The theory of “peace through commerce” has been voiced by Enlightenment thinkers and classical liberals like Immanuel Kant, Montesquieu, Voltaire, Jeremy Bentham, Richard Cobden, Herbert Spencer, and Frédéric Bastiat, as well as modern peace activists and free traders like Norman Angell and Ludwig von Mises.
They witnessed borderlands where traders made secret peace agreements while their kings called for war. They observed that Jews, Christians, and Muslims negotiated peacefully at the London Stock Exchange and only applied the word infidel to those who went bankrupt. Some of them called the tendency of exchange to civilize people and moderate prejudice doux commerce (gentle commerce). Make money—not war.
These intellectuals proposed that international trade made it possible to get resources through nonaggressive means. Bentham and others focused on how countries’ interests converge as they become economically interdependent, making the destruction of trade partners counterproductive. Some, like Spencer, discussed how growing middle classes and businesses engaged in peaceful, international exchange acted as counterweights to imperialists and arms suppliers.
But none of these great thinkers believed that trade made war “impossible.”
The title of his 1795 essay “Perpetual Peace” might give the impression that Kant thought so, but he makes clear that the title is meant somewhat sarcastically. Rather, he writes that war is the natural state of mankind, and it would take heroic efforts just to reduce its ubiquity. Countries must use the spirit of commerce to undermine man’s normal “state of war,” but they also had to get rid of despots and develop republican institutions.
Angell, the English liberal Labour politician who admired John Stuart Mill and Spencer, had a similar view. Angell has gone down in history as a naive Edwardian writer who incomprehensibly ignored that the forces of death and destruction were amassing outside his window as he wrote. But that’s the wrong interpretation of his work.
On the contrary, the whole starting point of Angell’s book is the imminent risk of a savage war between Great Britain and Germany. His closing chapter does not express the joy in dancing your cares away but the fear that Europe’s leaders would soon be “spilling oceans of blood, wasting mountains of treasure.”
However, it’s that reference to wasted mountains of treasure that summarizes his case. Angell didn’t think that war was impossible, but that it was futile. It’s illogical and uneconomical, even from the invader’s perspective. In a modern, globalized economy, countries do not benefit from wars of conquest anymore. Countries don’t grow richer just because they have more land or a bigger military. In fact, small, peaceful countries like Switzerland and Norway were richer than mighty empires like Britain and Germany, Angell pointed out.
We are in the longest stretch of peace between major powers for 1,800 years, the old archenemies France and Germany almost cozy up too much to one another, and Putin’s invasion is the first attempt to launch a major war of conquest since Saddam Hussein invaded Kuwait in 1990. In a world where peace used to be just a brief interlude while everybody rearmed, something has gone right in the post–World War II era. If you want the whole story, read Steven Pinker’s The Better Angels of Our Nature, but clearly doux commerce has something to do with it.
Proximity and interdependence are not always deterrents, especially if different groups share one pool of resources that they all want the largest share of. Additionally, not all cultures and communities are happily harmonious, and civil wars are often the most vicious. However, the general relationship between trade and peace is a strong one.
By analyzing thousands of country pairs over several decades, many researchers have found that increasing trade between two countries lowers the risk of war between them. They have also found that countries that are more dependent on international trade have fewer conflicts than self-reliant ones, which provides us all with a security interest in other countries’ global integration as well.
A larger amount of debt translates into reduced economic growth in the long run, as the cost of interest payments on the debt consumes dollars that could otherwise be put to productive use. As the CBO notes, persistently high levels of debt can also put upward pressure on interest rates and make it more difficult to combat inflation.
President Joe Biden has tried to portray his recent budget plan as fiscally responsible because it envisions a trillion-dollar reduction in the federal budget deficit, which the White House touts as the largest ever. But that’s only possible because the government is emerging from two years in which the deficit hit previously unimaginable highs due to the fiscal and monetary policy responses to the COVID-19 pandemic. When you put Biden’s budget plan into a larger context, it’s anything but fiscally sound—even with a planned tax on the wealthiest Americans, it projects a $1 trillion deficit this year and higher deficits in the years to come.
Their paper is optimistic, almost revivalist, in tone, even as it highlights the many faults with American policy. The U.S. economy, it states, “is among the most powerful forces for good in the history of humankind.” The authors credit the “micro-foundations of the economy” for having driven living standards “to heights unimaginable at the nation’s founding.”
Those foundations—Mr. Cogan’s first principles—are private property rights, the rule of law, free and competitive markets, and limited government. The last includes “subsidiarity,” meaning that no central authority should do what can be done by a more local body, and no public institution should do what can be left to private enterprise.
“When you think about what drives America’s GDP,” Mr. Cogan says, “it’s millions of individuals working, investing, saving and making allocative decisions with these microfoundations in place.”
Major crises give public institutions an excuse to arrogate ever more power, Mr. Cogan says: “The 9/11 attacks created a national-security fear. The collapse in 2009 of our financial system created a profound fear that our financial institutions weren’t capable of meeting the stresses of markets.” The pandemic caused Americans to fear for their health. These three very different shocks led to a common result.
“What we know about governments,” Mr. Cogan says, “is that they continue to try to expand their roles in society. And what we find is, very often, emergencies allow government to expand its authority.” Mr. Warsh concurs, adding that with the Russian invasion of Ukraine, “a fourth shock in such a short period of time, there’s the risk that we normalize the extraordinary in the conduct of government policy. Therein lies the problem—that we’ll never go back to the equilibrium in the level of government that predated the 21st century.”