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Debate: Globalisation and war

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Thanks to the IISS I was able to attend last week's inaugural Bahrain Global Forum, the first IISS Geo-economic Strategy Summit.

The idea of the meeting was to bring together politicians, business people, economists, strategists and others to think about how shifts in international financial and economic conditions were affecting local, regional and international relations, and to analyse the overlap between economic and strategic thinking. I think this is a good idea.

One feature that made the event particularly interesting for me was the explicit focus on 'geo-economic' issues. That term seems to have originated with an article by Edward Luttwak that first appeared in the National Interest in 1990. Back then, Luttwak argued that the waning of the Cold War was reducing the importance of military power relative to 'commercial logic'.

Luttwak did not think that 'World Politics' would simply be replaced by 'World Business', however. Instead, he suggested that the result would be the emergence of geo-economics, or 'the logic of war in the grammar of commerce', since commercial forces would still be operating in an environment dominated by states and blocs of states. 

The more general but related idea that countries could be thought of as companies competing in global markets became a popular theme during the 1990s, albeit to the annoyance of some prominent economists.

After being — briefly — fashionable during the 1990s, the term geo-economics largely dropped out of use. Now it seems to be making a comeback, at least in the looser sense of the entanglement of international economics, geo-politics, and strategy. 

It's this general theme of spillovers across disciplines that I find intriguing, not least because one of the things that the Lowy Institute tries to do is precisely to look at these kinds of linkages between our various research programs.

I can think of at least five reasons why geo-economics looks like an interesting way to think about the world again. I'll explore those in a follow-up post later today.

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Following on from my previous post about the revival of geo-economics, here are five reasons why geo-economics looks like an interesting way to think about the world:

1. The rapid geographic shift in economic weight currently underway. This transformation has been given an additional boost by the GFC and the subsequent multi-speed recovery, which has seen emerging markets significantly out-pacing their developed economy counterparts. 

In the near-term, at least, it seems that the post-GFC world is working to accelerate the convergence process, not retard it, although there remain questions regarding the longer term impact. Not surprisingly, some strategic thinkers view these major economic shifts as also heralding big moves in international power.

This sense of a changing world was actually captured quite nicely in the discussions in Bahrain. Once upon a time a gathering of this sort would have involved lots of Western executives discussing growth prospects versus sovereign risk across the various emerging markets. This time, it was more common to hear delegates from capital-rich emerging markets worrying aloud about the declining quality of rich country sovereign credit.

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2. Early on in the financial crisis, security experts identified the GFC as a major threat to national security. When the world avoided re-running the Great Depression of the 1930s, such fears looked overdone. Since then, however, the deadly riots in Greece, along with the concerns now being raised about the spread of 'crisis economics', have provided some compelling contemporary support for the idea of focusing on the links between economics and security issues. 

3. The theme of resource security raised by the 2003-2008 commodity boom (which saw average commodity prices double in US$ terms to deliver the longest and strongest price surge for at least a century) has also highlighted the linkages between economics and security. The 2003-2008 boom saw the price of oil peak at around US$147/barrel in July 2008 and prompted a food crisis in 2007-08 that involved riots and other social unrest.

4. The rise of government-controlled investment vehicles such as Sovereign Wealth Funds, along with the growing importance of state-owned enterprises and state-owned banks in international transactions, has contributed to the growth of a version of state capitalism. As was clear in the Australian debate over the Chinalco bid for Rio, the explicit linkages between the states and these financial and corporate institutions automatically injects international politics into issues of international economics.

5. While state capitalism has largely been seen as a feature of emerging markets, the GFC has also seen the state injected back into developed economies in a dramatic way. Initially this was in the form of bank bailouts and other government handouts, including some (effective) nationalisations.  But it's also increasingly taking the form of new regulations and controls, with Germany's recent ban on naked short-selling a potent example. This is a development that has financial markets jumpy and means businesses and investors now face what might be a new age of political risk.

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Many thanks to Mark Thirlwell and IISS for bringing geo-economics back to the fore. To Mark's list of five reasons why geoeconomics matters, I'd like to add one more.

I think geo-economics holds the key to one of the big questions about how world politics will unfold in the 21st century. The question is whether current and future levels of economic interdependence will be a significant dampener on strategic competition and conflict.

My view is that current levels and future trends in interdependence make open conflict between industrial economies prohibitively costly. And there are fewer and fewer issues that would justify the self-harm and system-wide harm that would come from the type of conflict that would severely damage the global economy.

I'm aware that this view bears the scars of Norman Angell and the Manchester School. But 2010 isn't 1910, for four reasons:

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  1. The past half-century has seen a dramatic increase in the dependence of modern and modernising economies on minerals and energy; and an equally dramatic decline in their self-sufficiency in minerals and energy. These trends will increase in future.
  2. Interdependence reaches deep within national economies and societies as well as across borders and oceans. With each passing decade, our economies and societies specialise, and more and more of what we need to survive is sourced from afar and abroad. As we become richer, we become much more vulnerable to the breakdown of the webs of interdependence we rely on – as a matter of life and death.
  3. The past 30 years has seen a dramatic internationalisation of production systems, first of manufacturing, but now increasingly of the services sector. This has led to a dispersal not only of production processes but of skills that would be costly and difficult to re-concentrate within countries.
  4. Sixty years of rising prosperity has led to a decreasing tolerance for economic pain. Think about the agony and turmoil in Europe and the US over the GFC – an event that made the American economy contract by just 4%. And it's not just the developed world — part of what keeps China together and heading in roughly the same direction is the rising tide of prosperity that's expected to lift all boats eventually.

For these four reasons, the threshold for conflict has been dramatically raised.

Perhaps the calculation of conflict has also changed. In the past, a state waged war if it believed it had a greater capacity to inflict pain than its opponent. In the future, the determinants of conflict may be states' comparative capacity to bear pain.

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I agree with Michael Wesley that interdependence raises the costs of competition and conflict. But unlike him, I'm not sure the threshold is raised far enough to keep the world peaceful over the next few decades.

My pessimism is best explained by looking at one of the key paradoxes of the modern world. On the one hand, the bundle of trends we call 'globalisation' seems to erode the power and significance of states, because it boils down to an exponential expansion in the number and significance of international transactions of all kinds – trade, money, data, and travel. 

It seems natural that, as international transactions become more important to all of us, the nation we happen to live in becomes less important to us, and the cost to each of us of disruptions to international transactions rises sharply. It is, as Michael says, an old argument, going back beyond the Manchester School to the Enlightenment, but it has been given a new lease of life as the density of transactions has increased.

On the other hand, the effect of globalisation has been to increase massively the power of states, and in particular, to increase the power of the states with the biggest populations, who have most to gain in aggregate power from the expansion of per capita productivity that globalisation has enabled.

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States have therefore been big beneficiaries of globalisation thus far. That's not just because, globalisation notwithstanding, states remain the basis on which all these international transactions are organised and managed, and remain capable of marshaling a big share of the resulting wealth to state purposes. It is also because states remain a remarkably powerful focus of individual loyalty and identity for the vast majority of people around the world, trumping anything expect family. It may be that globalisation, if anything, increased the power of nationality, rather than eroded it.

Hence the paradox: materially we are all more and more dependent on international transactions, but our sense of identity is at least as much, and perhaps more attached to nationality than ever before.

And hence my caution about Michael's optimistic conclusion that economic interdependence will make strategic competition and war prohibitively costly, and hence less likely. I agree with the first part of his argument: that the costs to all of us of any disruption of global transactions is higher now than it has ever been, and that this should therefore raise the threshold for states to engage in competition and conflict.

But I'm much less sure that globalisation raises the threshold sufficiently to reduce the risks of conflict low enough for anyone to relax about it. 

The fact is that the threshold has always been high: war has always been, and been seen to be, expensive, both materially and morally. The threshold nonetheless has often been crossed, because the choices people make on the brink of war are not rational judgements of costs and benefits, but highly emotive impulses reflecting most often their sense of identity. What evidence is there that globalisation has raised the threshold beyond the reach of these deep and still-powerful motives?

Let's look at the prime example. What evidence do we have that the intense interdependence of the US and China has yet had any affect on the probability that each would go to war with the other over Taiwan? More broadly, what evidence is there that either is prepared to put aside its aspirations for regional leadership with the other in order to build the kind of shared regional leadership which alone provides a reasonable prospect that interdependence in Asia can flourish in future? 

To be blunt: until it is clear that the US is willing to treat China as an equal as China's power grows, I will be hard to persuade me that the imperatives of interdependence will reliably trounce the instincts to competition in the relations between states.

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Hugh White's reply to Michael Wesley's post is wide-ranging, and you should read the whole thing. But it seems to me that much of the heavy lifting in Hugh's argument is being done by this claim:

...the choices people make on the brink of war are not rational judgements of costs and benefits, but highly emotive impulses reflecting most often their sense of identity.

This sounds more like a description of how violent crime or protest happens rather than how war happens. War takes a great deal of dull and sober preparation, work that tends to dilute emotional impulses. In fairness, the Iraq and Afghanistan wars could probably be cited as a counter-argument here — I tend to think emotion played a sustained role in Bush Administration decision-making, as this video illustrates.

So let's grant the premise that heightened emotion plays an important role in national security decision-making. If that's true, then we need to consider the possibility that it might actually reduce the impulse for conflict, as well as heighten it. For instance, it is possible that, with birth rates shrinking as societies get richer, the public and the governing class is developing a higher sensitivity to death.

In fact, there are a number of factors possibly contributing to this sensitivity.

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Consider the economic dimension: we spend massively more than 50 or 100 years ago educating and training our citizens. And in post-industrial economies, an increasing number of workers learn specialised workplace skills that are difficult and costly to replicate. Western states also invest ever-increasing amounts to keep their citizens healthy. As people live longer and stay healthier, they become more economically productive.

The increasing value of human life is felt acutely in Western military forces. Equipping a US infantryman today costs about 100 times more than in World War II, and this does not account for the far higher levels of training modern soldiers receive. The power of mass communications also creates a heightened sense of potential lost opportunity for those at mortal threat.

So I would add the increasing value of human life to Michael's list of four geo-economic factors that contribute to a reduction in the likelihood of conflict between advanced states. And I would submit that, even if Hugh is right about the role of 'emotive impulses', it's a factor that could increase the chances of peace as well as war.

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Sam thinks we might be less willing to go to war in future because we value human life more than we used to. It's a beguiling argument, because it appeals to an instinctive conviction that we are somehow wiser and better people than our ancestors. Actually, I'm a bit surprised that a staunch Oakeshottian like Sam is beguiled by such Whiggish optimism, but the argument deserves to be examined on its merits. Two points, then.

First, I'm not sure the empirical evidence, such as it is, supports the view that we value human life more now than our predecessors did. I keep on being surprised by how willing modern societies are to accept military casualties in marginal causes: consider the Canadians in Afghanistan, now with over 140 KIA. Or indeed how little the loss of 11 of our own people has weighed in thinking here about Afghanistan.

Conversely, it's hard to say that our ancestors did not value the lives of others as much as we do today. The weighing of individual sacrifice against collective purpose has been seen as the essence and tragedy of war since the beginning of politics. That is why the mainspring of Aeschylus' account of the Trojan War is not a great battle but Agamemnon's decision to sacrifice his own daughter for a wind to take the Greeks to war. 

Nor do I think economics has much to do with this: I cannot agree with Sam that the money we spend educating our soldiers equipping them makes any difference to how much we value their lives. 

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Second, I'm not sure I share Sam's belief that decisions for war are made by people slowly and carefully and weighing costs against benefits. It would be nice if they were, because that would allow us to predict strategic behaviour the way we predict economic behaviour – by presuming informed choices by rational individuals pursuing their long-term interests. I'd defer to Mark Thirlwell on how well this model works in economics; it certainly doesn't help us explain choices for war.

There are several reasons for this:

  • While Sam is right that decisions to build forces are taken slowly and deliberately, decisions to use them in war are most often taken quickly and under pressure.
  • The choice for war is often the last step on a long road of escalating strategic competition. The first steps on that road always seem harmless enough, but each one brings closer the point there seems no choice but for war, whatever the cost. So one might say that we do sometimes choose war slowly, step by step, but we do not know that is what we are doing until the last step, when it seems impossible to do anything else.
  • The decisions we take at those fateful moments are seldom informed by a clear understanding of the costs ahead. Even at the last moment, would anyone have chosen war in 1914 if they had known that they were heading not for Sedan but the Somme (pictured)? Would Bush have chosen war in 2003 if he had known he was heading for Fallujah? Would anyone think it would be worth the US and China fighting over Taiwan if they understood how easily it could lead to nuclear war between them?  
  • Finally, the decisions for war are made by groups, not individuals; and groups behave oddly, especially under stress. Think of the scene in Thirteen Days where Adlai Stephenson earns the scorn of his colleagues by suggesting that a deal with Moscow might be better than nuclear war.  

In the end, if we argue that the costs of war today make it unthinkable, we must explain how the costs of a global nuclear exchange in the Cold War did not seem to make war unthinkable only 25 years ago. Do we weigh the costs of economic disruption today more highly than decision-makers in 1985 weighed the costs of 100 million dead, or are we just being forgetful?

Actually, I think the focus on shifting views of the costs of war is misleading. Something else is at work here. I do not think we rate the costs of war any higher than we used to, but we do find it harder to imagine a strategic challenge which would justify the costs of major war no matter how they are calculated. 

In other words, the costs of war have not grown, but the reasons for war seem to have shrunk. And that is because, unlike the Cold Warriors, we do not envisage a serious challenge to the international order that underpins our security. If we did envisage a challenge to that order, our views on the costs and risks of major war might change.

And that, of course, is why the possibility of future major war arises. I do not rate that risk very high, because, like Michael and Sam, I think the costs of war do place a huge constraint on strategic competition. But the risk remains, and it will grow if the stable order of recent decades erodes as economic weight and strategic power shift. 

This is a dangerous moment in which concern about the future international order means that the imperatives for war could again rise, notwithstanding the appalling costs. Unless we acknowledge that risk, we will not work hard enough to avoid it. And we cannot afford not to work hard, because we cannot simply rely on globalisation to keep the world peaceful for us over the next few decades.

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Michael Heazle is an Associate Professor with the Griffith Asia Institute.

In response to The Interpreter discussion on whether economic interdependence can lower the chances of war between states, Northeast Asia provides an interesting illustration of the extent to which mainstream security thinking has remained resistant to this perspective.

Indeed, the many realist arguments about how a continuing US military presence is, and will remain, essential to maintaining peace in the region share the common assumption that, without the US around, China, Japan, and one or both of the Koreas would soon be at each others' throats.

But try the following thought experiment...

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The influence of China's increasing economic and military power on its relations with Japan, and regional security more broadly, is mostly seen as increasing competition within a shifting balance of power that will lead to military conflict at some point (the past repeats itself, realists observe).

But China's rise can also be understood as providing opportunities for engagement and cooperation between the two regional powers, which could lead to the formation of a Northeast Asian security community. Viewed exclusively through the prism of balance-of-power thinking, the most likely outcome of China's rise is conflict between China and Japan, and therefore also the US, at some point as strategic competition intensifies under the logic of the security dilemma.

But if China and Japan's fast-developing economic relationship and domestic circumstances and priorities are also considered – in particular, a clearly stated aversion to war with other states common to both societies and governments – the foundations of what Karl Deutsch described as a 'pluralist security community', including the Korean peninsula, may already exist. 

What makes the distinction between these alternative futures interesting is the way in which either set of assumptions fundamentally informs opinion on why the future role of the US in Northeast Asia is important.

Conventional wisdom, informed by a balance-of-power approach to China's rise, argues that the future course of China-Japan relations and regional security in the Asia-Pacific cannot be judged without also attempting to gauge US intentions in Asia. Viewed from the perspective of a shifting balance of power in the region, and the propensity for competition and conflict such shifts bring, the importance of US power in balancing that shift is undeniable.

But if the prospects for increased competition were to be diluted by a mutual aversion to the costs and destabilising effects of inter-state conflict, what would this mean for our understanding of the significance of the US role in Asia, and what could it tell us about the kinds of assumptions that realist depictions of Northeast Asia's security environment are based on? 

Because judgments concerning the importance of future US military engagement and support in Asia are the product of an assumed balance-of-power security environment that excludes other possible scenarios, the evidence informing this view needs to be tested rather than merely accepted as being intuitively correct.

Moreover, the possibility that balance of power competition will be diluted or prevented by the establishment of a security community in Northeast Asia – founded simply on a common aversion to war and the costs it entails –also needs to be more closely examined and assessed to obtain a more rigorous understanding of why the level of future US engagement in Asia is critical to the region's stability.

My guess is that security perceptions and developments within Northeast Asia are likely to reflect a mix of these two perspectives, and that, therefore, the significance of future US engagement in the region, especially why it is significant, may be far less clear than mainstream security thinking contends.

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With regard to Sam and Hugh's exchange: in strictly monetary terms, we do value life more now than in the past, and we do so by a substantial amount. At least, this is answer given by 'value of a statistical life' calculations.

To get an idea why this is so, see this piece by Steven Landsburgh: basically, as incomes rise, so does the calculated value of life. (See also this in the NY Times.)

Landsburgh cites this paper looking at estimated changes in the value of life for the US. The authors estimated that the value of life has increased by 300% to 400% between 1940 and 1980, rising from roughly US$1 million (in 1990 dollars) in 1940 to US$4 million to US$5 million (in 1990 dollars) in 1980. They estimate an elasticity of value of life with respect to GNP per capita of 1.5 to 1.7: in other words, a 10% increase in national income per head is associated with between a 15% and 17% increase in the value of life. 

This is an interesting application of this kind of approach to try to work out how much the US Army valued its soldiers' lives during Word War II.

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Hugh White makes a very good point about the importance of factoring in emotion to our thinking about strategic affairs. In both strategy and economics, we Anglos are blinded by a rationalist bias that will become a greater and greater impediment as the Anglo world order passes.

As an aside, I've been fascinated for a long time by how deep the antipathies and rivalries are in Asia – whereas they seem to moderate with time elsewhere. I think the answer is that Chinese, Japanese, Indian and other Asian societies are fundamentally hierarchic, and their hierarchies are based around culture. The consequence is a tendency to view international affairs hierarchically.

This is why European colonialism, backed by an ideology of racial hierarchy, was such a profound shock to Asia, and why Asia's international relations will remain imbued with a culturalist rivalry (it's also why David Kang is wrong to predict that the states of Asia will willingly settle into a hierarchy with China at the top).

But I part ways with Hugh on the role of emotion in war. I can't think of a war in the past 200 years that was triggered by emotion overriding rationality. As Geoffrey Blainey so beautifully argues, modern wars are a product not of emotion but of belief – either justified or mistaken – that one's own country (either alone or in coalition) will prevail or that the other side will back off.

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This can be either a general belief ('we can beat them on any given day') or specific ('something has given us a brief opportunity to beat them'). I know of no power that enters a war it is sure it will lose – or that it can win but at terrible cost.

So wars happen because of split-second decisions made by groups and with more than a bit of emotion thrown in – but all based on the general feeling that they can be won at acceptable cost. And here's the nub: there's plenty of emotion around in our region on any given day (some of it even whipped up by governments) but there's not much evidence it's being acted on. And I think the reason is that governments are well aware of how fragile the structures underpinning their stability and prosperity are.

Some may argue that it's precisely the changing power relativities that will contribute to an evolution of beliefs that wars can be won at acceptable cost. I'm not so sure. Even with the enormous power lead the US enjoyed in Asia in the early '50s and late '60s, Washington was unprepared to wage total war, even as the risks of losing the limited war mounted.

In the years ahead, there's no prospect of any one country building that sort of power lead. And with each passing month, the great rivals in Asia become a bigger and bigger part of each other's success. The likelihood of winning is going south, while the costs of fighting are heading north. This looks to me like a calculus of bounded competition, not war.

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Like Michael Wesley, I am a great fan of Geoffrey Blainey's work on the causes of war, but I think his idea that people only decide on war when they believe they can win must be subject to two big caveats.

Caveat Number One: they do not have to rationally believe they can win. There are plenty of wars in which it is not clear at all that one side or the other rationally thought it could win. Starting with the Greeks against the Persians, via the North Vietnamese against the US, and ending with...well, the Coalition against the Taliban? And who would rationally believe that either the US or China could win a war over Taiwan? What would 'winning' mean?

Indeed, Blainey's model does seem to depend on a rather simple idea of what counts as 'winning'. The world wars of the last century had clear winners and losers, like football matches, but many wars are less clear – like the 1940 Winter War between Finland and the Soviet Union. 

The Finnish example, and many others, shows that war depends not just on the balance of strength between opponents but on the balance of motivation. A weaker power can 'win' over a stronger one if it can raise the costs of victory beyond what the stronger side is willing to pay for the fruits of victory, and thereby stop the stronger power before it succeeds in its objectives. 

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So choices for war very often swing, not on a calculation of the balance between the material strength of the two sides, but on the balance between matériel on one side and motivation on the other. That's much harder to calculate, and it can often make sense for a weaker state to fight a war it knows it cannot win, if it believes it can stop the enemy from winning.

Which leads to Caveat Number Two: believing you will 'win' is at most necessary, not sufficient, to choose war. You must also believe that the costs of winning are worth the benefits. And this is where the irrationality really comes into the picture. Again, the Taiwan case is telling: most people agree that the US and China could choose war. But even if one side or the other could expect to win (however defined), how could Taiwan's political future possibly be worth what such a victory would cost the winner?

This brings me to Chris Skinner's interesting contribution. While agreeing that resource scarcity is an important issue, I'm not sure I agree that what drives states to war are rational, material concerns like that. My hunch is that states do not start wars to win resources — at least not big wars, even when access becomes a zero-sum struggle. The market can resolve the allocation of resources more cheaply and efficiently than wars ever can. 

The thing that drives people to fight big wars is most often fear or status ('honour', Thucydides calls it). The competition for status is much more zero-sum than for resources, and much more emotive. That, of course, is what is at stake over Taiwan.

Speaking of markets, Mark's post on the value of life is illuminating. It reminds me of Kipling's Arithmetic of the Frontier: 'Two thousand pounds of education falls to a ten rupee Jezail'. Of course, Kipling was being ironic, because the material value of human life, real and rising though it is, does not reflect the full human cost of war – which was my point to Sam.

In fact, Kipling's poem captures the West's predicament in Afghanistan perfectly, and brings us back to the importance of imponderable and irrational motives in war – on both sides. How would Blainey describe what either side there is fighting for? 

Smart guy, Kipling. Was there ever a poet with a better grasp of strategy? He also gave us the wonderful line in Recessional, foreshadowing at its apogee the sunset of empire: 'Far called, the navies melt away/the captains and the kings depart’. It comes to mind, these days.

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Hugh White's discussion of the balance of motivation and material strength, complete with literary flourishes (you can take the boy out of Oxford...), brings our debate back to where it all began: my point that wars of the twenty-first century will be decided not by who's better at inflicting damage, but by who's better at bearing pain.

This debate so far has focused around the question, 'why do states choose war?' It seems to me that an equally crucial question is, 'why do states choose not to go to war?'

I think two examples tell us a great deal about this. The first was China's agreement to the 1858 Treaty of Aigun with Russia, which many see as China's ultimate humiliation at the hands of foreigners. The Qing Court chose not to call Russia's rather far-fetched bluff of uniting with an Anglo-French force to enforce the treaty. The reason? They wanted to get foreigners out of Beijing as soon as they could.

The second is the fateful meeting between Hitler and Czech President Edvard Benes at the Reichschancellory in March 1938. Hitler, who had already swallowed up the Sudetenland, made Benes an offer: either the Wehrmacht could occupy the rest of Czechoslovakia unopposed, or the Luftwaffe would bomb Prague flat. Benes was so horrified he had a minor heart attack – and Hitler got his way.

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In both cases, capitulation was seen to be preferable to calling the opponents' bluff. But in other cases, capitulation is out of the question, irrespective of the imbalance in material strength. The Vietnamese stood up to a nuclear-armed superpower not because they thought they would lose but because they could not imagine losing. The Pashtuns are doing the same today.

There's a calculus at work here: the amount of pain a society is willing to bear in war rises the closer its aims are to the heart of the body politic's sense of being. Avoiding yet another unequal treaty was not as dangerous to the Qing Court as the continued occupation of Beijing by foreigners. The preservation of a 20-year old sovereign state was not as important to the Czechs as the preservation of the centuries-old culture embodied in their capital.

This is important because it separates wars of necessity from wars of choice. Societies are willing to bear enormous pain in what they see as wars of necessity – by which I mean a conflict that, if lost, would negate what the entire society stands for, and defines itself by. Societies will bear considerably less pain for wars of choice, the outcomes of which are not seen to have a major effect on how a society defines itself.

This pain threshold for wars of choice is lowered dramatically by the rise of mass politics in which societies in both democracies and non-democracies expect their opinions to count. Messrs Bush, Blair and Howard were reminded of this quite recently.

A pretty good way of picking winners is by working out for which party the war is one of choice, and for which it's one of necessity. For the latter, the war's not over even if it loses the fighting stage. For the former, societal support is likely to fall well short of the effort needed to prevail.

Thanks to the communications revolution, societies are much more able and inclined to interrogate governments' decisions to go to war, and their level of scepticism rises with their material prosperity. This means the ambit of wars of necessity is shrinking. That's why neither side has pushed the Taiwan issue towards decision. That's why the possibility of war in the coming years is dropping dramatically.

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As the Interpreter has been hosting a debate on the relationship between globalisation and conflict, I thought it might be useful to take a look at what some of the empirical literature has to say on the subject. To keep it manageable, I'll focus on the links between trade and war.

To start, let's look at what conflict means for international trade. Here the empirics confirm the intuition; conflict is bad for trade (although there are exceptions). So, for example, this paper by Reuben Glick and Alan Taylor finds a very strong impact of war on trade volumes. 

It estimates that the costs of war in terms of lost trade are large, and comparable in scale to the other costs of war such loss of human life. Glick and Taylor also find that the damage to trade is persistent, so that even after a conflict ends, trade does not resume its pre-war level for many years. And they find that trade destruction also harms neutrals (a negative externality in econo-speak). 

Brock Blomberg and Gregory Hess have looked at the economic cost of violence more broadly, adding terrorism and internal conflict to external wars. They too find that the economic cost of violence for trade is large and comparable to the cost of other trade barriers; indeed, they find that the positive impact of peace on trade is larger than the trade-supporting effects of WTO membership or bilateral trade arrangements. 

Finally, some recent work by Daron Acemoglu and Pierre Yared goes beyond conflict to look at the relationship between militarism and international trade. They find that increased militarism, measured by military spending and size, is negatively associated with trade.

But what happens when we reverse the causality, and ask about the implications of international trade for conflict? That's the subject of my next post.

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Having discussed the effects of conflict on trade in my previous post, what can we say about the implications of international trade for conflict?

The optimistic case for commerce reducing the likelihood of war can be traced back to Montesquieu ('peace is a natural effect of trade'), Kant ('The spirit of commerce, which is incompatible with war, sooner or later gains the upper hand in every state') and JS Mill ('It is commerce which is rapidly rendering war obsolete'). A bit more recently, as Michael mentioned in his initial post, there is Norman Angell, who gave a great diagnosis of the material futility of war in the modern age, but was famously unlucky when he moved from analysis to prediction. 

Subsequently, this thesis has been updated and refined by John Mueller and more recently still by 'Norman Angell with nukes', Thomas Barnett. One of the famous modern statements of the commercial peace comes from Solomon Polachek, who argued that mutual economic interdependence would make conflict more costly, and hence increase the chances of peace. 

Away from theory, and the establishment and growth of the EU is arguably a concrete manifestation of these kinds of ideas. But is there much other empirical support for the idea of the commercial peace? 

The chart below plots globalisation (measured as the ratio of world trade to GDP) and the occurrence of conflict (measured as the number of country pairs which in a given year are in a military conflict, divided by the number of existing country pairs) over the period 1870 to 2001. It suggests that there is no simple relationship between the two. For example, the first era of globalisation (1870-1914) is marked by both growing openness and rising military conflict. And the sharp rise in trade integration since 1970 has been associated with a relatively stable pattern of conflict.  

 

This shouldn't be a complete surprise. Any sophisticated version of the theory would have to assert that trade discourages conflict, all else equal. But that last qualification is important since in reality, all else is never equal. This means that it's helpful to use statistical techniques to try to isolate the influence of trade on conflict.

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Political scientists rather than economists seem to have made most of the early running on this. In a large literature on the subject, they have tended to focus on the relationship between bilateral trade interdependence and military conflict. So, for example, one important early contribution from John Oneal, Bruce Russet and co-authors uses this approach to find empirical support for the hypothesis of a commercial peace. 

On the other side of the debate, Katherine Barbieri's work has suggested that things are not quite so straightforward: instead of a negative relationship between bilateral trade interdependence and military conflict, Barbieri finds a positive one. Oneal and Russet have found that this result is sensitive to the way trade interdependence is measured.

Taken overall, surveys of this literature tend to find that the majority of studies support the idea of a negative relationship between bilateral trade and conflict, a result supported by some recent work.

Economists look to be relative newcomers to this debate. One interesting and relatively recent contribution comes from Philippe Martin, Thierry Mayer and Mathias Thoenig (summarised here). Their work confirms the proposition that a given pair of countries with more bilateral trade has a lower probability of bilateral war. 

But they also report a more surprising finding: countries more open to global trade have a higher probability of war. They explain this result by arguing that, while the probability of war is lower for countries that trade more bilaterally because of the opportunity costs associated with lost trade, greater multilateral openness has the opposite effect because, by reducing the level of bilateral dependence, it reduces the opportunity cost of any given conflict. 

They argue that multilateral trade openness therefore affects the nature of war: it increases the probability of local wars but deters global conflicts, a prediction which they argue fits well with the stylised fact that military conflicts have become more localised over time:

The same authors have built on these results to suggest that free trade agreements are good for peace.

Another recent paper, this time from Jong-Wha Lee and Ju Hyun Pyun (summarised here), also finds that bilateral trade interdependence is associated with a lower probability of conflict. And, in contrast to the surprising findings of Martin, Mayer and Thoenig, they find that global interdependence is good for peace. Lee and Pyun also find that the peace-promoting effects of trade vary depending on the degree of geographical proximity: greater bilateral interdependence seems to produce larger peace-promoting effects for neighbouring countries, while greater global trade openness has a relatively greater positive effect on peace for distant countries.

Summing up, I would judge that, while the evidence for the Pax Mercatoria is not absolutely conclusive, nevertheless its still strongly supportive of the general idea that international integration is good for peace, all else equal.

One last thought. I have concentrated on trade flows, but globalisation, even narrowly defined, encompasses more than the market for goods. While there has been some work on the relationship between conflict and other variables (such as foreign direct investment), this seems to be an area which is still relatively unexplored.

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Michael Wesley's historical examples show that there are telling cases in which states have chosen not to go to war because the price is just too high. This supports Michael's argument that countries can and do rationally weigh the costs of war, and hence his basic thesis that, in an era of globalisation, as the costs of war increase, the likelihood that states will choose to avoid war increases. 

I completely agree. Globalisation does make war more costly and hence less likely. But does it make war so unlikely that we need do nothing more to avoid it? 

There is a temptation to believe that we don't have to make sacrifices to reduce the risk of future wars, when globalisation makes the risk negligible anyway. That temptation is strong because avoiding war is painful. It requires us to build and maintain an international order that limits strategic competition and reduces the sources of conflict, and that needs compromise on deeply-held national priorities. Such compromises are unpopular, so people will gladly accept the argument that they are unnecessary.

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They are not. Michael's examples show that states sometimes calculate the costs and risks of war rationally, but not that they always do. There are many examples of irrational choices for war, right up to the present day. Michael mounts a supplementary argument that states are better at making rational decisions now than they were, because their people are better informed, and more sceptical. I'm not so sure: a comparison of Fox News and Thucydides' accounts of the Athenians debating war with Sparta does not flatter the globalised age.

Hence my central point: despite globalisation, there remains a real risk of escalating strategic competition between major powers, as their relative strategic weights shift. This carries a smaller but still very serious risk of conflict between them. The development of a new order which reduces these risks is the most important strategic issue of our day, and poses immense and unwelcome political challenges. We need to face up to them. 

My argument, in other words, is not that the 'globalised peace' theory is wrong, but that it is not right enough to make any difference to how we should act.

Mark's wonderfully meaty posts on Pax Mercatoria prompt me to air a hypothesis about the poverty of my own discipline compared to his. Economics and International Relations (including Strategic Studies) both attempt to create predictive generalisations about human conduct. But economics enjoys an advantage in numbers: the sheer volume of the decisions it studies provides a huge data-set from which generalisations can usefully be drawn. 

In IR – especially strategic studies – the total number of decisions is tiny, and so building useful generalisations is much harder. This makes the subject especially prone to extrapolation error. Sure, there have been no big wars between major powers for many decades. But with so few data points, how can we know whether this reflects a deep and enduring trend, or just the gap before the next event?

Photo by Flickr user Pink Sherbet Photography, used under a Creative Commons license.

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Ross Buckley is a Professor in the Faculty of Law, University of New South Wales.

Michael Wesley distinguishes wars of choice from wars of necessity and suggests if one is a betting person, one's money should always be on the nation fighting out of necessity. This is an important distinction (although I am sure we all hope Michael doesn't bring his gambling skills to bear in managing the endowment of the Lowy Institute).

An early and strong example is the American War of Independence.

On July 4, 1776 in Philadelphia a group of very brave men signed the Declaration of Independence. They did so knowing it was treason, knowing they would hang for it if they lost the war, knowing they had no experience in battle, no standing army, almost no gunpowder and almost no money. They did so knowing Britain had 32,000 troops on Staten Island in New York, a force larger than the population of America's largest city.

Thomas Jefferson, John Adams and the others went to war out of necessity, for an idea that was core to their being, the United States of America. Britain chose to fight back, but victory in this war was for them never essential.

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Britain was the superpower of the age, with heavy weaponry and a large, well-trained army. They were up against a local militia with little weaponry or training, men who walked from their homes and farms to fight. Yet the locals won. They won because the fight for them was essential in a way it simply was not for the British troops.

An American who knew a lot about war understood this. Dwight Eisenhower once said, 'What counts is not necessarily the size of the dog in the fight — it's the size of the fight in the dog.'

All Americans are raised on the Fourth of July story, and yet, extraordinarily, they don't understand it, and continue to replay it. America went to war in Vietnam underestimating the fight in the enemy. The US had all the advantages of modern weaponry, but the war was one of necessity for North Vietnam, and of choice for America.

America went to war in Afghanistan and Iraq and won the military battles swiftly. But the wars drag on, with no victory in sight, again because for only one side in each war is the issue one of necessity.

Whether globalisation makes war less likely is a difficult question. However, one way we could reduce the number of wars is to help America understand its founding story. The fourth of July story is glorious, filled with heroism and the highest of ideals, and Americans see in it the proof of their own exceptionalism.

Yet America could have taken from this story that those fighting from necessity will always triumph over those fighting out of choice. If this lesson had been learned from the story of America's founding, we'd have fewer ongoing wars today, and a world that looks quite different.

Photo by Flickr user Anniebby, used under a Creative Commons license.

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