Università di Pisa
Scuola Superiore Sant’Anna
Dipartimento di Economia e Management
Master of Science in Economics
The Interdependence
between Trade and Conflicts
A Theoretical and Empirical Assessment
Candidato:
Emanuele Bani
Prof. Alessio Moneta
Relatore:
Abstract
For ages economists, philosophers, historians, political scientists and many other thinkers and scholars have argued about the connections between world economy and international relations. Within this broad subject, two related and prolific debates exist: the possible peacekeeping or warmongering effects of trade and, inversely, the influences of warfare and peace on commerce. The present dissertation introduces a theoretical and empirical assessment about the interdependence between international trade and interstate conflict. In particular, a causal perspective on the issue is adopted. The first part presents the most renowned theories about trade and conflict, trying to extrapolate the alleged casual linkages behind them. In the second part, a detailed review of the previous empirical studies is provided. Furthermore, an empirical analysis on the interdependence between international trade and militarized interstate disputes (MIDs) is attempted employing a vector autoregression (VAR) model. Finally, personal considerations about the examined arguments conclude the thesis.
Contents
List of Figures ...iv
List of Tables ...vi
Acknowledgments ... viii
Introduction ... 1
1 Theoretical Analyses of Trade and Conflict ... 4
1.1 Definitions ... 5
1.2 The Effect of Trade on Conflict ... 6
1.2.1 Trade Promotes Peace... 7
1.2.2 Trade May Promote Peace ... 21
1.2.3 Trade Promotes Conflict ... 26
1.2.4 Trade Has an Insignificant Effect on Conflict ... 28
1.3 The Effect of Conflict on Trade ... 29
2 Empirical Literature Review ... 31
2.1 The Effects of Trade on Conflict ... 31
2.1.1 Unit level ... 31
2.1.2 Dyadic level ... 33
2.2 The Effects of Conflict on Trade ... 39 3 An Empirical Study ... 42 3.1 Data ... 42 3.2 Methodology ... 45 3.3 Results ... 47 Bibliography ... 53
List of Figures
Figure 1: The Gains from Trade (Polachek, Conflict and Trade, 1980) 17
Figure 2: Determination of the Optimal Level of Conflict (Polachek, Conflict and Trade,
1980) 19
Figure 3: Correlation between militarized conflict probability and trade openness
List of Tables
Table 1: Coefficient matrix 𝑩 of instantaneous effects from SVAR with 1 time lag 48
Table 2: Coefficient matrix 𝚪𝟏 of lagged effects from SVAR with 1 time lag 49
Table 3: Coefficient matrix 𝑩 of instantaneous effects from SVAR with 2 time lags 49
Table 4: Coefficient matrices 𝚪𝟏 and 𝚪𝟐 of lagged effects from SVAR with 2 time lags 50
Introduction
"Everybody is concerned about trade wars. If trade stops, war starts." This sentence was pronounced by Jack Ma on 4 February 2017 during the inauguration of Alibaba’s headquarter in Australia. The founder of one of the greatest e-commerce firms in the world seems to have few doubts about the logical linkage between trade and war: when trade is not allowed to express its values, war occurs. The Chinese tycoon did not forget to provide the motive for this conclusion: "Trade is about trade of values. Trade of culture." The argument by Ma could appear rather ordinary, even simplistic. Nevertheless, these few sentences reported on newspapers echo a long tradition of debate about the relationship between trade and war. A debate suddenly revived by the election of Donald Trump at President of the United States of America. Indeed, during the electoral campaign he promised to pose a limit to free trade deals that in his view had harmed United States’ economy. In particular, Trump has questioned the process of globalization as it has been conducted until now, arguing that free trade and the related phenomenon of offshoring have led to massive job losses within the country. Looking at the first months of his presidency, it seems that Trump really wants to move from words to action: on 23 January 2017 the withdrawal of United States from the Trans Pacific Partnership became effective by an executive order. Therefore, there is no wonder about the concerns of Ma, who has built his fortune on the values of trade. A deeper issue is to understand whether, as he argues, among these values it is possible to find that one that could be reasonably considered the most important one: peace.
Such events have constituted a crucial hint for choosing the subject of the present dissertation. Indeed, the principle aim consisted in dealing with a relevant argument of international political economy. This academic discipline, born within the broader field of political science, studies the reciprocal linkages between politics and economics on a world scale. The founder of this approach, the British scholar Susan Strange (1923 – 1998), claimed that it is not possible to fully interpret the complexity of political and economic global phenomena, adopting the point of view of a singular branch of knowledge. In this framework, it is clear that the debates about the possible peacekeeping or warmongering effects of trade and, inversely, the influences of warfare
and peace on commerce have occupied a prominent position in international political economy literature. Current events might furtherly revive the attention of scholars and general public on these topics in the following years.
The present dissertation is divided into three different parts. In the first one, the most renowned theoretical contributions about the relationship between trade and conflict are reviewed. An “history of ideas” approach has been adopted in order to treat the various authors. This choice is rather innovative, since the original treatise are rarely scrutinized and the names of the famous theorists that has joined the debate are often merely mentioned in recent studies. On the contrary it is a deliberate purpose to examine in depth the details that diversify the various theories among them, even if apparently similar at first glance. Furthermore, this process can allow to deduce the alleged causal linkages implied in the treatises of each author. A more careful reading of the original texts has indeed revealed that some common interpretations might not coincide with the authentic thought of the writer. In the second part, a considerable literature review of the empirical studies concerning the possible and varied relationships between trade and conflict is introduced. Finally, in order to actively assess the theme under study, an empirical analysis on the interdependence between international trade and militarized interstate disputes is attempted. In particular, vector autoregression models are employed in the analysis of a considerable dataset. The corresponding results are then interpreted on the ground of their empirical and theoretical implications.
In summary, without presumptions of completeness, exhaustiveness and perfection, the present work could be read as an useful introduction for whoever takes an interest in the debate about the connections between trade and conflict. Indeed, the theoretical and empirical reviews touch a large number of the major contributions on the issue in a middle way between the detailed study and the simple quote, providing a broad and sufficient knowledge in order to understand the fundamentals on the matter. Such convenient feature has been rarely found within the considered literature. Furthermore, the empirical study might suggest some practical insights for further empirical analyses, given the uncommon application of an econometric technique such as vector autoregression models. Finally, the peculiar multidisciplinarity of the topic has allowed to encompass themes and methods pertaining to different fields of study: a framework typical of the history of philosophy characterizes the first part, while economic and statistical approaches are adopted in the empirical treatment. Moreover,
a general historical overview of the phenomenon is appropriated in order to assess the long term narratives that have been involved in this everlasting debate.
1
Theoretical Analyses of Trade and
Conflict
In the first part of the dissertation an overview of the vast theoretical literature on the relationship between trade and conflict is presented. As most complex human activities, trade and conflict present multiple consequences, that may be considered as benefits or as disadvantages according to various analyses and points of view. The exclusive or mutual effects between the two phenomena have been debated for long time by theorists in various fields, politicians, journalists and even by the general public. Given the antiquity of both phenomena, it is possible to find references on this issue since ancient times till nowadays. Opinions vary according to the epochs, the places and the beliefs of the authors.
In order to explain the fundamental concepts of this everlasting debate, the definitions of trade, war, peace and conflict and some terminological notes are firstly introduced. Given these sufficient clarifications, the best renown theoretical contributions to the subject are examined. An approach typical of the “history of ideas” is adopted and, rather than following a chronological order, the theories are presented according to the claimed causal relationships between trade and conflict.
Therefore, a first partition is based on the direction of the alleged causal relationship, namely: has trade an influence on conflict? And conversely, does conflict impact on trade? The first theme regards the important question whether trade promotes peace or war. This is the actual core of the historical debate about the Pax Mercatoria: a debate that still endures and occupies a prominent position within international political economy studies. On the contrary, the beneficial influence of peace on commercial activities is a rather pacific conclusion. Nevertheless, it deserves proper attention due to its relevant implications.
Secondly, the theories that sustain an existing causal influence of trade on conflict can be gathered according to the nature of such effect, namely: trade has a peacekeeping, warmongering or insignificant effect on conflict. Within each category of this threefold basic classification, there exist various theses, that further differ due to the different
possible causes behind the common conclusion. For example, most Marxist-Leninists and some realists (two opposed schools of thought in international relations) both conclude that international trade has a negative effect on world peace; nevertheless, they provide two completely different analyses in order to support this view.
1.1 Definitions
According to the Cambridge Dictionary, trade is “the activity of buying and selling, or exchanging, goods and/or services between people or countries”. The entry accurately and conscientiously specifies that this kind of human activity can occur both among people, considered as individuals, and among political entities, across borders. This important specification is at the core of international economics: according to mainstream economics, the behaviour of individuals is in principle the same whether trade occurs between fellow countrymen or between foreigners. Nevertheless, the existence of sovereign states may affect trade activities influencing the choices of individuals: independent nations can indeed carry out different trade and monetary policies (perturbations usually absent in a free domestic market). It is then clear that international trade, that is trade that occurs between countries, presents relevant specific features, studied in a large subfield of international economics1.
Starting again from the Cambridge Dictionary, war is defined as an “armed fighting between two or more countries or groups”, while peace is meant to be the “freedom from war and violence, especially when people live and work together happily without disagreements”. It is clear that the two terms indicate two opposed states of human societies: whether war occurs peace does not, and the other way around. In each moment a given community should be possible to considered in one, and only one, of the two conditions. Furthermore, while peace is negatively defined2, war has a more
1 (Krugman, Obstfeld, & Melitz, 2012)
2 Indeed, in peace studies, this is the specific definition of “negative peace”. There actually exist
various definitions and theories of “positive peace”, which stress not only the absence of war but also the further presence of social justice. Since the absence of war is a prerequisite of both definitions and given the focus on “conflict” in the present dissertation, in the following pages
proper meaning. A more specialized definition was provided by a founding father of polemology, the Prussian general Carl von Clausewitz (1780 – 1831), in his renown work On War: “War is […] an act of force to compel our enemy to do our will”3. Modern
interpretations do not distance themselves too much from this concept: Bonanate speaks of “the volutary conflict between two fronts, each composed by many people and whose common aim is to bend the other”4. Given the variety and the complexity of the
phenomenon, it is difficult to provide a unique definition of war5; nevertheless, as the
previous statements point out, there exist some features that can be considered at its core, such as the voluntary display of force and violence in a conflict between groups of people. The nature of these groups is a relevant point in order to introduce an early classification of wars. Indeed, we talk about internal or civil war, when the factions belongs to the same nation, and of international war, when the groups involved represent whole countries.
In the present work, the two words “trade” and “war” mostly refer to their more restrictive senses of “international trade” and “international war” respectively. There exist studies about the relationship between trade and conflicts in smaller groups of people: in a sense, conflict economics starts from the basic assumption that appropriation by violence is an alternative to voluntary exchange at an individual level of choice. Nevertheless, even this more recent field of research, as most of the traditional debate conducted by philosophers, historians, international economists and international relations scholars on the matter, mainly ends up in theoretical descriptions, empirical validations and conclusions at an interstate level of analysis.
1.2 The Effect of Trade on Conflict
the world “peace” will be used only in its negative sense. See (Cortright, 2008) for a deepened analysis on the issue.
3 (Clausewitz, [1832] 2007) 4 (Bonanate, 2011)
5 See (Bobbio, Matteucci, & Pasquino, 2012) and (Bonanate, 2011) for a deepened analysis on
1.2.1 Trade Promotes Peace
The idea that one of the major benefit of foreign trade is to avoid war as a solution to international disputes was initially proposed by some famous philosophers mostly tighten to the Enlightenment in the eighteenth century and to classical liberalism in the nineteenth century. Therefore, the debate has been biased since the beginning by what Katherine Barbieri defines the unconditional trade hypothesis: trade promotes peace regardless of the nature and context of economic linkages6. For terminological clarity, it
is worthy to highlight that some scholar refer to this concept with the term “commercial liberalism”. Nevertheless, the latter expressions is more adapt to indicate a systematic treatise of the argument, i.e. to proper theories or to the corpus of such theories supporting the peacekeeping consequence of trade7. Many of the opposed positions
within the debate arise as reactions to the old and modern versions of this liberal stance.
The French jurist Jean Bodin (1530 – 1596), even if justly considered as a forerunner of mercantilism, “endorse[d] foreign trade not only on economic grounds but also “to maintain communication and keep good feeling among nations”8. In 1623 the French
monk and political writer Émeric Crucé (1590 ? – 1648) published Nouveau Cynée ou Discours d'Estat représentant les occasions et moyens d'establir une paix générale et la liberté de commerce pour tout le monde. In this book the idea of a universal peace plan is presented for the first time in political thought. The author stresses the necessity of a worldwide assembly for peace and strongly believes that wars are mostly driven by materialist considerations rather than theological issues and state-building ambitions9.
Furthermore, he acknowledges the classical economic view (that will be later studied by early economists) that free trade enriches people and nations, the “global city”, as he defines it. Therefore, once an initial universal peace is promoted by international agreements, commerce becomes easier and the productive classes of different nations become wealthier, satisfying their mutual materialist interests. The members of these classes would grow due to the incentive in pursuing such economic activities, and production and trade would further increase. The mutual interests that tight the “global city” makes war disadvantageous, so that the bellicose classes that had lead societies
6 Cf. (Barbieri, The Liberal Illusion: Does Trade Promotes Peace?, 2002)
7 For sake of simplicity, the two terms are used almost as synonyms in the present dissertation. 8 (Spiegel, 1991)
before would decline10. It is relevant to highlight that Crucé stresses the crucial
necessity of an initial stage of political agreement on peace, as a trigger for the consecutive virtuous cycle activated by the economic benefits of trade: indeed, the French author seems to suggest a one-to-one causal relation between trade and peace.
The famous philosopher of the Enlightenment Charles-Louis de Secondat, Baron de Montesquieu (1689 – 1755) seems to have few doubts about the relation between trade and peace. Indeed, in his renown work The Spirit of the Laws he clearly states:
“Certainly, when democracy is founded on commerce, it may very well happen that individuals have great wealth, yet that the mores are not corrupted. This is because the spirit of commerce brings with it the spirit of frugality, economy, moderation, work, wisdom, tranquillity, order, and rule. Thus, as long as this spirit continues to exist, the wealth it produces has no bad effect. The ill comes when an excess of wealth destroys the spirit of commerce; one sees the sudden rise of the disorders of inequality which had not made themselves felt before.” 11
In this statement, the French philosopher not only foresees the positive economic impact of trade on the wealth of nations, but he also suggests that the enrichement originated by trade causes a change in the spirit of individuals, that become more inclined to “moderation, work, wisdom, tranquillity, order, and rule”, the typical conditions for of peace.
Furthermore, he provides another connection, whose nature is even more economic, that links trade to peace besides the above-mentioned change of morality: the concept of interdependence is directly mentioned in the fourth part of the book:
“The natural effect of commerce is to lead to peace. Two nations that trade with each other become reciprocally dependent; if one has an interest in buying, the other has an interest in selling, and all unions are founded on mutual needs.”12
Economic interdependence among nations is an additional motive to avoid conflicts. This quote is often reported in the recent literature, especially by liberal scholars using
10 (Oneal, Oneal, Maoz, & Russett, 1996) 11 (Montesquieu, [1749] 1989)
the reference by Hirschman (1997). Reading the original text, it curious and worthy to note that Montesquieu subsequently provides deeper considerations about the “spirit of commerce”:
“But, if the spirit of commerce unites nations, it does not unite individuals in the same way. We see that in countries where one is affected only by the spirit of commerce, there is traffic in all human activities and all moral virtues; the smallest things, those required by humanity, are done or given for money.
The spirit of commerce produces in men a certain feeling for exact justice, opposed on the one hand to banditry and on the other to those moral virtues that make it so that one does not always discuss one's own interests alone and that one can neglect them for those of others.”13
Therefore, on the one hand, the French philosopher seems to praise trade as the way to provide men with the “feeling for exact justice”. On the other hand, he seems to be concerned about the loss of what could be considered as unselfish and altruistic values. This conclusion does not mean that Montesquieu weights the positive effects of trade on peace with the negatives one on individual behaviours: commerce is the only way that countries can follow in order to enrich themselves without overwhelming drawbacks. Nevertheless, the complexity and the nuances of his reasoning should not be forgotten.
David Hume (1711 – 1776), the prominent figure of the Scottish Enlightenment, was a strong opponent of mercantilism and supported free trade also on the ground of a general argument for international harmony. His biographer John H. Burton summarises the core of Hume’s thought on the political economy of peace as follows:
“[…] commercial restrictions deprive the nations of the earth " of that free communication and exchange, which the author of the world has intended by giving them soils, climates, and geniuses, so different from each other ; " and that, like the healthy circulation of the blood in living bodies, Free Trade is the vital principle by which the nations of the earth are to become united in one harmonious whole.”14
13 Ibid.
Immanuel Kant (1724-1804) is considered as a founding father in many peace theories, including the liberal democratic theory15. In his treatise Perpetual Peace: A
Philosophical Sketch, the philosopher argues that universal peace among nations has three fundamental determinants: democracy, the respect of the legitimate rights upon which a structure of international organizations can be built and economic interdependence. With respect to the latter issue, he states:
“Just as nature has wisely divided the peoples from one another, whom the will of any state would seek to unite under it through deception or violence, even on the basis of international right, it also unites, by means of mutual self-interest, peoples whom the concept of cosmopolitan right would not have secured against violence and war. It is the spirit of trade, which cannot coexist with war, which will, sooner or later, take hold of every people. Since, among all of the powers (means) subordinate to state authority, the power of money is likely the most reliable, states find themselves forced (admittedly not by motivations of morality) to promote a noble peace and, wherever in the world war threatens to break out, to prevent it by means of negotiations, just as if they were therefore members of a lasting alliance. For the great alliances for the purpose of waging war, as is the nature of the matter, can arise only very rarely, and even more seldom can they succeed.—In this way nature guarantees perpetual peace through the mechanism of human inclinations itself. To be sure, it does this with a certainty that is not sufficient to foretell the future of this peace (theoretically), but which is adequate from a practical perspective and makes it a duty to work toward this (not simply chimerical) goal.”16
Nevertheless, the three factors do not share the same features: trade is a necessary enforcement to the legal and moral changes. Republican constitutions and the adoption of cosmopolitan rights are prerequisites to the pacific effect of economic exchange and, without them, trade between undemocratic states may end up in exploitation and violence: in fact, only free citizens of different countries that are not submitted to autocratic powers voluntary trade in order to share mutual benefits. Given the existence of such benefits, free citizens dissuade political power from undertaking conflicts. At the same time, material interests satisfied by trade are necessary to let
15 (Kamel, 2015) 16 (Kant, [1795] 2006)
these political achievements endure: indeed, the plenty resulted from trade enforce the conviction that democracy and cosmopolitan rights lead to prosperity. The positive “spirit of commerce” is therefore the consequence and the defender of political liberalism in different stages of the process toward the “perpetual peace”17.
Thomas Paine (1737 – 1809), one of the Founding Fathers of the United States, similarly focuses on the mutual advantages from trade that reduce conflicts between states. In Common Sense (1776), he writes: “our plan is commerce, and that, well attended to, will secure us the peace and friendship of all Europe; because it is in the interest of all Europe to have America as a free port. Her trade will always be a protection”18. Furthermore, the American thinker argues in Letter addressed to the
abbe Raynal on the affairs of North-America (1782) that trade also affects the “human mind”. In a sense, the American Revolution itself was guided by the values of commerce. Therefore, commercial practices push nations to ask for liberal pacific institutions. Paine also stresses the other side of the casual relationship: the insurgence of new institutions with respect to old monarchies is a necessary passage in order to promote the peaceful cosmopolitan values of liberalism. Under this new course of peace, trade would flourish, leading mankind to the eventual goal of prosperity.
The British statesman Richard Cobden (1804 – 1865) was one the most convinced supporter of free trade in the first half of 19th century, founding with John Bright (1811
– 1889) the Anti-Corn-Law League. In two pamphlets, England, Ireland, and America. By a Manchester Manufacturer (1835) and Russia (1836), he argues that protectionism should be defeated pursuing two simultaneous policies: non-interventionism in foreign countries affairs and unilateral free trade liberalization19.
Indeed, the problem of democratic governments is not to conduct wars in order to protect commerce, rather to let other nations know that the spreading free trade has a positive effects on their economies. According to the liberal politician, the powerful example of such policies is the strongest weapon to be employed. Nevertheless he also acknowledges that free trade does not always promotes peace: in some particular cases (such as loans to foreign states with the aim of purchasing of arms) politics should still correct mere economic interests. As the historian Harry Hinsley puts it, “He worked for free trade because he wanted peace, not for peace because he wanted free trade”20. The
beliefs of Cobden and Bright were later maintained by William Gladstone (1809-1898),
17 (Gelpi & Grieco, 2003) and (Kant, [1795] 2006) 18 (Blackwill & Harris, 2016)
19 (Wolf, 1998)
another important British politician who served as Prime Minister during the late 19th
century. Notwithstanding his liberal convictions against colonialism and trade barriers, he was eventually obliged to adopt discordant policies during his mandate, such as the occupation of Egypt21.
One of the most famous economist of all times, John Stuart Mill (1806 – 1873), not only was convinced of the economic benefits of trade, but at the end of the 13th (Mill,
[1848] 1885) Chapter of the Principles of Political Economy (1848) he also remarks:
“the economical advantages of commerce are surpassed in importance by those of its effects which are intellectual and moral. It is hardly possible to overrate the value, in the present low state of human improvement, of placing human beings in contact with persons dissimilar to themselves, and with modes of thought and action unlike those with which they are familiar. Commerce is now, what war once was, the principal source of this contact. Such communication has always been, and is peculiarly in the present age, one of the primary sources of progress. Finally, commerce first taught nations to see with goodwill the wealth and prosperity of one another. Before, the patriot, unless sufficiently advanced in culture to feel the world his country, wished all countries weak, poor, and ill-governed but his own: he now sees in their wealth and progress a direct source of wealth and progress to his own country. It is commerce which is rapidly rendering war obsolete, by strengthening and multiplying the personal interests which are in natural opposition to it. And it may be said without exaggeration that the great extent and rapid increase of international trade, in being the principal guarantee of the peace of the world, is the great permanent security for the uninterrupted progress of the ideas, the institutions, and the character of the human race.”22.
Therefore, Mill asserts that the economic interests have the power to force individuals to avoid conflicts: even a patriot should acknowledge that the benefits of trade enrich the country more than war. The British economist also touches upon the positive effect of communication between people as a source of progress, and views commerce as the new form of such communication. Nevertheless, it is not properly clear whether
21 (Copeland, 2015) 22 (Mill, [1848] 1885)
progress is a synonym of peace; rather it is seemed to be asserted that war was the previous manner of communication, fortunately substituted by more convenient trade.
Another Nobel Peace Prize winner, the United States Secretary of State during the Franklin Delano Roosevelt (1882 – 1945) presidency and Cordell Hull (1871 – 1955) leaded the political revival of the liberal thesis after World War II. He already matured his view during the years as member of the Congress during World War I:
“When the war came in 1914, I was very soon impressed with two points. […] I saw that you could not separate the idea of commerce from the idea of war and peace. […] wars were often largely caused by economic rivalry conducted unfairly. […] But toward 1916 I embraced the philosophy that I carried throughout my twelve years as Secretary of State. […] From then on, to me, unhampered trade dovetailed with peace; high tariffs, trade barriers, and unfair economic competition, with war. Though realizing that many other factors were involved, I reasoned that, if we could get a freer flow of trade —freer in the sense of fewer discriminations and obstructions— so that one country would not be deadly jealous of another and the living standards of all countries might rise, thereby eliminating the economic dissatisfaction that breeds war, we might have a reasonable chance for lasting peace.”23
These arguments influenced the President Woodrow Wilson’s (1856 – 1924) Fourteen Points, in particular the second and the third ones:
II. Absolute freedom of navigation upon the seas, outside territorial waters, alike in peace and in war, except as the seas may be closed in whole or in part by international action for the enforcement of international covenants.
III. The removal, so far as possible, of all economic barriers and the establishment of an equality of trade conditions among all the nations consenting to the peace and associating themselves for its maintenance.
In accordance to this reasoning, the fall in world commerce during the 1930s was considered the main cause of the greatest war experienced by mankind. As delegate at the Bretton Woods conference in 1944, he argued for the elimination of tariffs and
barriers in order to allow a long-lasting world peace. The theory by Hull could be defined as a “theory of war”, rather than a “theory of peace”. Indeed, the idea seems to be that restrictions to international commerce certainly conduct to war, and that therefore free trade should be supported. Nevertheless, this favourable condition may not be sufficient in order to obtain peace, as soon as other factors affect the condition of foreign relations24.
Economists Jacob Viner (1892 – 1970) and Eugene Staley (1907 – 1989), both members of the Council on Foreign Relations, shared similar liberal views about the pacific effects of trade. Nevertheless, the explanations proposed differentiate themselves from the standard arguments of mutual interdependence above described. On the one hand, according to Viner “barriers to international economic activity stimulate conflicts of interest that can contribute to political-military discord”25. On the
other hand, Staley starts his reasoning from the concept of Smithian growth: economic welfare depends on the division of labour, that derives in turn on the extension of the market. Economic nationalism limit this process of economic expansion, and growth arrests. In such case a Malthusian dilemma becomes actual again: countries with a growing or copious population should accept decreasing, or at least stable, living standards or consider expansionism and conquer as necessary alternatives26. In his The
World Economy in Transition, he concludes:
“To the extent, then, that large, important countries controlling substantial portions of the world’s resources refuse to carry on economic relations with the rest of the world, they sow the seeds of unrest and war. In particular, they create a powerful dynamic of imperialism. When economic walls are erected along with political boundaries, possession of territory is made to coincide with economic opportunity. Imperialistic ambitions are given both a partial justification and a splendid basis for propaganda.”27
24 This conclusion could be also derived by another statement by (Hull, 1948): “a revival of
world trade [would be] an essential element in the maintenance of world peace. By this I do not mean, of course, that flourishing international commerce is of itself a guaranty of peaceful international relations. But I do mean that without prosperous trade among nations any foundation for enduring peace becomes precarious and is ultimately destroyed.”
25 (Mansfield & Pollins, Economic Interdependence and International Conflict: An Introduction,
2003)
26 Cf. (Keohane, International liberalism reconsidered, 1990) 27 (Staley, 1939)
Therefore, according to the American economist, a properly regulated and organized international environment that allows fair forms of commerce encourages production rather than the violent alternative of war.
The prominent political scientist Karl Wolfang Deutsch (1912 – 1992) considers trade as a relevant component of his analysis on international integration. In his view, it is possible to build the democratic peace that Kant foresaw within a “secure community”, i.e. a group of people or nations that does not expect to go to war among them and therefore does not prepare for it. This kind of community arises from a political, economic and social integration. Phenomena such as shared democratic values, economic interdependence and institutional linkages are particularly strong in tightening a secure community. In turn, the multiple benefits that the participants experience, and the simultaneous high costs of quitting, furtherly strengthen the integration. Trade, as well as capital flows, and other forms of social and institutional exchange are the sources of the avoidance of war as a resolution of conflicts28.
In an influential paper (Polachek, Conflict and Trade, 1980) applies for the first time microeconomic theory in order to analyse the relationship between international trade and conflict. The American scholar arranges his theoretical arguments29 in support of
the trade-promotes-peace hypothesis in two ways and, in both cases, he employs economics.
Firstly, he simply restates standard economic theory: it may seem a naïve solution but actually no previous liberal theorist arguing about commercial peace had explicitly and formally mentioned economic models in the modern sense. On the contrary, Polachek provides a brief but proper overview of the Ricardian model of comparative advantage, the most famous explanation of the gains from trade30. Each country desires to
maximize its social welfare by reaching the possible highest level of material wealth. In the international context, each country differs in terms of technology and endowments of resources and factors of production. Given these diversities, the advantages of national specialization of production become clear: therefore, countries tend to produce the commodities for which they have a comparative advantage and trade for commodities whose production would be less efficient. In this system conflict is
28 Cf. (Cortright, 2008)
29 He also provides an empirical analysis on the issue (see Part II).
30 The Ricardian model was presented in the Essay on the Influence of a Low Price of Corn on
the Profits of Stock (1815) and in the On the Principles of Political Economy and Taxation (1817) by the British political economist. A first mathematical interpretation was proposed by William Whewell in 1833 and the early empirical tests go back to the 1950s.
assumed to negatively affect trade. Indeed tariffs, quotas, embargoes and other form of commercial restrictions usually rise when bad political relations between states occur. In turn, trade losses worsen national welfare. This standard trade model is graphically described in Figure 131. The curve 𝐴𝐵 represents the production possibility frontier of a
given country, i.e. the possible combinations of the maximum amounts of commodities 𝑥 and 𝑦 that it can produce. The curve 𝑤2 shows the welfare level if the given country does not participate international trade. On the contrary, the curve 𝑤5 represents the welfare level if trade is allowed at the price ratio 𝑃𝑥
𝑃𝑦
32. Since 𝑤5> 𝑤2, the welfare gains from trade can be clearly deduced. However, if tariffs or other commercial restrictions occur, relative prices are affected, so that the slope of the trade line changes to 𝑚′. Given the new prices, welfare reduces to its 𝑤4 level. Indeed, the author concludes:
“Thus the price of being belligerent is an implicit price that increases with the level of trade. Ceteris paribus, the greater the amount of trade, the higher the price of conflict, and the less the amount of conflict that is demanded.”33
The standard trade model presented by Polachek can be considered as the standard economic foundation of the interdependence argument: governments are rational agents and, once they have understood by their own experience the gains from trade, avoid conflict in order to prevent losses of national wealth. Polachek formally justifies one (and perhaps the most relevant) of the traditional trade-promotes-peace hypothesis, according to which commercial linkages between countries promotes a mutual dependence that makes conflictual relationships very onerous and eventually prevents them.
31 Standard textbooks of international economics, among which (Krugman, Obstfeld, & Melitz,
2012), usually report similar models.
32 In Figure 1 the absolute value of the price ratio is considered, since actually the slope 𝑚 is
negative.
Figure 1: The Gains from Trade (Polachek, Conflict and Trade, 1980) Secondly, a further model is presented in the appendix of the paper. In this case, the author does not use the existing economic theory to derive some logical implications on the relationship between trade and conflict but he applies microeconomic methods to create a specific model that directly takes into account a variable of conflict. Polachek adopts an expected utility theory approach. A representative country consumes 𝑖 = 1, … , 𝑛 commodities and produces 𝑄 = {𝑞1, 𝑞2, … , 𝑞𝑖} volumes of them. Furthermore, it maintains commercial and political relations with 𝑗 = 1, … , 𝑘 foreign countries. In order to describe the political ones, a vector of NETF value 𝑍 = {𝑧1, 𝑧2, … , 𝑧𝑘} is employed. The NETF (net frequency of conflict) index is computed as the frequency of conflictual events minus the frequency of cooperative events. Therefore, if the value is negative cooperative interactions exist while if it assumes a positive value conflictual relations occur. The volumes of commercial relations are represented by the exports of
commodity 𝑖 to country 𝑗, 𝑥𝑖𝑗, and by imports of commodity 𝑖 from country 𝑗, 𝑚𝑖𝑗. It is hypothesized that import and export prices are affected by hostility, so that 𝑃𝑥𝑖𝑗 = 𝑓(𝑧𝑗) with 𝑃𝑥𝑖𝑗
𝜕𝑧𝑗 =
𝜕𝑓(𝑧𝑗)
𝜕𝑧𝑗 < 0 is a decreasing function of net conflicts and 𝑃𝑚𝑖𝑗 = 𝑔(𝑧𝑗) with
𝑃𝑚𝑖𝑗 𝜕𝑧𝑗 =
𝜕𝑔(𝑧𝑗)
𝜕𝑧𝑗 > 0 is an increasing function of net conflicts. Indeed, if the representative
country wants to start a conflict with a foreign one, this usually requires a reduction on the price of exports to induce the opponent to purchase the domestic commodities and restrictions of imports from the adverse country. If the balance of trade is assumed to be in equilibrium, then ∑ ∑ 𝑃𝑥𝑖𝑗𝑥𝑖𝑗 𝑗 𝑖 − ∑ ∑ 𝑃𝑚𝑖𝑗𝑚𝑖𝑗 𝑗 𝑖 = 0
The desired consumption of the given country is represented by the volume of all the commodities 𝑖 = 1, … , 𝑛 produced, plus the imported ones and minus the exported ones.
𝐶 = 𝑄 + ∑ 𝑚𝑖𝑗 𝑗
− ∑ 𝑥𝑖𝑗 𝑗
Finally, the welfare function of the representative country is
𝑊 = 𝑊(𝐶, 𝑍)
The problem of the representative country is therefore to identify the optimal levels of conflict or cooperation given the existing consumption and trade patterns, i.e. maximize 𝑊 = 𝑊(𝐶, 𝑍), given the balance of payments. In mathematical terms, this is expressed by the following optimizing equation
max 𝑧 ℒ(𝑍; 𝐶) = 𝑊(𝑍; 𝐶) + 𝜆 [∑ ∑ 𝑃𝑥𝑖𝑗𝑥𝑖𝑗 𝑗 𝑖 − ∑ ∑ 𝑃𝑚𝑖𝑗𝑚𝑖𝑗 𝑗 𝑖 ]
That leads to the following first order conditions:
𝜕ℒ 𝜕𝑍= 𝜕𝑊 𝜕𝑍 + 𝜆 [∑ ∑ 𝜕𝑃𝑥𝑖𝑗 𝜕𝑍 𝑥𝑖𝑗 𝑗 𝑖 − ∑ ∑𝜕𝑃𝑚𝑖𝑗 𝜕𝑍 𝑚𝑖𝑗 𝑗 𝑖 ] = 0
and 𝜕ℒ 𝜕𝜆 = ∑ ∑ 𝑃𝑥𝑖𝑗𝑥𝑖𝑗 𝑗 𝑖 − ∑ ∑ 𝑃𝑚𝑖𝑗𝑚𝑖𝑗 𝑗 𝑖 = 0
The second equation is simply a restatement of the constraint, i.e. the balance of payment. The first one can be employed in order to obtain the optimal level of conflict. In Figure 2, the curve 𝐷𝐷’ represents the welfare marginal benefits of conflict 𝜕𝑊
𝜕𝑍 and curves 𝐴𝐴’,𝐵𝐵’ and 𝐶𝐶’ show marginal net costs of conflict originating from commercial relations ∑ ∑ 𝜕𝑃𝑥𝑖𝑗 𝜕𝑍 𝑥𝑖𝑗 𝑗 𝑖 − ∑ ∑ 𝜕𝑃𝑚𝑖𝑗 𝜕𝑍 𝑚𝑖𝑗 𝑗
𝑖 . The graph illustrate how an increase in the level of trade from an initial equilibrium 𝐷𝐴̇ leads to a lower level of hostility due to the higher costs of conflicts in 𝐷𝐵̇. On the contrary, if trade decreases the country becomes more bellicose, as the equilibrium 𝐷𝐶̇ shows. In synthesis, as Polachek states: “countries involved in more trade have on balance higher costs of conflict, and hence ceteris paribus are hypothesized to engage in less conflict”34.
Figure 2: Determination of the Optimal Level of Conflict (Polachek, Conflict and Trade, 1980)
However, Polachek’s model has received various and relevant critiques. Firstly, the simplicity and the tautology of the assumptions, that straightforwardly lead to the desired conclusion. Secondly, more specific deficiencies are present: it does not take into account strategic interdependence, that differs from the mere economic one, and assumes a scale measurement of conflict such as NETF is possible, a not shared view in the following years. For these reasons, most political scientists have abandoned expected utility models in favour of other tecniques35. Nevertheless, Polachek and other
scholars have continued to develop further and refined versions of the original model in successive publications36.
The American political scientist Richard Rosecrance provides one of the most recent and famous version of the liberal trade-promotes-peace hypothesis. The theory exposed in his work The Rise of the Trading State has become a foundational argument of modern commercial liberalism. Adopting a multidisciplinary view, Rosecrance argues that since the peace of Westphalia the circumstances have changed, and the forms of states have changed as well. The old “military”, “political” or “territorial” is disappearing in favour of the new “trading state”, that better suits an international environment of increasing international commerce, investment and economic relationships in general. Territorial states desire to obtain greater national power and they think that the best way to achieve this goal is military expansionism. This is not the case of trading states, whose aims regard national material wealth. Since international trade is a major source of prosperity, trading states are able to understand that war could only endanger their fundamental objective. In summary, the growth of international trade of the last centuries has fostered the shift, at least in some countries, from territorial to trading states which are sufficiently rational to avoid conflicts. It is worthy to note that this statement of commercial liberalism presents particular features: indeed, Rosecrance does not argue that economic interdependence per se necessarily brings more peaceful relations, rather that trade and economic interdependence promote institutional forms that are more aware of the negative consequences of war37. The example of Germany in the first half of the twentieth
35 Cf. (Barbieri & Schneider, Globalization and Peace: Assessing New Directions in the Study of
Trade and Conflict, 1999)
36 Cf. (Polachek, Conflict and Trade: An Economics Approach to Political International
Interactions, 1992), (Polachek, Why Do Democracies Cooperate More and Fight Less: The Relationship between International Trade and Cooperation, 1997) (Polachek, Robst, & Chang, Liberalism and Interdependence: Extending the Trade-Conflict Model, 1999) (Polachek, Robst, & Chang, Geographic Proximity, Trade, and International Conflict/Cooperation, 2007) and (Polachek & Seiglie, Trade, Peace and Democracy: An Analysis of Dyadic Dispute, 2007).
37 Cf, (Ripsman & Blanchard, Qualitative Research on Economic Interdependence and Conflict:
century is paradigmatic according to the author. Notwithstanding the high level of economic interdependence with the Britain, the Second Reich was still an old military state, so that it could not understand the risks of the First World War. Then, with the fall of international commerce during the interwar period, every effort towards the consolidation of a modern state became vain and eventually war occurs again38. Other
renown contemporary scholars in the field, such as John Oneal and Bruce Russett, have departed their analyses starting from the argumentations of Rosecrance.
1.2.2 Trade May Promote Peace
The author and politician Norman Angell (1872 – 1967) studied the powerful forces of open markets on the wake of Adam Smith and the old British tradition of liberals and economists. Nevertheless, even if he recognizes the indebtedness of these illustrious predecessors, Angell regrets the natural and eternal validity of the previous statements: he acknowledges that it is correct to praise the powerful forces of free markets in establishing a new, more civilized and rational society, but such forces did not pre-exist modernity. Contrary to what was argued by previous authors, markets are not the natural base of social life, numb by the irrationality of the ancient systems, rather they are a product of the specific historical and economic conditions that characterize modern societies. In a sense, he could be considered the first structural-functionalist liberal, who leaved the natural law principle to adopt the sociological one39. The
modern system of production is founded on the economies of specialization and on the division of labour. Therefore, interdependence becomes the natural condition of modern societies: every individual becomes highly specialized in a single function, so that he needs that all the other activities necessarily to survived are fulfilled by other individuals. Within this framework, international trade, that is no more restricted to a minor part of population and to limited kinds of goods, fosters specialization of entire nations. Therefore, countries become interdependent among them, in the sense that their economic prosperity derives from their specific role in the global market. In 1910 Angell published The Great Illusion, that could be considered a summa of his thought and that would become a milestone of commercial liberalism. In that period, Britain
38 Cf. (Copeland, 2015) 39 Cf. (Navari, 1989)
and Germany, even if their economies were highly interdependent, displayed conflictual relations and conducted an actual naval arms race. The aim of Angell was to publicly assert the usefulness of conflicts in the era of modernity, to debunk the “great illusion” that political power, militarization and eventually war could enrich nations. A new shared “economic thinking”, based on rational and utilitarian principles that acknowledges the importance of international specialization, should guide politics. Thanks to his work, the British author received the Nobel Peace Prize in 1933.
Norman Angell is cited in most studies about trade and conflict relation. Nevertheless, the theory illustrated above reveals that further specifications should be considered. In this case, it seems that a proper casual relation that supports the trade-promotes-peace hypothesis is absent. Indeed, Angell does not argues that commerce fosters good relations between countries, instead he supports that peace rather than war is the more rational political choice in order to promote the wellbeing of nations. Therefore, only if the political agent is considered to be rational a causal relation could have been inferred: understanding the worthless costs of international conflicts, government should (with “economic thinking”) commit themselves to promote an universal peace, the better way to take the advantages of modernity. Nevertheless, Angell does not seem to suppose that political élites are rational (the fact itself that he wrote the book with the aim of convincing European governments to avoid a major conflict could be considered as a proof). Therefore, if politicians are not considered as rational agents, trade cannot directly cause peace, that is rather and eventually the result of a political choice.
Albert Otto Hirschman (1915 – 2012) was one of the first economist to investigate the relationship between international trade and politics. In his famous work National Power and the Structure of Foreign Trade (1945) he analyses how Germany employed commerce as an instrument of statecraft at the expenses of its south-eastern European allies during the Second World War: Bulgaria, Hungary and Romania were pushed to support the Axis powers due to the asymmetrical dependence relation with the Third Reich. The strategic employment of trade committed by Germany is explained in an exemplar way by (Solingen, 2003):
“[…] importing goods for which there are no substitutes at home and those required for its war machine while actively deindustrializing weaker potential competitors and making neighbours dependent on industrial exports in which the hegemon enjoys a monopolistic position.
An imperial commercial strategy allows a large backlash regional power to maximize economic profit, military power, and regional influence, all of which sustain and reproduce its ruling backlash coalition.”
Once this economic and foreign policy has succeeded, the roles became asymmetrical and it is appropriate to speak of dependence rather than interdependence: a situation in which a weaker country, with few commercial partners and opportunities to change them, values trade more than the powerful one. Hirschman acknowledges the mainstream view that both countries share the benefits of international trade, nevertheless in the case in which trade stops the powerful country would be less harmed than the weaker one. Therefore, this threat let the weaker country more subject to the political willingness of the powerful one, that could threaten repercussions whether contumacy occurs.
A first consideration to be made about the theory of Hirschman is that the liberal portrait of harmonious commercial cooperation may not always be the case, and the historical example provided demonstrates that political reasons, rather that only economic ones, may have a considerable influence on trade policy40. Nevertheless, the
economist does not elaborate nor clarify the presence of a universal causal relationship from trade to conflicts: Hirschman simply cautions the advocates of the unconditional trade-promotes-peace hypothesis that, when foreign trade is employed as an instrument of foreign policy, it promotes the political will of the strongest partner, whether peaceable or warmongering. Some bolder interpretations assert that causal linkages actually emerge from Hirschman analysis. However, such relations are ambivalent also in this case: in particular, asymmetrical interdependence would lead to conflictual relationships while symmetrical forms of exchange would promote peaceful ones41.
The theory of economic interdependence proposed by Robert Keohane and Joseph Nye, two prominent figures of neoliberalism in international relations42, can be considered a
refined evolution of Hirschman’s arguments. Indeed, in their famous work Power and Interdependence the two political scientists argue that economic interdependence does not necessarily lead to the pacification of foreign policies and can be on the contrary
40 Cf. (Barbieri & Schneider, Globalization and Peace: Assessing New Directions in the Study of
Trade and Conflict, 1999)
41 Cf. (Schneider, 2010)
42 It is worthy to highlight that neoliberalism is a school of thought within international relations
employed as an instrument of statecraft in order to pursue both economic and political goals. A first differentiation operated by Keohane and Nye are the definitions of dependence, interdependence and interconnectedness:
“[…] dependence means a state of being determined or significantly affected by external forces. Interdependence, most simply defined, means mutual dependence. Interdependence in world politics refers to situations characterized by reciprocal effects among countries or among actors in different countries.
These effects often result from international transactions—flows of money, goods, people, and messages across international boundaries. […] Yet this interconnectedness is not the same as interdependence. The effects of transactions on interdependence will depend on the constraints, or costs, associated with them. A country that imports all of its oil is likely to be more dependent on a continual flow of petroleum than a country importing furs, jewelry, and perfume (even of equivalent monetary value) will be on uninterrupted access to these luxury goods. Where there are reciprocal (although not necessarily symmetrical) costly effects of transactions, there is interdependence. Where interactions do not have significant costly effects, there is simply interconnectedness. The distinction is vital if we are to understand the politics of interdependence.”43
Therefore, a situation of economic interconnectedness between countries can remain stable, not implying particular costs, or evolve towards dependence or interdependence, according respectively to the smaller or greater reciprocity in sharing the costly effects of the relationship. Within this framework a further specification is operated between sensitivity and vulnerability:
“In terms of the cost of dependence, sensitivity means liability to costly effects imposed from outside before policies are altered to try to change the situation. Vulnerability can be defined as an actor’s liability to suffer costs imposed by external events even after policies have been altered. Since it is usually difficult to change policies quickly, immediate effects of external changes generally reflect sensitivity dependence.
Vulnerability dependence can be measured only by the costliness of making effective adjustments to a changed environment over a period of time.”44
Therefore, in the case of dependence or interdependence between two countries, sensitivity indicates the costs that they will face if the existing bond dissolves. In particular, such costs will be equally shared if interdependence occurred, while they will weigh on the weaker partner in case of proper dependence. On the other hand, vulnerability indicates the capacity of one country to compensate the costs and recover from them once the economic relationships has been broken, that essentially corresponds to the capacity of one country to substitute the given economic partner with another in case of conflict.
At the light of analysis by Keohane and Nye, the causal relationship that runs from trade to conflict can be summarized as follows. International commerce is initially a form of interconnectedness that may evolve in forms of economic interdependence or dependence. In the first case, trade can promotes peace: indeed, in case of conflict both of them would be equally damaged and no superiority of one on the other occur. Therefore, the equal sharing of costs make pacific relations more convenient. Nevertheless, if one country commercially depends on its partner and such dependency is highly vulnerable (a not uncommon possibility in reality), the counterpart is able to make use of trade as a blackmail policy instrument. The constricting power of the stronger country may be used for both pacific or bellicose aims, but in foreign relations studies coercion against the will of other sovereign countries could be considered as a form of conflict per se. In summary, trade may promotes peace as well as conflicts and this is especially determined by the nature of the existing economic interdependence.
The hypotheses that asymmetrical commercial relationships promote conflict between countries are also very popular among dependency theorists45 and neo-Marxist political
scientists. Indeed, the formers argue that, when trade occurs between developed and developing states, only the first ones enjoy the gains from trade while the development of the second ones is furtherly retarded. Therefore, the concentration of power in the hands of rich countries increases with the expansion of trade, making the dependent countries vulnerable to foreign political and economic influence. A similar view is
44 (Keohane & Nye, Power and Interdependence, [1977] 2012)
45 Dependency theory’s founders and most renown supporters were the economists Hans Singer
(1910 – 2006) and Raúl Prebisch (1901 – 1986), which indeed took their inspiration from Hirschman’s National Power and the Structure of Foreign Trade.
shared by neo-Marxists, according to which capitalist states pursue the economic interests of the bourgeois class and, whether the exploiting commercial relations with third world countries (although covered by an alleged universally beneficial free trade) is not possible, such interests are promoted through imperialist wars and conflicts. Therefore, both these schools of thought support the idea that, unless it occurs at equal conditions, international trade may promote tensions and unpleasant interstate relations.
Finally, also conflict economics theorists can be considered part of the group of authors that believe in the disjunctive causal effect of trade on conflict46. In this field conflict is
considered as a rational economic activity and it is studied adopting typical microeconomic approaches, game theory in particular. According to one of the major exponent of the discipline, Jack Hirshleifer (1925 –2005), predation and conflict constitute indeed another feasible (even if not morally fair) way in order to satisfy material needs, alternative to production and exchange47. Within this framework,
conflict may happen in two cases. Firstly, when the agent has precisely to opt between production and exchange or predation, according to the costs of each possibility. Secondly, trade is chosen, and this is possibility is usually considered as the most desirable given the assumption of gains from trade, conflict between the two parties may arise about the redistribution of such gains. To cite (Polachek & Seiglie, Trade, Peace and Democracy: An Analysis of Dyadic Dispute, 2007):
“Thus to game theorists the logic is simple: first, trade creates trade gains; second, trade gains must be divided; finally, dividing trade gains leads to conflict. Following the logic through, trade leads to conflict.”
1.2.3 Trade Promotes Conflict
Another Founding Father of the United States, Alexander Hamilton (1755 – 1804), was sceptical about the positive effect of trade on foreign relations. His ideas about the future of American economic policy were inspired by mercantilist thinkers, such as Jean-Baptiste Colbert, and for this reason he is considered the forerunner of the
46 Cf. (Polachek & Seiglie, Trade, Peace and Democracy: An Analysis of Dyadic Dispute, 2007) 47 Cf. (Kapstein, 2003)
American School of economics, according to which the protection of “infant industries” and state intervention constitute the solid foundation for the prosperity of a developing country (as were United States in the second half of the nineteenth century). In his The Federalist Papers, Hamilton debunks the myth of a “Golden Age” of peace and prosperity driven by democracy and exchange: on the contrary, the American politician argues that behind a great number of wars in history economic motives, and in particular the commercial ones, assume considerable relevance. In support to this view, the various wars fought between republics, like Holland, and kingdoms, like England and France, that were at the same time the most involved countries in international trade, contradict the utopic optimism of the advocates of both democratic and commercial peace. Therefore, the casual conclusion that can be deduced by the writings of Hamilton is that as foreign trade increases, economic rivalries emerge, so that international disputes are more likely to happen.
Marxist-Leninist tradition has historically opposed to the idea that free trade could bear any benefit. This conviction is so strong that paradoxically Karl Marx (1818 – 1883) is actually a supporter of free trade: indeed, the liberalization of international commerce is considered by the German philosopher a source of tensions such powerful and destabilizing that it would end up in accelerating the crisis of the capitalist system. Marxian ideas had notable influence on his followers, in particular on some theorists of imperialism48. Rosa Luxemburg (1871 – 1817) bases her theory of imperialism on the
undercomsumption theory of trade cycle and overproduction theory: the tendency of working class to dispose of lesser and lesser amount of income for consumption ends up in convincing capitalists to conquer international markets. This struggle counterposes the governments of different capitalist countries and results in conflicts and wars. The same conclusion is suggested by Lenin (1870 – 1924) in his work Imperialism: The Highest Stage of Capitalism, but in this case the rationale of the contest is the financial, rather than the commercial, control of new markets. In these authors, it is not free trade per se that fosters conflict between nations, rather free trade as a necessary phenomenon of capitalism, which is the original cause of wars in the industrial era. Free trade properly exacerbates a particular case of conflict, that is class struggle at a world level. On the contrary, concerning interstate conflicts, wars are made in order to trade, so that the inverse causal relationship may be inferred: interstate conflicts harm current international commerce but will increase the future one (at least that one of the winning capitalist countries).
