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Economic Interdependence Essay

Between 1939 and 1945, World War II took the lives of over 60 million people worldwide, making it the deadliest military conflict in the history of mankind. These statistics are so staggering that if famine were hypothetically eradicated from the earth, war would stand as the largest executioner of mankind. With that in mind, it would be safe to assume that today’s global leaders are in no way in favor of engaging in an armed conflict with another nation.

Sadly, this is not necessarily the case we see in reality; wars are still being fought to attain fundamental components such as territory or political freedom. There are, however, theoretical aspects in today’s globalized society that allows political leaders to prevent military disputes from occurring in the first place. The question then becomes: is it possible to prevent or diminish war onset between dyads and if so, how? It is important to ask this question mainly because war is still very much a relevant aspect in our current international system.

From the Gulf War to the War on Terror in the Middle East, military conflict seems to be the go-to option for a country seeking to achieve their goal when no other choice seems viable. In essence, war still occurs even in the relatively evolved society we currently inhabit because it has historically proved that brute force is at times the only practical option. The American Revolutionary War, for example, demonstrated that the colonies did not have the luxury of simply claiming their independence from Britain.

The colonists had no choice but to fight for their freedom in order to become independent. Such historical instances demonstrate what war can accomplish, thus justifying why countries save war as a last resort. The majority of the time, however, military disputes are not the best course of action to undergo so finding a way to prevent war is a nation’s best alternative. By no means does this question have a definitive answer since war is a highly perplex, multi-faceted phenomenon but I will attempt to propose the best strategy leaders can take to reduce the possibility of war.

In this paper I will call attention to several theoretical answers to the research question above, each with their own advantages and faults. The possible solutions to decrease military conflicts between dyads are based upon the governmental aspects of each country – such as regime type or levels of trade – and their influence on the relationship with another nation. The most recognized theories that could reduce the likelihood of war are the Democratic peace theory, balance of power theory and the commercial peace theory.

The validity of each of these theories will be outlined to highlight their potential to help dyads avoid armed conflict. However, the latter theory will be the focus of this paper as my hypothesis stems from the belief that an increase in economic interdependence within a dyad leads to an overall decrease in militarized interstate disputes (MIDs) between that dyad. In order to validate my argument, I will first make an argument for each theory and then continue by creating a case that trade truly diminishes war.

First, the Democratic peace theory is defined as a theory in political science and philosophy which holds that democracies—specifically, liberal democracies—almost never go to war with one another (Gartzke 2000). The idea behind ‘democracies do not fight one another’ is sustained by the fact that when two democracies confront one another in conflicts of interest, they are able to effectively employ democratic bargaining in their interaction, which then prevents most disagreements from escalating to a military conflict.

In a struggle between democracies, by the time the two states are militarily ready for war, diplomats have had the opportunity to find a nonviolent solution to the dispute (Gartzke 2000). The concept behind democratic peace bears a close resemblance to a ‘them vs. us’ mentality. Countries take more into account what other likeminded states think of them over the ones with a completely different structure and ideals; it is easier to rally with people of the same beliefs.

Nations that share democratic principles will be more concerned with pushing that same mindset and threatened by opposing regimes extending their reach, thus leading democracies to rely on each other. It is more beneficial being on the same side, than it is against one another. Unfortunately, the Democratic peace theory begins to start falling apart at the seams once you take into consideration the foundation that defines democratic peace. The first problems stems from the inaccurate definition of democracy, which calls into question the alleged evidence in support of the theory.

Methodology used in collecting data to test whether or not a country is democratic is unscientific and democracies have been involved in conflict with each other at a much higher rate than what the proponents have determined. Even if the definition of democracies were accurately outlined, the current data would still be insufficient to establish a causal link between the democratic political institutions of a state and the frequency with which that state will engage in conflicts with other democracies (Layne 1994).

The relative peace between democracies may just as well be the consequence of the international power structure of recent decades. If such is true, the very foundation of the democratic peace theory collapses. Next, the balance of power theory centers on the idea that when one nation or coalition increases its power or employ it more assertively, threatened states will respond by increasing their own power, usually by creating a counter-balancing alliance.

Since the rise of major players in the international system, e. g. he United States, the balance of power among the most powerful states has been a delicate aspect that can potentially create complications or prevent them altogether. For example, if China were to somehow generate enough momentum and overthrow the United States in terms of global power, the US would most likely become agitated and retaliate with armed force. Alternatively, it can also act as a component for peace; a defeated nation can receive leniency from the major power and allow them to reestablish themselves prior to their conflict.

The most important factor affecting the relation between the distribution of power and the likelihood of war is whether the terms of a compromise agreement that might be accepted in lieu of war affect the relative power of the antagonists and therefore the probability that the agreement will be enforced (Wagner 1994). Thus the relationship one can expect between the distribution of power and the likelihood of war depends on the specific instances that a dyad is faced with. The problem with the balance of power theory is that it is prone to security dilemmas, a concept that is generally integrated within the balance of power.

With security dilemmas, none can feel at ease because both sides of a dyad want to match their power to the other, creating a never-ending quest for power. A nation’s possession of power – no matter how much the state tries to guarantee others that it is for defensive purposes only – will likely result in fear and/or suspicion from the opposing side. Thus, military disputes are expected to occur even when political “motives” for war – like territorial disputes, revenge, etc. – are absent. Nineteenth century Europe fosters many examples of how security dilemmas and balance of power created tension between states.

The lack of overall authority in Europe meant that a self-help system of alliance and military force dominated the region (Wagner 1994). The justification touted by states to acquire military force was constantly outfitted as a solution of a threat to the equilibrium of the international system, which in turn validates the idea that balance of power theory acted as a cause of war in the nineteenth century. While democratic peace and balance of power theories offer intriguing premises to prevent war, they fall short in the end.

Although there are several potential answers to the research question, I believe the truest method of inhibiting military disputes between two nations lies within the dyad’s economic interdependency. When it comes to the effect of economic interdependency among states, political experts are torn between two explanations. More specifically, states that are interdependent are either believed to be less likely to initiate militarized conflict – the liberal approach – or follow the realist view where bilateral trade doesn’t necessarily lead to conflict mitigation.

There is compelling data on both sides of this argument but extensive research has led me to believe that the liberal perspective of trade follows this relationship more closely. The economic relationship that states share is imperative in determining whether or not they will uphold peace in order to facilitate greater benefits in the future. Economic interdependence, as explained by Gartzke, has multiple facets that embody this relationship between a dyad such as trade share, trade dependence and trade openness.

Gartzke finds that these variables each have their distinct relationship with dyadic conflict, demonstrating that trade dependence and openness both decrease the probability of MID onset (2003). He notes that trade share, however, coincides with Barbieri’s findings, which indicates an increased probability for MID onset. Barbieri supports the conservative approach and states “although war sometimes leads to a temporary decline in the level of dyadic trade, in most instances war has no permanent long-term effect on trading relationships and, in fact, trade often increases in the postwar period” (Barbieri 1999).

Even though Barbieri’s study makes a compelling argument, there is more evidence to support the claim that bilateral trading diminishes the chance of militarized disputes since trade mediates any tension that exists and reinforces their relationship at the international level. Nations, as rational actors in the diplomatic system, will consider trade agreements accordingly with other nations in order to gain goods and services to increase the well being of their state. This relationship between states is an important factor that will determine their rate of trade and whether or not they go to war with one another.

Rational choice says that if the state is indeed rational, then their preferences are stable and transitive so they will always prefer to diminish any chance of war while at the same time benefiting from dyadic trade. Trade acts as a stabilizing force between the dyad and will prefer positive reinforcement (i. e. trade) versus negative reinforcement (i. e. war), hence transitivity. Rational choice therefore leads to the utility maximizing concept where states weigh the pros and cons of waging war on a state where mutual trade agreements take place.

States will consider the most beneficial trades to maximize their gain but will also contemplate even the most miniscule trades in order to accelerate the possibility of greater trade in the future. The expectations of future trade impact the expected value of the trading option if a state decides to forgo war (Copeland 1996). In other words, although economic exchange may not offer immediate substantial gains, prospective trade opportunities prevent states from initiating conflict.

Trade allows states to mutually benefit from one another while states that don’t trade gain nothing. Reed argues, “trading states can expect to gain less from a militarized clash than would nontrading states and, as a result, are more likely to accept a bargained outcome short of militarized conflict” (2003). If that benefit were no longer being exchanged, i. e. , trade, then the trading states would rather resolve their issue through negotiations rather than militarized conflict to continue receiving the benefit.

In other words, the aforementioned relationship between trading and interstate conflict describes my causal process where an increase in bilateral trade leads to a decrease in MIDs. By choosing to exchange goods and/or services with states regardless of their contribution size, they are directly diminishing the probability of going to war with the opposing state. Alternatively, the relationship is reversed when trade is absent between a dyad since there is nothing to inhibit one another from attacking.

Another benefit that comes from high levels of commercial exchange is described as the ‘information-maximizing’ theory: a belief that bilateral trade not only produces benefits from tangible goods but also intangible benefits such as increased information, which reduces the likelihood of hostility between the dyad (Reed 2003). Economic interdependence mitigates the effect of uncertainty through transparency and full disclosure agreements that lead to an enhanced probability of settlement short of militarized conflict.

Interdependent states prefer the benefits gained from trade – tangible or intangible – because it allows the states to become more informed on their opponents’ costs of war than would nontrading states. Even when existing commercial exchange is low or non-existent, positive expectations for future trade will produce a positive expected value for trade, and therefore an incentive for continued peace.

From 1971 to 1973 and in the late 1980s – the two main periods of cooperation between the Cold War superpowers – positive signs from U. S. leaders led to trade being significantly increased, which coaxed the Soviets into a more cooperative relationship, reducing the probability of war (Copeland 1996). The Cold War exemplifies the idea that trade can act as a mediator, even among opposing superpowers. Trade agreements are effective means to ensure peaceful relationships among other states. Economic interdependency creates the ability to build beneficial trade arrangements, increasing state resources and improving the dyad’s collective relationship.

The correlation between interdependence and MID onset is important not only for dyads that trade at higher levels but also for those with minimal trade amounts. Furthermore, the magnitude of trade does not play an influential role in determining the importance of the trade agreement since prospective gains always outweigh a militarized strike. If we ask ourselves again if it is possible to prevent or diminish war onset between dyads, it becomes clear that preventing military disputes stems from having a well established trade arrangement.

It is irrelevant if the countries are both democracies or if they are similarly matched in military power – the only thing that really matters is whether a dyad exchanges goods and/or services. Consider the United States and China today; one is a democratic, military superpower while the other is a socialist state with no exceptional global power. Yet they share a relatively prosperous, mutually beneficial commercial relationship. No matter which way you view it, trade acts as the greatest approach for peace.

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