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Artillery Row

So long to the capitalist peace

The Big Mac has not consigned conflict to history

One of the longest-running disputes between realist and liberal theories of international politics regards the status of economic interdependence as a cause for peace. Yet amid Russia’s invasion of Ukraine and rising tensions in East Asia, surprisingly few have noted the real-time refutation of the “capitalist peace theory” that has for so long been at the center of liberal (in the IR sense) views of international relations.

In 1910, Norman Angell wrote his famous book The Great Illusion, which argued that it would be irrational for the European great powers to go to war with one another when their prosperity was so interconnected by mutual trade and investment. The subsequent outbreak of WWI confirmed for many observers that competition for relative power and security trumped the pacific pursuit of reciprocal gains in wealth.

Following the Cold War, however, the sheer scope and intensity of globalization convinced many that a new era of capitalist peace had arrived. Thomas Friedman famously proposed a “Golden Arches Theory of Conflict Prevention,” which claimed that no two countries with a McDonalds had ever gone to war. There were many propitious augurs for a new era of peace: the lines stretched for blocks when McDonalds first opened in Moscow, and even still-nominally Communist China proclaimed, “to get rich is glorious.”

Simply put, the “capitalist peace theory” says that mutual gains from trade reduce incentives for conflict between economically engaged states, making the prosperity of each dependent on the other and producing high opportunity costs for war.

Realists have long countered this theory by claiming that states prioritize relative gains over absolute gains. State X and State Y may both be made wealthier in absolute terms by trading with one another, but if Y’s wealth grows at a faster pace than X, X may fear that Y’s rapidly growing wealth could be translated into a surplus of military power putting X’s security at risk. Realists contend that states will ultimately prioritize security over all other goals for the simple reason that without security, no other goals can be assured, including the pursuit of prosperity. Realists tend to reverse the logic of interdependence, claiming that low barriers to the cross-border flow of goods and capital are effects, rather than causes, of peace.

It appears that the realists are being proven right. On the eve of the unveiling of the Nordstream-2 pipeline between Russia and Europe, Moscow decided to invade Ukraine, which (literally) blew up the multi-billion-dollar project and all its future returns. Even McDonalds, the golden harbinger of perpetual peace, shuttered its operations in Russia.

An even more important example is provided in East Asia. The US and China, the two largest economies in the world, are engaged in a rapidly escalating economic, technological, and military rivalry. Not only did the US initiate a trade war against China, it has also launched an increasingly severe series of export restrictions on advanced technology to China, clearly designed to halt China’s economic growth and limit its growing military power. America’s attempts to cut China off at the knees are reminiscent of the measures taken early in the Cold War to contain the Soviet Union and isolate it from the other industrial centers of the world.

But there are even more illustrative rebuttals of the interdependent peace hypothesis. In seeking to contain a rising China, the US has sought to cultivate a coalition of allies in the region. Japan, Australia, the Philippines, and South Korea are all significantly more economically dependent on trade with China than they are on the US. But as second-tier powers and long-standing security partners (or dependents) of the US who also fear the growth of China’s power, they all face a stark choice between fundamental priorities: security on the one hand, prosperity on the other. Even though all these states count China as their main trade partner, they are all also seeking to augment and coordinate their security efforts to limit China’s growing military power, including increasingly developing bilateral security ties independent of the US, such as Japan and Australia’s recently upgraded security pact.

Tokyo has made clear in recent years that it identifies China as its main threat. After decades of underspending on defense due to the US security umbrella, it is finally beginning to augment its independent capabilities. Canberra is also clearly developing its national defense strategy around the effort to deter China’s expanding military power, and has been an energetic member of both the Quad and AUKUS security partnerships. After a short flirtation with Beijing, the Philippines are also reconsolidating their long-standing security ties with the US.

South Korea has long sought to chart a middle way of “the United States for security and China for the economy.” Unresolved historical disputes with Japan have prevented Seoul and Tokyo from engaging in meaningful security cooperation in recent years. Nevertheless, as Seoul finds itself forced to choose between Washington and Beijing, the Yoon administration is increasingly tilting towards the former. Meanwhile, Seoul and Tokyo have cautiously initiated a thaw in relations in order to hedge against the threat from China.

The implications of these developments go beyond mere theoretical debates, however. Abandoning the illusion that trade is a silver bullet for peace is ultimately to the benefit of policymakers who wish to avoid unintended follies. The fact that allies in East Asia and Europe are ultimately willing and able to provide for their own security interests is a benefit to a badly overextended US, insofar as the more its allies do, the less the US needs to do. If the US exercises restraint in adapting to the realities of a multipolar world and a shifting balance of power, a new strategic equilibrium may yet emerge that facilitates a stable peace and a renewed pursuit of mutual prosperity.

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