancy does not make you more free, libertarian bullshit conflating free trade with freedom not withstanding.

    1. How about this thought: Free trade among peace-loving and freedom-loving nations encourages peace and freedom and means greater prosperity, so that peace-loving and freedom-loving nations can gird their loins against those who hate peace and freedom and prosperity.

      And peace, freedom, and properity are all better off in nations that don't engage in witch-burning and it's underlying Supernatural superstition.

      Fuck Off, Witch-Burner!

    2. Dependency does not lead to freedom, but the converse is true: Freedom leads to dependency. But it's one that is freely chosen and for good reasons. Think for a moment how utterly dependent you are on others for the food you eat. But you're free to choose the alternative--grow your own food and live on 500 calories a day.

      It's also worth noting that the dependency that freedom promotes is an inter-dependency. We are no more dependent on our trading partners than they are on us.

      Free trade is the essence of freedom itself! If you don't believe in it, you can't call yourself a Libertarian.

  6. how can there be any trade with Russia if Brandon seizes the assets from the trade?

  7. Out of curiosity, has Reason run any articles on Biden's trade war with Russia?

    1. Try National Socialist Review. If the John Birch Society still has a newsletter, you might try them. (https://tinyurl.com/yxm5s5a8)

  8. Johan reveals utter innocence of how 10% tariff was "revenue only" to Democrats and "Jacobin free trade" to Whigs and Republicans. Yet the "sumptuary" and "protective" rates imposed by the Northern Metropole on the colonial South first brought nullification, then war. Europe's wars were mostly over who got to sell more heroin in the colonial backwaters. The series of Opium Wars in China, followed by the US-backed Hague convention brought WW1 just as Versailles and Limitation Convention restrictions invited WW2. Why ignore that?

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