Political scientists often argue that international economic relationships can decrease the likelihood that states will engage in war. Nations that might otherwise be inclined to fight can be deterred, informed or transformed by economic interdependence.
World War I has been called the “Achilles Heel” of such theories. In the decades before the war, Europe experienced unprecedented growth in international economic interdependence, both through trade and capital flows. Yet war not only broke out, but the scale of its destruction was unprecedented. Economic liberalism went into retreat. How could anyone sustain the notion that trade could prevent war when the most destructive war in history had followed an era of expansive international trade? For decades, scholars and policymakers alike pointed to World War I as providing strong evidence against the liberal case.
In a recent article published in International Security (ungated, thanks to MIT Press), we argue that these claims are exaggerated.
The growth of international economic exchange in Europe before the war was uneven. Much of Western Europe belonged to a highly interdependent subsystem of states in which crises arose but were resolved peacefully. By contrast, economic interdependence was much shallower in most of Eastern Europe and parts of Central Europe. The Ottoman Empire, Serbia, Austria-Hungary, and several other newly independent Balkan states traded relatively little with each other. Unlike in the interdependent West, crises in this region tended to escalate to war.
It is no coincidence that World War I was sparked among the non-interdependent states in Eastern Europe. Economic ties played an important role in averting escalation to major warfare in the crises that led up to the Great War, especially in the first and second Balkan wars. These crises, however, produced the need for the more economically integrated countries, most importantly Germany and Russia, to demonstrate an increasing resolve to support their weaker, less interdependent, allies, Austria-Hungary and Serbia. Alliances tightened after Germany and Russia took turns backing down under the pressure of war in previous crises. Tighter alliances increased the leverage of Balkan allies, but only by in effect handing the foreign policies of the interdependent powers over to countries that were less well integrated into the world economy, and thus had fewer reasons not to engage in war.
Economic integration could not forestall conflict where integration had yet to occur. And a partial European network of economic interdependence could not prevent war, once started, from spreading through the competing network of alliance commitments, making it more difficult for Western powers to take advantage of available economic linkages to their greatest pacific effect.
The world is different today from 1914, but there are enough similarities that it is tempting to draw on historical analogy. U.S. hegemony is on the wane, much as British hegemony was at the close of the 19th century. Rising powers were and are creating a more complex set of political dynamics, even as strong trading relations among the most prominent nations led and lead to liberal optimism, and realist skepticism, about peace. Tensions exist and existed between status quo nations and those nations that perceive that they have been denied their rightful status as they rise in power in world affairs. A naval arms race enshrouded Europe for the first two decades of the 20th century, much as one appears to be developing in Asia today. Prime Minister Shinzo Abe of Japan recently compared Sino-Japanese tensions to relations between Great Britain and Germany a century ago, citing strong trade relationships between both pairs of nations as well as the onset of world war. Will economic interdependence in Asia today again fail to prevent a major war?
The size and organization of existing trade networks suggest that Asia, like western European powers in the decades before World War I, is more likely to manage secondary crises without bloodshed. If interdependence works as theorized, disputes such as those over the Senkaku/Diaoyu Islands are more likely to be occasions of considerable posturing and no actual force. While no one likes to be the loser, excessive brinksmanship is not a practical strategy in the world that Japan, China and other developed nations inhabit today. Discretion is likely to rule these relationships, even if there is occasional grumbling from those on the short end of the stick. There is much to gain from tough talk, but more to lose by failing to pull back from the brink.
The larger risk to international stability today comes from nations cast in the role of the Eastern European powers a century ago. Lacking economic inhibitions and with no other methods to advance themselves, sovereigns in some countries will find it useful to heighten international tensions. North Korea is a prime example. Russia is on the cusp. Reliance on energy exports rather than a more diversified trading base has allowed President Putin to bluster more often and occasionally to engage in naked aggression, if only against minor powers so far. Fortunately, fewer of these countries exist today and most are on the periphery of the international system, not near its center.
Still, the risk with North Korea, Russia and others is much the same as that of Eastern European powers in 1914. Alliance ties produce their own logic of (non-economic) interdependence. Alliance ties can be forged in part because interdependent states find it difficult signal their resolve to fight. Nations with no wish for war can be drawn into contests simply because abandonment is not a viable option, shifting discretion to client states. The effectiveness of economic ties in producing or failing to produce peace is again, as it was a century ago, not so much about economics as it is about alliance commitments to nations with no such investment in stability. The relative scarcity of such relationships offers promise today, and hope that interdependence will prove more successful in fostering peace this time around.