The significance of free market to keeping the peace is glaring in the cases of post-World War II Europe, contemporary US-China economic relations and US-Russia economic relations.
By Osagioduwa Eweka
Peace and Conflict Studies Programme, Institute of African Studies,
University of Ibadan, Ibadan, Nigeria
The
significance of free market to keeping the peace is glaring in the cases of
post-World War II Europe, contemporary US-China economic relations and
US-Russia economic relations. Right from the 18th century, Europe was already
ravaged with series of wars: the Franco-Prussian war, the Napoleonic wars, the
World War I and II. After World War II, European states converged to discuss
measures to prevent the outbreak of another war. It should be noted that none
of the treaties signed by European states was as effective for keeping the
peace as those of free market.
In March 1951,
France and Germany cast away their suspicion and began to expediently discuss
integration of economic policies which would result in disregard for national
sovereignty as far as economic issues are concerned. This was a giant stride
from the traditional hostile Franco-German relationship towards a Franco-German
rapprochement. That same year, the Paris Treaty was signed to set up the
European Coal and Steel Industry. With the participation of other European
countries, it became impossible for either France or Germany to exploit the
industry for war production as it was now under the control of “The High
Authority”. This later led to the Treaty of Rome in 1957, giving birth to the
European Economic Community (also known as the Common Market) and the European
Atomic Energy Treaty. In 1960, the European Free Trade Association established
by the treaty of Stockholm paved the way to better European economic
integration such as the Common Agricultural Policy. In 1967, all bodies came
under one umbrella called The European Commission.
The objectives
of these agreements were a common tariff; harmonization of tariffs vis-a-vis
that of foreign and non-member states; to allow for an economically borderless
Europe and; ultimately, to ensure the prevention of war and keep peace among
European countries. Interestingly, about 80% of European countries subscribed
to this move which economic liberals term “commercial peace” and which brought
about relative peace to Europe. Apparently, a country with a reason to wage war
against another, viewed as an adversary, would most likely change her mind
considering what she has to lose economically. Additionally, now that majority
of the countries have given up economic sovereignty and control of coal and
steel, it would be impossible for any one of them to single-handedly decide on
acquisition of nuclear weapons or other high degree weapons.
Another
pointer to the indispensability and viability of free market in keeping peace
is its utility by China to establish and foster peace between itself and other
nations. In this regard, the General Secretary of the Communist Party of China
(CPC) asserts that China loves peace and would follow a path of peaceful
development, particularly through its diplomatic policies. As exemplarily
delineated in its economic relationship with the United States, China offers
that free market is capable of presenting itself as a tool for regulating
conflict and infusing peace in order to create an international environment
essential to socio-economic development regarded as “complex interdependence”.
Relations among the major Western powers fit this model of complex
interdependence very well. The United States has significant disagreements with
its European and Asian allies over trade and policy, but it is hard to imagine
a circumstance in which the United States would use military power against any
of these allies particularly as attempts at military power has proved futile in
the past. In 1995 when America refused to allow the then Taiwan’s president to
make a high profile visit to America for diplomatic reasons, China reacted
militarily by firing ten unarmed DF-15s into waters off Taiwan. America
launched counteractive troops and aircraft-carrier to the region and China
quickly backed-off. At this point in time, China was not an economic giant,
whereas the US was. In fact, there was a remarkable gap between the US and
China in terms of economic abilities. It was probably for this reason that
China reached the prudent decision to back off. It is significant to remark
that since China assumed its current, acclaimed economic and military status,
the US has taken dressing and has not dared to threaten China because, as
remarked by Douglas Paal, unofficial American ambassador to Taiwan, the cost of
conflict has certainly gone up for America to easily afford. Instead, the
United States now relies on economic pressure, negotiations and incentives to
achieve its policy aims.
Several
scholars, journalists and politicians have reiterated that the bilateral ties
between both countries are strengthened by free market in particular and
economic alliance in general. It should be noted that there exist quite a
number of Chinese entrepreneurs in the US and vice versa. Also worthy of mention
is the fact that the free trade existing between the United States and China is
on the increase and the economies of both countries are benefiting so immensely
from it that they cannot allow a war to bring it to ruin. For instance, the two
countries are largely interdependent for production and marketing of an array
of technological gadgets. This is what their bi-lateral ties are basically
about.This has been inferred in many instances. As Kerry
(2014) , US Secretary of State avers, “China and the United States
represent the greatest economic alliance trading partnership in the history of
humankind, and it is only going to grow”. He further asserts that both
countries seek to strengthen their security relationship which grows out of the
economic relationship at the same time. This undoubtedly implies that bilateral
trade and free market between both countries have resulted in a military or
security relationship which discourages armed conflict of any degree and kind.
Although Hitchens (2002) argues that no power has been able to
match the US economically and militarily as China, recently, the East Asian
Strategic Review (Katahara,
2014: p. 20) indicates that current diplomatic policy among both
countries is carrying forward the path of peaceful development through free
trade, and this is seen as “a new type of major-power relations upon which both
countries have formally agreed”. Similarly, Yang Jiechi of China has put forth
the argument that “[...] business not only brings goods and jobs to us, but
also mutual understanding and friendship among our peoples”. In concord, Jacob
Lew of the US remarks the “people-to-people” engagement that “goes beyond the
business world”.
Up to this
point, it has been argumentatively and historically ascertained that free
market, more than the other identified tools for keeping the peace, has the
capacity to uphold relationship between nation states such that peaceful
coexistence and collaboration are possible and sustainable, towards the
attainment and sustenance of peace among them. This is not to suggest that
violent conflict is forcibly inevitable between nation states with the absence
of free market relationship or pronounced economic alliance. For instance, the
United States has a remarkably insignificant economic alliance with countries
such as Brazil, India and Turkey, yet they are not at loggerheads with them.
The suggestion here is that such absence or minimization, which is often
occasioned and at the same time sustained by rivalry rather than constructive
competition, is much likely to make nations prone to violent conflict
institutionalization and/or solidification, whereas the reverse is indisputably
the case in the presence of free market. In other words, economic competition
is peaceably worth more than economic rivalry when it comes to keeping the
peace. At this juncture, in order not to be guilty of analytical
disequilibrium, it is pertinent to take a critical look at the other side of
the coin by giving due consideration to instances where the absence of free
market has not only proved itself to be conflictogenic, but also pro-conflict.
The United States of America and Russia conveniently fit this description.
The hostile
behaviour existing between the US and Russia is not unrelated to their failure
to explore free trade with each other. The origins of bilateral trade relations
between both countries are traceable to the period antedating the World War II.
The peak of these relations dates back to the period between 1941 and 1945,
while the period that followed ushered-in the decline of these relations. Since
then, the economic relationship between the two powerful nations has been
rather remarkably low and intermittently fluctuant. However, it is not as much
of significance to this paper to dwell on this issue as it is to discuss the
violent conflict effect of the absence of free market between both countries.
Russia, by virtue of being a major producer of natural gas and oil, is a vital
actor in the international economy being the 4th largest
economy in the world since 2013 till date(Russia
Insider, 2015) . This implies that the country is quite significant to
the global economy. In spite of this pedigree, the overall US-Russia economic
relations remain significantly weak to the point that both countries account
for an impoverish portion of the international economic activities of one
another (Nelson, 2014) . According to the Global
Trade Atlas , corroborated by the Bank
for International Settlements and the Bank of
Russia , Russia housed less than 0.5% of the foreign investment of the
US as of 2012. In 2013, export of goods from the US to Russia was estimated at
only 0.71% and 1.19% vice versa. In the same vein, at the end of 2013, Russia
had an outstanding US bank loan of 1.1%. Similarly, the US accounted for less
than 1% of the foreign direct investment in Russia at the end of 2012. In all
these, the European Union has managed to remain at the favoured end.
The foregoing
explains why the two countries have been able to afford enduring, episodic
conflicts with one another, with little or no discomfort and hesitation to the
extent of periodically arriving at the brink of mutual exchange of nuclear
blows specifically by means of threatened proxy wars, latest of which Ukraine
and Syria are potential theatres. Both countries seem to directly have nothing
economically at stake to make them sheathe their swords. This goes further to
explain the nonimpact of economic sanctions and countersanctions periodically
imposed by both countries on one another. Noteworthy, these sanctions and
countersanctions double as cause and effect of absence and/or weakness of free
market between the countries. As Nelson
(2014) succinctly posits,
The indicators
suggest that the direct effect of US sanctions on Russia on overall trade and investment
could be relatively small for the United States and Russia. However, sanctions
could disrupt specific economic activities at the firm-and sector-level,
improving economic costs on specific US and Russian firms and industries.
It may
therefore be argued that if these sanctions have relatively small effect on the
United States and Russia, it then continues to widen the gap of peace between
them. If this be the case, it would mean that the effect the sanctions would
have on the European Union (EU) would be unquantifiable since the EU has also
been caught imposing sanctions on Russia, as seen for instance in the
Russia-Ukraine conflict of 2014, in spite of it being much economically in
tandem with Russia, a situation which has continued to play a major role in
keeping the peace among both parties, unlike their US counterpart. There is no
disputing the fact that the peaceful rapprochement between Russia and the EU
countries (significantly Germany) is deeply rooted in free trade. So, the worry
here is whether these sanctions would accordingly bring, or why have they not
brought, to an end the peaceful rapprochement between Russia and the EU. This
may not necessarily be the case.
The
technicalities and motives involved in the degree and manner of sanctions
imposed on Russia by the EU differ from those of the US. Arguably, the
collaboration of the EU with the US to impose sanctions on Russia can be said
to be largely politically orchestrated. If the EU had refused to collaborate
with the US in this venture, they would have almost completely, irrecoverably
fallen out of the age-long, profitable economic alliance with the US, and such
a move would have been economically and diplomatically consequential, yet an
unreserved collaboration would have equally spelt doom for them on the Russian
side. Hence, it is safe to regard the EU, under this peculiar circumstance, as
a victim of circumstance as well as of historical vengeance caught in the
inescapable web of multilateral cooperation of politically conventional array
of sanctions. Therefore, what the EU tactically resorted to, in order not to be
economically and diplomatically irrelevant in the eyes of both Russia and the
US, was to courteously but stealthily sit on the fence by indulging in
selective sanctioning. This is evidently exemplified in the obvious reluctance,
difficulty and tardiness displayed by European leaders in reaching a consensus
on sanctions on Russia until it became glaringly unavoidable. It is even
further and better exemplified in the selectiveness and economic impoverishment
of the sanctions which were again fickly implemented, unlike the case of the US
which has been found to be rather relatively annihilative and malicious.
In the
presidential statement following the 2014 shooting of a civilian airliner
transporting citizens of the Netherlands, Malaysia, Australia and other
countries by Ukrainian rebels purportedly backed by Russia (The
White House, Office of the US President, 2014) , Barack Obama affirmed
that:
Today, and
building on the measures we announced two weeks ago, the United States is
imposing new sanctions in key sectors of the Russian economy: energy, arms, and
finance. We’re blocking the exports of specific goods and technologies to the
Russian energy sector. We’re expanding our sanctions to more Russian banks and
defense companies. And we’re formally suspending credit that encourages exports
to Russia and financing for Economic projects in Russia (Underlining by
author).
The president
further affirmed that:
At the same
time, the European Union is joining us in imposing major sanctions on Russia
[…]. In the financial sector, the EU is cutting off certain financing to the
state-owned banks in Russia. In the energy sector, the EU will stop exporting
specific goods and technologies to Russia. In the defense sector, the EU is
prohibiting new arms imports and exports and is halting the export of sensitive
technology to Russia’s military users (Underlining by author).
The underlined
words and phrases in the above extract of the US president’s statement reveal
the contrast between the intensity, motive and level of involvement in the
imposition of sanctions on Russia by the US and the EU. In the first quote, the
underlined words and phrases depict nihilism, malice, rivalry as well as
unwillingness of the US to firm-up any economic, bilateral tie with Russia, let
alone establish free trade with it. Contrastively, the underlined words in the
second extract here-above depict hesitation, indecision, reluctance, prudence
and unwillingness of the EU to discontinue economic, bilateral ties and firmly
sustain the existing free trade with Russia. In clear terms, it can be safely
implied from the foregoing that while the EU may have gotten involved in the
sanctions on Russia because of expediency in international politics and
conventions, the US may have reeled out its own sanctions for two basic reasons
apart from deterrence. First is that it was found economically inconsequential
and secondly, the military and politico-economic rivalry unchangingly
characterising the relationship between both nations was conspicuously
overboard, thus the US considered show of power as expedient if Russia must not
grow to become an untameable threat. Same can be said about Russia coming up
with its countersanction activities. This standpoint is evident in the
following extract from the aforementioned statement of the president of the US:
[…] the
sanctions that we’ve already imposed have made a weak Russian economy even
weaker. Foreign investors already are increasingly staying away. Even before
our sanctions today, nearly $100 billion in capital was expected to flee
Russia. Russia’s energy, financial, and defense sectors are feeling the pain. Projections
for Russian economic growth are down near to zero.
The summative
inference extractable from the above is that it is easy and convenient for
countries to imprudently engage in a sanction and countersanction parade where
both countries do not have much economic leverage over each other and, as such,
mutual exchange of sanctions would not necessarily impact economic interests.
Otherwise, economic ‘pain’ would be avoided for being contagious.
Relative to
other countries with which the US practices Free Trade, certain factors are
responsible for the economic alienation of US-Russian trade culminating in
strengthening protracted, intermittent uprisings among themselves. Firstly, the
US does not grant Russia permanent normal trade relations (NRT) status.
Secondly, Russia is not a member of the World Trade Organisation (WTO) and
OECD. Thirdly, there is a lack of a ratified bilateral investment treaty among
the two countries (Deutsche
Bank Research, 2009) . Recognising the import of free trade in keeping
the peace, Charap & Kuchins (2009) postulate that economic
ties are important in their own right, but may in addition help to provide the
broader bilateral relationship. This postulation buttresses the thesis of this
study that deep economic ties in form of free trade, as exemplified in the case
of Russia and Germany as well as France and Germany, is highly efficient in
bringing about peace through stable political cum diplomatic relationship. The
hostile relations evident between Russia and the United States cannot be said
to outweigh those of Russia and Germany or France and Germany prior to their
decision to sacrifice their hate, malice, jealousy and rivalry on the altar of
revolutionary economic collaboration (free trade). If the US and Russia decide
to chart this same productive course towards attainment of peace, violent
conflict among them and by extension among their numerous allies―is most likely
to reduce to its barest minimum, and, judging from the
Russia-Germany/France-Germany experience, the feasibility of resurgence appears
to be quite slim. If on the contrary they continue to shun the exploration of
mutual free market, their hostile relations and alienation of peace would
likewise continue to be nurtured.
Nevertheless,
there are limits to the concept of free market as a tool for keeping the peace.
Two shall be briefly discussed here. First, there may be instances where
religious or racial issues may hinder free market. Two clear examples are the
experience of the Jews in the 20th century France and Nazi Germany when the
Jews were persecuted purportedly for being commercially prosperous. The
commonest instance is the case of Alfred Drefus (Affaire Drefus), a Jewish
accused of treasonable offences such as espionage and divulging of French
government’s secret documents to the German government. In the end, the
accusation was discovered to be false in its entirety. Given such a situation,
there may arise the possibility of retaliation from the government of the
accused person, either by devising measures of hindering the commercial activities
of the nationals of the accusing country, or simply launching a retaliatory
accusation. In either case, the end result may be full-blown armed conflict.
Another limit may be that countries may not be willing to go into economic
alliance with other countries, either for historical reasons or for reasons of
reward divide as played out in the case of Russia and the US after the Cold
War.
Publication Details:
This article is an excerpt from a technical paper, titled - "Exploring Essentials for Keeping the Peace" published at Open Journal of Political Science, Vol.06 No.01(2016), Article ID:62567,15 pages 10.4236/ojps.2016.61003
Copyright © 2016 by authors and Scientific Research
Publishing Inc.
This work is licensed under the Creative Commons Attribution
International License (CC BY).
