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Investing in the Peace: Economic Interdependence and International Conflict

Abstract

Research appears to substantiate the liberal conviction that trade fosters global peace. Still, existing understanding of linkages between conflict and international economics is limited in at least two ways. First, cross-border economic relationships are far broader than just trade. Global capital markets dwarf the exchange of goods and services, and states engage in varying degrees of monetary policy coordination. Second, the manner in which economics is said to inhibit conflict behavior is implausible in light of new analytical insights about the causes of war. We discuss, and then demonstrate formally, how interdependence can influence states' recourse to military violence. The risk of disrupting economic linkages—particularly access to capital—may occasionally deter minor contests between interdependent states, but such opportunity costs will typically fail to preclude militarized disputes. Instead, interdependence offers nonmilitarized avenues for communicating resolve through costly signaling. Our quantitative results show that capital interdependence contributes to peace independent of the effects of trade, democracy, interest, and other variables.

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This list contains references from the content that can be linked to their source. For a full set of references and notes please see the PDF or HTML where available.

Geoffrey Blainey . 1973. The Causes of War. New York: Free Press.

Robert Gilpin . 1987. The Political Economy of International Relations. Princeton, N.J.: Princeton University Press.

Paul A. Papayoanou 1999. Power Ties: Economic Interdependence, Balancing, and War. Ann Arbor: University of Michigan Press.

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International Organization
  • ISSN: 0020-8183
  • EISSN: 1531-5088
  • URL: /core/journals/international-organization
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