Trade Wars Lead to War
The Capitalist Peace (2007)
Trading on Misconceptions: Why World War I Was Not a Failure of Economic Interdependabnce: World War I is generally viewed by both advocates and critics of commercial liberal theory as the quintessential example of a failure of economic integration to maintain peace. Yet this consensus relies on both methodologically flawed inference and an incomplete accounting of the antecedents to the war. Crucially, World War I began in a weakly integrated portion of Europe with which highly integrated powers were entangled through the alliance system. Crises among the highly interdependent European powers in the decades leading up to the war were generally resolved without bloodshed. Among the less interdependent powers in Eastern Europe, however, crises regularly escalated to militarized violence. Moreover, the crises leading to the war created increased incentives for the integrated powers to strengthen commitments to their less interdependent partners. In attempting to make these alliances more credible, Western powers shifted foreign policy discretion to the very states that lacked strong economic disincentives to fight. Had globalization pervaded Eastern Europe, or if the rest of Europe had been less locked into events in the east, Europe might have avoided a “Great War.”
Despite substantial evidence that international trade has promoted peace in the post—World War II era, the commercial peace research program still faces an important historical challenge. Dramatic economic integration in the nineteenth century failed to prevent the increasing interstate hostilities that culminated in the outbreak of war in 1914. This article uses a theoretical revision grounded in standard trade theory to reexamine the relationship between commerce and peace in the fifty years before World War I, a period often referred to as the first era of globalization. The article focuses on domestic conflict over commercial policy rather than on interdependence to understand the conditions under which globalization promotes peace. In a sample dating from 1865 to 1914, the authors find that lower regulatory barriers to commerce reduce participation in militarized interstate disputes. Contradicting conventional wisdom, this evidence affirms a basic premise of commercial liberalism during the first era of globalization—free trade promotes peace.